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  • Coming Soon for Expanded Access Policies

    Many companies with investigational drugs have posted an expanded access policy on their websites as required, but more than a few still have this task left over from the 2018 to-do list.  As the time for New Year’s resolutions and new to-do lists is upon us, those companies, as well as those that already have policies available on-line, may want to start thinking about how they will handle the newest requirements that Commissioner Gottlieb has described as part of a new program coming in 2019.

    In November 2018, FDA released the results of an independent assessment that evaluated the expanded access program at FDA and made recommendations for improvement.  In reporting on the results of the assessment, Commissioner Gottlieb announced a number of program modifications that either had already begun or would begin soon at the Agency to streamline the process and to recognize companies’ concerns about how adverse events related to expanded access might complicate the approval process.

    Recent statements about the coming program signal that FDA is now planning to become more involved in expanded access with the goals of facilitating and expediting access.  As reported by BioCentury, under the new initiative, FDA staff will provide information by telephone to physicians and patients seeking expanded access.  FDA staff also will complete forms for single-patient IND requests and send the completed forms to the physician for signature and then forward the request to the sponsor.

    Particularly noteworthy is that, as reported by BioCentury, although companies will still have the discretion to deny requests for expanded access, under the new initiative, they will have to provide a reason for the denial.  It remains to be seen how comfortable it will be for companies to maintain a policy against granting expanded access when faced with FDA’s queries even in the absence of a regulation requiring a response.  But perhaps that’s the point.  While FDA cannot require that investigational drugs be provided on a compassionate basis, the Agency is well aware of sponsors’ predisposition to maintain positive relationships with their FDA review team.

    It was also reported that FDA will follow-up with the physician or patient who receives an investigational drug to obtain information about the outcome.   The potential for poor outcomes in the expanded access setting and the potential for those outcomes to adversely affect the approval process has been cited historically by sponsors who have shied away from providing expanded access.  FDA has been working to convey the message that providing expanded access is unlikely to lead to such a negative result.  The Agency, however, has not and, under the Food, Drug, and Cosmetic Act, cannot assure sponsors that such a result is impossible.

    Robert Temple, M.D., who was recently appointed to the new position of senior advisor within the Center of Drug Evaluation and Research, Office of New Drugs’ Immediate Office, and Peter Marks, M.D., Director of the Center for Biologics Evaluation and Research, addressed sponsors’ hesitation to make investigational products available through expanded access at the Reagan-Udall Foundation for the Food and Drug Administration program on using real-world evidence from expanded access protocols in November.  Both officials emphasized their belief that sponsors should not fear that adverse events occurring in the context of expanded access use will negatively affect the prospects for approval of an investigational product.  Dr. Marks referred to reports of negative effects as “urban lore,” and Dr. Temple noted that FDA understands that patients receiving treatment under expanded access are likely to be sicker and have multiple comorbidities, among other factors.  Dr. Marks acknowledged that the expense and complications of manufacturing cell and gene therapies currently make providing these investigational products available through expanded access more difficult, but predicted that costs may decrease in the future making these therapies more accessible.

    Although it has not yet been formally announced, as reported by BioCentury, FDA will be having one or more public meetings about the new initiative and plans to launch a pilot program for cancer drugs in 2019.

    Avalanche or Roadblock: FDA Publishes Flurries of Biologic and Biosimilar Materials

    At the end of a calendar year in DC, we expect to see a few flurries. Maybe some light snow, but definitely flurries of regulatory activity.  December is often rich with FDA publications, specifically warning letters and guidance documents.  And things have not changed this December.  Indeed, in one day, FDA announced and published four new guidance documents, one proposed rule (really a technical correction), and one list related to biologics and biosimilars under the Biologic Price Competition and Innovation Act (“BPCIA”).

    These FDA actions arise as part of the Biosimilar Action Plan (“BAP”) announced by FDA earlier in 2018.  With the success of the competition-based generic market, FDA is looking to advance new policies that will have the same effect in the biologics market.  Calling biologic medicines “increasingly the backbone of modern therapy,” Commissioner Gottlieb predicted in the announcement that 2019 will see a significant focus on the biosimilar market.  And FDA decided to ring in the new year a bit early.

    Two of the BAP guidance documents recently released focus specifically on scientific and regulatory considerations for the development of biosimilar and interchangeable products.  These guidance documents are Questions & Answers on Biosimilar Development and the BPCI Act and New and Revised Draft Q&As on Biosimilar Development and the BPCI Act (Revision 2).  These guidances, both in question and answer format, are part of a series to “facilitate development of biosimilar and interchangeable products” and revisions to previously issued guidance documents.  Indeed, much of the information from prior versions remains substantively the same.

    The first of the two guidance documents, Questions & Answers on Biosimilar Development and the BPCI Act, finalizes the questions and answers from both the April 2015 version of this (final) guidance and the May 2015 draft guidance Biosimilars: Additional Questions and Answers Regarding Implementation of the Biologics Price Competition and Innovation Act of 2009.  There does not appear to be any new questions or significant substantive revisions to the answers.

    The second guidance, New and Revised Draft Q&As on Biosimilar Development and the BPCI Act, is still in draft form and includes similar questions as the other guidance and the May 2015 draft guidance with a few new ones sprinkled in.  New questions and answers include questions about post-approval manufacturing changes for licensed biosimilar products; permissible differences in route of administration, dosage form, strength, or condition of use between proposed 351(k) products and reference products (spoiler alert: none); and REMS.  The Commissioner has noted previously that abuse of REMS restrictions has led to problems obtaining comparator samples for the development of small molecule generics; to prevent the same blockade on the biosimilar side, this guidance announces that FDA will review study protocols submitted by biosimilar applicants to assess safety protections and issue a letter from the agency to the reference product holder stating that FDA will not consider it a violation of a REMS for the reference product holder to provide the prospective 351(k) applicant with a sufficient quantity to perform necessary biosimilar application testing.  This is similar to the approach FDA has taken on the small molecule side.

    The proposed technical correction regulation, the other two guidance documents, and the list deal with the transition of certain biological products from NDAs to BLAs.  Starting with the simplest, the proposed (so-called) technical correction would amend the definition of “biological product” in 21 C.F.R. § 600.3(h) to conform to the definition implemented in the BPCIA and provide an interpretation of the statutory terms “protein” and “chemically synthesized polypeptide.”  FDA calls it a “technical correction” in the proposed rule, but this isn’t really technical, nor is it a correction.  Indeed, it reflects a significant change to the definition of biological product because the rule would replace the phrase  “means any” with the phrase “means a” and would add the phrase “protein (except any chemically synthesized polypeptide)” to the definition of “biological product.”  Consistent with the April 2015 Questions & Answers guidance, the proposed rule would amend 21 C.F.R. § 600.3(h) to further define protein as any alpha amino acid polymer with a specific defined sequence that is greater than 40 amino acids in size, and the term chemically synthesized polypeptide as any alpha amino acid polymer that: (1) is made entirely by chemical synthesis and (2) is greater than 40 amino acids but less than 100 amino acids in size.  Given that that FDA has been using this definition since the publication of the April 2015 final version of this Question and Answer guidance,  this proposed regulation is unlikely to catch industry by surprise.  But this is just one of multiple steps FDA is taking to prepare industry for the March 2020 transition of certain biological products approved under NDAs to BLAs.

    As noted, this proposed technical revision arises from the BPCIA’s “Deemed to be a License” provision, which transitions all biological products approved under NDAs to BLAs as of March 23, 2020.  To help ensure a smooth transition, FDA has published a preliminary list of NDAs that will become BLAs on March 23, 2020.  All your favorite insulins are on the list, as are human growth hormones and other hormones.  Commissioner Gottlieb posits that these protein products may be easier to “copy” under biosimilar standards than ANDA standards and may now see more competition.  This, combined with the loss of certain exclusivities (discussed below), FDA expects to see more robust competition for the products transitioning from NDAs to BLAs under the BPCIA.

    Additionally, FDA published two additional guidance documents related to the “Deemed to be a License” Provision of the BPCIA.  The first was a revision of the March 2016 guidance, Implementation of the “Deemed to be a License” Provision of the Biologics Price Competition and Innovation Act of 2009.  Renamed the Interpretation of the “Deemed to be a License Provision” of the BPCIA, the Guidance is largely the same substantively as the earlier version, but provides more specifics.  For example, the new Guidance explains that only applications approved under an NDA will be deemed to be a BLA, and this transition will occur only on the transition date (rather than before or after).  After 11:59 PM March 23, 2020, the guidance explains, a pending original 505(b)(2) application for a biological product will receive a complete response because the NDA for the listed drug relied upon will no longer exist.  Applications may be withdrawn and submitted under sections 351(a) or 351(k) of the PHS Act, but there is no pathway akin to the 505(b)(2) pathway on the BLA side (affected sponsors can have Type 3 meetings with FDA to discuss new development options).  FDA will, however, administratively convert any pending NDA supplements to BLA supplements and will maintain the same goal date.

    Importantly, this guidance stresses that transitioning NDAs will lose all exclusivity other than orphan and pediatric as of March 23, 2020.  And not only will transitioning products lose exclusivity, those that are deemed to be licensed under the Public Health Service Act won’t be eligible for a 12-year period of reference product exclusivity.  As a result, those of you with protein products looking for NCE exclusivity are probably better off filing for BLAs now, which FDA states in this guidance, it will accept prior to the transition date rather than trying to squeeze in NDA approval.  Further, while FDA previously expressed in a footnote of the 2016 version of the guidance that FDA is considering a mechanism that, in limited circumstances, would allow holders of approved applications under section 505 of the FD&C Act that reference a type II DMF to continue to reference the DMF after the application is deemed to be a license, this statement is nowhere to be found in the revised version of the guidance.  Instead, the footnote directs readers to the Question and Answers guidance (discussed below), which includes no discussion of the use of DMFs or cooperative licensing arrangements in BLAs.

    Finally, FDA published a Questions and Answers guidance on the “Deemed to be a License Provision” of the BPCIA.  While the guidance is brand new, it covers a lot of the basics that have been explained in previous iterations (i.e. the April and May 2015 guidances mentioned above), as well as logistics.  Indeed, it provides much of the same information as the Interpretation guidance, just in a different format.  This guidance includes a robust discussion of the products affected by the transition (with a plug for the new Preliminary Transition List), the process for the transition (in which there are no active steps required by NDA holders for transitioning products and no pre-approval inspections for deemed licenses), and the results of the transition (BLA numbers will be sent to NDA holders).  The guidance also informs readers that all NDAs will transition – even if discontinued – as long as FDA has not withdrawn approval of the application, and all transitioned BLAs will be considered 351(a) BLAs rather than 351(k) BLAs.  Review divisions will remain the same, but the guidance provides a reminder that the requirements for approval will not remain the same.  All pending supplements transitioned as of March 23, 2020 will be subject to BLA review processes, and sponsors are expected to revise transitions to meet any differing requirements with a specific emphasis on CMC.  Further, all transitioned products will need to conform to BLA requirements, including labeling, but FDA will exercise enforcement discretion with respect to labeling until March 23, 2025.

    Importantly, the guidance notes that pending NDAs withdrawn and resubmitted as 351(a) applications will not be subject to additional user fees, but pending NDAs withdrawn and resubmitted as 351(k)s will be subject to the biosimilar user fee.  Nothing indicates that such a withdrawn application will be entitled to a refund, so resubmitting as a biosimilar may cost two separate user fees.  Pending NDAs resubmitted as 351(a)s will not require a fee if:

    • The applicant previously submitted an NDA for the same product and paid the associated PDUFA fee;
    • The NDA was accepted for filing; and
    • The NDA was not approved or was withdrawn.

    This makes sense since BLAs are covered by PDUFA, but biosimilars under 351(k) have a separate user fee scheme set forth in BSUFA.  And nothing in the BPCIA appears to grant FDA authority to waive user fees for transitioning products.

    FDA has given us a lot to think about with respect to transitioning biologics.  Luckily, we still have about a year and a half left to plan for and execute the transition, but March 23, 2020 is rapidly approaching.  Collectively, these publications suggest that it’s not really worth rushing to get NDA approval prior to the transition date.  FDA will take BLA applications for transitioning products now (but probably not 351(k)s since there are no reference products until the transition date), and no exclusivity other than orphan and pediatric will transfer.  Going for the BLA may result in 12 years of exclusivity while going for the NDA will result in almost none.

    Federal Court Invalidates CMS’ Reduction of Medicare Hospital Outpatient Payment Rates for 340B Drugs

    On December 27, 2018, the Federal District Court for the District of Columbia enjoined the Centers for Medicare and Medicaid Services (CMS) from implementing a regulation setting reimbursement for hospital outpatient payment rates for 340B drugs at Average Sales Price (ASP) minus 22.5%.

    A brief history: Section 340B of the Public Health Service Act requires a manufacturer of covered outpatient drugs, as a condition of having its drugs be eligible for federal payment under Medicaid and Medicare Part B, to enter into a Pharmaceutical Pricing Agreement with HHS. Under the agreement, the manufacturer is obligated to charge no more than a statutorily defined ceiling price to certain types of purchasers (called “Covered Entities”) designated in the statute, which include certain types of clinics that receive federal funding and certain types of hospitals. Congress’s stated rationale for the 340B Drug Discount Program was to maximize scarce Federal resources as much as possible, reaching more eligible patients, and providing care that is more comprehensive.

    Under the Social Security Act, CMS must set reimbursement rates for certain separately payable drugs under the Medicare Part B hospital outpatient prospective payment system (OPPS). Since 2005, CMS has set reimbursement rates for all separately payable hospital outpatient drugs, including 340B drugs, based on average sales price (ASP) plus 6%. However, in 2017, CMS proposed to revise the reimbursement formula for 340B drugs. Concluding that hospital Covered Entities profited too much from reimbursement for 340B discounted drugs, CMS revised the payment amount for hospital outpatient separately payable 340B drugs to ASP minus 22.5%. The American Hospital Association (AHA) and various other hospital associations and non-profit hospitals submitted comments opposing this change in calculation methodology, arguing that CMS was not authorized to make the change. Nevertheless, CMS finalized the rule, asserting that it had the statutory authority under 42 U.S.C. 1395I(t)(14)(A)(iii)(II) to set the rate based on average price for the drug “as calculated and adjusted by the Secretary.”

    Within days of the release of the final rule, a group of hospitals and health organizations—including the American Hospital Association, the Association of American Medical Colleges, and America’s Essential Hospitals—filed suit to stop the cuts. Since at the time of filing of that first complaint, the reduction in reimbursement was not yet effective, the case was dismissed. In 2018, shortly after the Court of Appeals upheld the district court’s dismissal, Plaintiffs refiled the case. By that time, the rule had become effective and Plaintiffs had presented reimbursement claims. Thus, procedural concerns leading to the 2017 dismissal had been resolved.

    Plaintiffs’ core allegation was that CMS acted ultra vires (i.e., it lacked the authority) when it reduced the OPPS reimbursement rate for 340B drugs from ASP plus 6% to ASP minus 22.5%. In the 2017 rulemaking, CMS had based its action on 42 U.S.C. § 1395I(t)(14)(A)(iii)(II), which authorizes CMS to “calculate[] and adjust[]” the statutory benchmark rate of ASP plus 6% as “necessary.” CMS claimed that the statute does not impose any limits on its authority to adjust the rates, as long as they are related to ASP. The judge disagreed and concluded that the statute does not give CMS unbridled authority to change the calculation methodology. In fact, precedent established that the provision allowing CMS to “adjust” does not mean that it is authorized to make “basic and fundamental changes” to statutorily imposed rates.

    Considering the magnitude of the reduction of almost 30% in reimbursement (from ASP plus 6% to ASP minus 22.5%) and the wide applicability (affecting potentially thousands of 340B drugs), the Court concluded that CMS “fundamentally altered the statutory scheme,” thereby exceeding its authority to “adjust[]” the reimbursement rate. The Court agreed that CMS has the authority to base reimbursement rates on the hospitals’ acquisition costs (here the 340B price). However, CMS is so authorized only if it considers hospital acquisition cost survey data, which CMS did not have. Under the statute, if CMS does not have such survey data, CMS must calculate the reimbursement rate based on ASP rather than on acquisition cost, and cannot fundamentally rework the statutory scheme through a purported “adjustment”.

    Although the Court granted Plaintiffs’ motion for a permanent injunction, it did not yet vacate the 2018 rule. Among other relief, Plaintiffs sought a retroactive increase in payment rates for 340B drugs to ASP plus 6% for 2018. However, because of a requirement that all OPPS payment rates be budget neutral, increasing hospital reimbursement rates for 340B drugs retroactively for 2018 would also require retroactive offsets in payments for other items and services, creating a “quagmire that may be impossible to navigate . . . .” Accordingly, the Court decided to postpone a decision on an appropriate remedy, ordering the parties to provide supplemental briefing on this issue. Note that CMS had continued the ASP minus 22.5% reduction through 2019. 83 Fed. Reg. 58818, 58822 (Nov. 21, 2018). However, because Plaintiffs did not explicitly challenge the rule for CY 2019, and could not show that they had submitted a claim for payment under the 2019 rule as required for judicial review, the court declined to review the more recent rule. Presumably, an attempt by CMS to implement the rate reduction for 2019 would be challenged by Plaintiffs, with a similar result.

    Categories: Health Care

    Report on Antimicrobial Drugs for Sale in Food-Producing Animals: Downward Trend Holds; 10 Year Low

    On Dec. 18, 2018, the Center of Veterinary Medicine (CVM) of FDA  announced the publication of its 2017 Report on Antimicrobials Sold or Distributed for Use in Food-Producing Animals.  This report is required by the Animal Drug User Fee Amendments of 2008.  Under that law, every sponsor of an approved or conditionally approved new animal drug application containing an antimicrobial active ingredient must annually report to FDA the amount of each such ingredient in these drug products sold or distributed for use in food-producing animals.  FDA must summarize this information and make it available to the public in annual summary reports.  The data on antimicrobial drugs sales and distribution information are intended to assist FDA in its evaluation of antimicrobial resistance trends as well as its analysis of other issues that may arise relating to the safety and effectiveness of antimicrobial drugs approved for use in food-producing animals.

    The first report was published in 2010.  Since that time,  FDA has taken several measures to reduce the use of antimicrobials in food-producing animals.  Notably, FDA issued Guidance for Industry (GFI) #213,  New Animal Drugs and New Animal Drug Combination Products Administered in or on Medicated Feed or Drinking Water of Food-Producing Animals: Recommendations for Drug Sponsors for Voluntarily Aligning Product Use Conditions with GFI #209.  Based on recommendations in this guidance, all production uses (i.e., non-therapeutic uses) of medically important antimicrobials were eliminated.  As CVM mentions in its press release, this guidance was fully implemented early 2017.  Since that time, medically important antimicrobial drugs can only be used for therapeutic purposes under veterinary oversight.

    The graph below suggests that FDA’s efforts are paying off.

    According to the report, between 2016 and 2017, the sale and distribution of medically important antimicrobials approved for use in food-producing animals that have an approved indication for production use decreased from 5,770,655 kg to 0 kg and the sales and distribution of medically important antimicrobials approved for use in food-producing animals that are sold over-the-counter, decreased from about 8 million in 2016 to 217,280 in 2017.  Overall the reduction in sale and distribution of the relevant drugs decreased by 33% from 2016 through 2017 and by 43% from its peak year (2015).

    Scott Gottlieb issued a statement that he was pleased with the report, but said more work is needed to fight antibiotic resistance.  He pointed to CVM’s 5-year action plan published in September 2018 for additional steps that the FDA plans “to continue fostering our momentum in antimicrobial stewardship across veterinary settings.”

    In its press release, CVM also stressed that the primary goal of its programs is no to reduce antimicrobial sales but “to support the implementation of good antimicrobial stewardship practices . . . to slow the development of antimicrobial resistance” and preserve the effectiveness of antimicrobial drugs.

    The importance of stewardship is recognized by the animal production industry.  On the same day that FDA published its report, major food animal companies from across the supply chain—including retailers, livestock producers, and trade and professional associations such as Elanco Animal Health, Hormel Foods, Jennie-O Turkey Store, McDonald’s Corporation, National Milk Producers Federation, National Pork Board, National Pork Producers Council, National Turkey Federation, Smithfield Foods, Inc., Tyson Foods, Walmart Inc., and Zoetis —announced the publication of a “Framework for Antibiotic Stewardship in Food Animal Production.”  Apparently, these companies came together as a result of a two-year dialogue moderated by the Pew Charitable Trust and the Farm Foundation.  The framework is meant to apply across the animal supply chain.

    AMS Issues Final Rule BE Labeling; Narrow Definition of BE and No Disclosure for Highly Refined Foods

    On December 20, 2018, the Agricultural Marketing Service announced the availability of its long-awaited final rule implementing the national mandatory bioengineered (BE) food disclosure standard (NBFDS).  The history of the law and rule was discussed in our post on the proposed rule.

    In the proposed rule, AMS requested input on, among other things, the definition of BE (e.g., should it include genetic editing) the definition of BE foods (should it include highly refined foods that contain no DNA), the proposed logo to use on BE foods, other electronic means of disclosure, and a possible threshold below which no disclosure statement would be required.  Not surprisingly, AMS received many comments and the final rule is 63 pages long. Some “highlights” include:

    • Use of the term “bioengineered:” AMS maintained the designation BE rather than GMO
    • Definition of bioengineering: In the proposed rule, AMS discussed the reach of the definition and queried whether bioengineering should cover procedures such as gene-editing. Ultimately, AMS did not deviate from the statutory definition.
    • Definition of bioengineered food: AMS limited the definition to foods that do contain modified genetic material; highly refined foods that do not contain detectable modified genetic material do not need to be labeled with a disclosure statement.  For example, even though sugar beets may be a bioengineered food, the refined sugar derived from these sugar beets is not subject to the disclosure requirement.  This definition (which is consistent with the statute) greatly limits the number of foods that would require a BE disclosure statement.
    • Although the rule does not require a BE disclosure statement on foods that contain no detectable modified genetic material, it allows voluntary labeling of such products, which may be labeled as “derived from bioengineering.” The rule does not provide for a “may contain” disclosure; if the food is not derived from a BE food, it may not be labeled with a BE disclosure statement.
    • The rule allows for inadvertent or technically unavoidable BE presence of up to five percent. AMS did not set a threshold for foods that intentionally contain a BE substance, but if the BE ingredient qualifies as an incidental additive (as defined in 21 C.F.R. § 101.100(a)(3)) a BE disclosure statement is not required.
    • List of BE foods: AMS has decided to maintain one list (not two, as considered in the proposed rule) of BE foods that could potentially be offered for sale in the United States.  This list includes foods that are not (yet) commercially available in the United States, such as BE salmon.  This list is subject to annual review (and update).  The rule provides a mechanism for public input into updates to the list, including rulemaking as necessary, as well as consultation with other government agencies.

    The list of BE foods establishes a presumption about what foods might require BE disclosure statement.  However, it does not “absolve regulated entities from the requirement to disclose the BE status of food and food ingredients produced with foods not on the list when the regulated entities have actual knowledge that such foods or food.”

    • Forms of disclosure:
      • On-package text, e.g. “Bioengineered Food,” or “Contains a Bioengineered Food Ingredient” whichever is applicable.
      • Symbol: AMS developed a modified version of one of the proposed symbols; it uses the word bioengineered instead of BE.  The symbol may be in color or in black and white.  The Agency has provided links to various formats for the symbol options (“AMS believes the modified symbol is an appropriate, nondisparaging way to communicate the information” required by the law).
      • Despite comments against the use of an electronic or digital link disclosure, the final regulation allows use such disclosures. As explained by AMS, the law requires that AMS provides this option.  The link must be accompanied by instructions to “Scan here for more food information” or similar language, and the label must provide an option for the consumer to access the disclosure by calling a phone number.
      • A text message disclosure – “Text [command word] to [number] for bioengineered food information.”

    Additional disclosure options are available for small entities and for small packages.

    Retailers that sell bulk/non-packaged foods are responsible for providing the disclosure and may use any of the four standard disclosure options.

    • Enforcement: Failure to make a required disclosure is prohibited. The rule sets forth a process for investigation and AMS action on complaints reporting possible violations.  Pursuant to this process, AMS may investigate such complaints and conduct a records audit of the regulated entity.  AMS will share the results of its investigation with the regulated entity and provide the option for a hearing/appeal.  Following the hearing, AMS makes a final determination.  This determination will be made public and is considered a final agency action (e. subject to challenge in court).  The rule does not set forth specific civil penalties, recalls, or other enforcement mechanisms.

    The rule will be effective on Feb. 19, 2019.  AMS has set an “implementation date,” “a voluntary compliance date,” and “a mandatory compliance date.”  The “implementation date,” (Jan. 1, 2020 for all but small entities, and Jan. 1, 2021 for small entities) is described as the date by which the regulated entities should begin “identifying the foods that will need to bear a BE disclosure, the records necessary to meet the recordkeeping requirements, and the type of BE disclosure they will use on their products.”  The “voluntary compliance date,” (ending on Dec. 31, 2021) is described as the last date on which companies are not mandated to comply, whereas the “mandatory compliance date,” (January 1, 2022) is the date by which all regulated entities (including small entities) must comply with the new regulation.  In other words, from now through Dec. 31, 2021, regulated entities may voluntarily comply with the regulations.  “Very small” food manufacturers, defined as manufacturers with annual receipts below $2,500,000, are exempt from the mandatory BE labeling requirements.

    AMS has created a page containing frequently asked questions and a fact sheet.  AMS plans to provide additional outreach and education to inform regulated entities and the public about the new disclosure terms.

    FDA Formally Recognizes First Public Genetic Information Database

    For the first time, FDA formally recognized a public database containing information about genes, genetic variants, and their relationship to disease.  FDA announced its formal recognition of the genetic variant information in Clinical Genomic Resource (ClinGen) consortium’s ClinGen Expert Curated Human Genetic Data, a database funded by the National Institutes of Health, on December 4.

    This formal recognition is the result of a process outlined in FDA’s guidance document, Use of Public Human Genetic Variant Databases to Support Clinical Validity for Genetic and Genomic-Based In Vitro Diagnostics (Guidance).  See our posts on the draft version of the Guidance, here, and final version, here.

    By formally recognizing public genetic information databases, FDA permits sponsors to use information from a recognized database as a source of valid scientific evidence to support the clinical validity of genetic and genomic-based in vitro diagnostic.  The key benefit is that sponsors should have confidence that FDA has already vetted the database, and sponsors do not have to expend resources to collect the same data on their own.

    FDA’s announcement explains that FDA’s review of ClinGen included a review of its standard operating procedures (SOPs) and policies.  This review included “processes and validation studies for variant evaluation, data integrity and security, and transparency of all evidence.”  Additionally, FDA reviewed how ClinGen “qualifies and approves researchers and clinicians to evaluate variants, including conflict of interest and disclosure policies.”

    FDA also issued a lengthy decision summary, detailing the basis for its recognition of the ClinGen database.  The decision summary describes in detail all information FDA reviewed in deciding to recognize the database.

    Notably, the decision summary includes a section titled “Scope of Recognition.”  This section states that the recognition is for the use of the ClinGen database “for germline variants for hereditary disease where there is a high likelihood that the disease or condition will materialize given a deleterious variant (i.e., high penetrance).”  FDA’s Guidance did not specify that the scope of FDA recognition would be limited to certain applications, and doing so can limit the usefulness of FDA recognition.  It remains to be seen how strictly FDA will apply the limited scope of recognition when a sponsor relies on data from a recognized database in a premarket submission.

    FDA plans to review FDA-recognized databases annually to verify that they continue to follow their SOPs and data collection practices.  As noted in our post on the draft version of the Guidance, it is unclear whether undergoing regular FDA scrutiny will be appealing to database administrators.  This formal recognition is perhaps not only a test case for how sponsors may use database information in supporting a premarket submission, but also how well database administrators will tolerate regular FDA review in order to maintain recognized status.

    Farm Bill Creates Legal Framework for Hemp, But Challenges Remain

    In a rare display of bipartisanship in Washington, Congress has passed, and the President has signed, the Agricultural Improvement Act of 2018.  The agricultural legislation is far-ranging, but its most significant aspect from a controlled substance perspective is that it removes “hemp” as defined in the legislation from control under the federal Controlled Substances Act (“CSA”).  The Farm Bill also establishes general requirements of U.S. Department of Agriculture (“USDA”) and state and Indian tribal regulatory plans for oversight of hemp producers.  If recent inquiries about the Farm Bill and the Agricultural Act of 2014 are a gauge, there is rampant misinformation about what effect the new legislation will have on hemp, marijuana and cannabidiol (“CBD”).  We thought it valuable to explain what the Farm Bill does, and does not, authorize.

    The Farm Bill removes “hemp” from the CSA definition of “marijuana,” and expressly excludes THC in “hemp” from scheduling under the CSA.  Consistent with the definition of “industrial hemp” under the Agricultural Act of 2014, the Farm Bill defines “hemp” as “the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol [“THC”] concentration of not more than 0.3 percent on a dry weight basis.”  Consequently, any Cannabis plant and plant part with a THC concentration of 0.3 percent or less is no longer a controlled substance, and any product derived from the plant or parts of the plant is also not controlled.  By the same token, a Cannabis plant and any part of a Cannabis plant that contains a THC concentration above 0.3 percent on a dry weight basis is not “hemp,” and remains a schedule I controlled substance unless otherwise excluded from the CSA definition of marijuana.  THC not “in  hemp” also remains controlled under the CSA as a schedule I controlled substance.

    Hemp, like marijuana, derives from the Cannabis sativa plant.  Unlike marijuana, hemp lacks significant THC, the cannabinoid that produces psychoactive effects in humans.  And unlike marijuana, hemp is an agricultural commodity used in the production of a wide array of products including paper, rope, clothing, personal care products like lotions and shampoos, industrial solvents, and even conventional foods and dietary supplements.  By removing hemp and THC in hemp from control, the Farm Bill fosters hemp manufacturing and commerce.

    Turning specifically to CBD, the effect of the Farm Bill is that CBD and other cannabinoids derived from hemp are not controlled.  CBD derived from a Cannabis plant or part of Cannabis plant that is not hemp, remains a schedule I controlled substance under the CSA unless it is excluded from the definition of marijuana.

    By default, the USDA will exercise primary regulatory authority over hemp production in the U.S. under the Agricultural Marketing Act of 1946 (“AMA”), as amended by the Farm Bill.  However, the AMA authorizes the states and Indian tribes wishing to exercise primary regulatory authority over hemp production within their boundaries to submit regulatory plans to the USDA.  The state or tribal regulatory plans must include:

    • Maintenance of relevant information about the land on which hemp is produced, including a legal description of the land, for at least three years;
    • A procedure for testing hemp THC concentration levels;
    • A procedure for disposal of plants that exceed hemp THC levels, and products from those plants;
    • A procedure to comply with enforcement provisions specified in the AMA;
    • A procedure for conducting random, annual inspections of hemp producers;
    • A procedure for submitting hemp production information to USDA; and
    • Certification that the state or tribe has adequate resources and personnel to implement required hemp production procedures.

    The AMA gives USDA 60 days to review a state or tribal plan, provides for auditing of such plans, and dictates how to address a state or tribe’s non-compliance with its plan.

    In the absence of a state or tribal plan, USDA will regulate hemp production under a federal regulatory framework that includes components similar to those summarized above, and that must be established in consultation with the Attorney General.  The AMA stipulates that hemp producers not subject to state and tribal plans must obtain a license issued by USDA.

    Although enactment of the Farm Bill obviously eliminates a major obstacle for production and marketing of hemp and its derivatives (including CBD), it’s not clear how production and marketing of such products can proceed pending USDA’s issuance of implementing regulations and the approval of state or tribal plans.  The AMA directs USDA to issue regulations and guidance “as expeditiously as practicable,” but some delay seems inevitable.  In the interim, the AMA states that production of hemp in a state or tribal territory that does not have a USDA-approved plan is unlawful unless the producer has a license from USDA.  Further, USDA must report production of hemp without a license to the Attorney General.

    Also worth bearing in mind is that, while hemp and products derived from hemp are no longer federally-controlled substances, they remain subject to Food and Drug Administration requirements and restrictions – a point driven home in this statement by Commissioner Gottlieb.  As noted in the statement, FDA’s current view is that “it’s unlawful under the FD&C Act to introduce food containing added CBD or THC into interstate commerce, or to market CBD or THC products as, or in, dietary supplements, regardless of whether the substances are hemp-derived.”  It remains to be seen whether FDA will initiate rulemaking to resolve that issue.

    An additional potential obstacle lies in the fact that the use of any ingredient derived from hemp in food is subject to the premarket approval requirement applicable to food additives, unless that use is generally recognized as safe (“GRAS”).  There is hope on that front, as FDA took the opportunity to concurrently announce the issuance of letters of no objection to three GRAS notices for ingredients derived from hemp seed that “contain only trace amounts of THC and CBD, which the seeds may pick up during harvesting and processing when they are in contact with other parts of the plant.”

    Finally, although a number of states authorize the cultivation, processing and sale of hemp and hemp products, those substances may remain controlled substances in other states.  The AMA expressly disclaims any intent to preempt or limit “any law of a State of Indian tribe that…regulates the production of hemp… and is more stringent” than the AMA.

    Categories: Cannabis

    DOJ Wants It Both Ways: Case Satisfies Materiality Standard, but Still Merits Dismissal

    Drug and device manufacturers that sell FDA-approved products reimbursed by the federal government should stay abreast of the pending Supreme Court petition in United States ex rel. Campie v. Gilead Sciences, Inc. (the factual and procedural background is summarized here and here).  In short, the relators allege the company made misrepresentations to FDA that led to product approval and ultimately payments by the federal government; the company’s response is that the alleged misrepresentations were not material to the government’s decision to approve or pay for the products, and therefore, no False Claims Act liability results.  Even though the government declined to intervene in this matter several years ago, in April, the Court invited the Solicitor General to file a brief expressing the view of the United States.  The government’s Statement of Interest, filed seven months later, addresses a slightly modified issue from the question presented by Gilead:

    Whether the government’s continued payment for a product, after learning of allegations that the manufacturer had made misrepresentations to the government regarding that product, requires dismissal at the pleading stage of a suit under the False Claims Act, 31 U.S.C. 3729 et seq., on the ground that any misrepresentations were not material as a matter of law.

    Not surprisingly, the government supports the Ninth Circuit decision that the relators had adequately alleged “materiality” under the False Claims Act: while the evidence may support that the alleged misrepresentations were not material to the government’s decision to pay for the drugs, the fact of continued payments “did not by itself” require dismissal of the case at the pleading stage. This position is consistent with DOJ’s filings in other matters involving the Escobar materiality standard.

    What is surprising, however, is the gratuitous statement the government offered about its plan to affirmatively seek dismissal of the case should it be remanded to the district court.  Recall that in January, DOJ issued a memo instructing attorneys handling False Claims Act cases to affirmatively seek dismissal of a qui tam complaint under certain circumstances.  We have yet to see the Granston memo in action, until now. Although not citing it directly, the government’s brief claims that continued litigation could result in “burdensome discovery and Touhy requests for FDA documents and FDA employee discovery (and potentially trial testimony),” which would distract from the Agency’s public health mission.  The government concluded that “allowing this suit to proceed to discovery (and potentially a trial) would impinge on agency decision-making and discretion and would disserve the interests of the United States.”

    Now, we have learned (hat tip to Scott Stein @ Sidley) that the United States has begun filing motions to dismiss several other cases pending throughout the country.  DOJ argues that it has the power to dismiss a qui tam action under either of the two standards adopted by the courts, one which grants DOJ “an unfettered right to dismiss” a qui tam action (called the Swift standard), and the other that requires a “rational relationship” between the government’s decision to dismiss and a legitimate government interest.  The Swift standard, based on Swift v. United States, 318 F.3d 250 (D.C. Cir. 2003), is preferred by DOJ, and is based on the general principle of separation of powers: the Executive Branch not courts should decide whether to pursue litigation on behalf of the United States.

    The rational relationship test requires the United States to (1) identify a “valid government purpose” for dismissing the case, and (2) show a “rational relationship between dismissal and accomplishment of the purpose.”  If the government satisfies this test, the relator bears the burden to demonstrate that the dismissal is “fraudulent, arbitrary and capricious, or illegal.”  In affirmatively moving to dismiss these cases, the government cites to the substantial litigation burden on the United States even if it is not a party.  These costs include:

    • Monitoring the litigation
    • Collecting, reviewing, processing and producing documents
    • Screening and redacting patient health information
    • Preparing agency witnesses for depositions
    • Filing statements of interests
    • Addressing relator’s interpretation of laws

    DOJ claims that its lawyers in the Civil Division’s Fraud Section have spent collectively more than 1500 hours on the matters it seeks to dismiss; this number does not include the time spent by the AUSAs throughout the country, the law enforcement agents assisting the investigation, or the attorneys from the affected agencies.

    In a final kiss of death, DOJ states that the relator’s case conflicts with the policy and enforcement prerogatives of the federal government’s healthcare programs and would undermine common industry practices the government deems appropriate and beneficial.

    Assuming the relators in these matters cannot meet their burden of showing the government’s decision to dismiss is “fraudulent, arbitrary and capricious, or illegal,” these lucky defendants had Christmas arrive a week early.

    Categories: Enforcement

    Comment on FDA’s Notice of Intent to Consider the Appropriate Classification of Hyaluronic Acid Intra-articular Products Intended for the Treatment of Pain in Osteoarthritis of the Knee Based on Scientific Evidence

    On December 18, 2018, FDA published in the Federal Register a new docket entitled, “Notice of Intent to Consider the Appropriate Classification of Hyaluronic Acid Intra-articular Products Intended for the Treatment of Pain in Osteoarthritis of the Knee Based on Scientific Evidence.

    This document is quite unusual, to say the least. Without fanfare, FDA has suddenly announced that products regulated as Class III devices for 23 years “may” actually be drugs. FDA invites holders of device approvals to seek a classification decision the next time they want to make a change to the product.

    Let’s back up and start at the beginning: Under section 201(h) of the Federal Food, Drug, and Cosmetic Act (FD&C Act) (21 U.S.C. 321(h)) a device “does not achieve its primary intended purposes through chemical action within or on the body,” among other things. HA is introduced to the synovial fluid of the affected knee joint via injection, with the intention of treating pain.

    Since 1995, FDA has classified these injectable products as devices. The basis for classifying HA as a device has been FDA’s conclusion that this product achieves pain reduction in an osteoarthritic knee via mechanical or physical actions at the joint (e.g., shock absorption). The first premarket application (PMA) was filed in 1995 and approved in 1997 (P950027). Since that time, there have been 198 separate approvals of either PMAs or PMA supplements (mostly the latter). The most recent one was 12 days ago, on December 6, 2018 (P080020 S031).

    Now, FDA has suddenly issued a notice suggesting a new scientific theory that would necessarily require classifying these products as drugs. FDA’s summary of the notice (p. 1) states:

    The Food and Drug Administration (FDA) is announcing our intent to consider the appropriate classification of hyaluronic acid (HA) intra-articular products intended for the treatment of pain in osteoarthritis (OA) of the knee. Although HA products intended for this use have been regulated as devices (Procode MOZ; acid, hyaluronic, intra-articular), the current published scientific literature supports that HA achieves its primary intended purpose of treatment of pain in OA of the knee through chemical action within the body [which would require classification as a drug]. Because HA for this use may not meet the definition of a device, sponsors of HA products who intend to submit a premarket approval application (PMA) or a supplement to a PMA for a change in indications for use, formulation, or route of administration are encouraged to obtain an informal or formal classification and jurisdiction determination through a Pre‑Request for Designation (Pre-RFD) or Request for Designation (RFD), respectively, from FDA prior to submission. If a sponsor believes their product meets the device definition, they may provide relevant evidence in the Pre-RFD or RFD.

    As a procedural matter, this approach does not seem sensible. If FDA believes that new science requires the agency to re‑classify HA injectables for the knee as drugs, then it would make more sense to announce the concern, conduct a public proceeding to gather all the appropriate information and views, and make a class‑wide decision, with clear guidance on the transition and implementation of the decision. The sudden change without public input will deprive FDA of receiving broad feedback.

    Instead, FDA has expressed doubt about the classification of all these products but only “encourages” PMA holders to seek classification decisions via the Pre‑RFD or RFD processes, and only if they are making a change to their product. This approach seems likely to result in inconsistency and expense, with little clarity. Will these RFD reviews really have pre‑determined outcomes, based on the notice? Nothing in the notice suggests that the science FDA is citing would apply to some HA products but not others. If so, why bother with case‑by‑case decision making at all? Why not take a class‑wide approach, and solicit comments?

    Practical questions come to mind. If a PMA‑holder complies with the Quality System Regulation (QSR) for device manufacturing, would they be required to revamp their operations to comply with the Good Manufacturing Practice (GMP) regulation for drug manufacturing? That could be expensive and time‑consuming. How long would they have? Would companies submit Medical Device Reports (MDRs) for one version and Adverse Event Reports (AERs) for a product with new labeling deemed a drug? It is more than a little strange that the notice does not try to anticipate and answer the obvious practical questions that PMA‑holders will immediately ask.

    Under the FD&C Act, a Pre‑RFD/RFD request is voluntary. It will be interesting to see whether the Pre‑RFD/RFD process will remain truly voluntary or if the Center for Devices and Radiological Health (CDRH) will refuse to process new PMAs and PMA supplements for HA products unless the applicant first obtains a Pre‑RFD/RFD decision. If CDRH does continue to process PMAs and PMA supplements for HA products, it would probably be advisable for PMA holders to simply skip submitting a Pre‑RFD/RFD request, since there is only a downside, which is reclassification as a drug.

    Finally, if new science may necessitate upsetting long‑settled industry regulatory expectations, can we now expect that devices now inappropriately regulated as drugs will be moved to their rightful domain as well? If this type of notice can be issued announcing an intent to consider reclassifying devices as drugs, then perhaps we will see additional notices in the coming years, announcing an intent to consider reclassifying drugs as devices. Over the years, we have expressed our concerns about the product jurisdictional process (for example, here). This notice only reinforces our concerns.

    Farm Bill Resolves Issue of Added Sugar Declaration for Single Ingredient Foods

    As we previously reported, one of the main components of FDA’s 2016 final rule to update the Nutrition Facts is the mandatory requirement for a declaration and a daily value (DV) for “added sugar” for both sugars added to processed foods as well as foods “packaged as such,” including a bag of table sugar, jar of honey or container of maple syrup.  The requirement to declare added sugars on foods “packaged as such” created confusion.  Industry, particularly honey and maple syrup manufacturers, objected to the requirement and argued that the declaration of added sugars was misleading.  Thus far, FDA had not come up with an acceptable solution to this issue.  A draft guidance allowing a disclaimer yielded many comments and FDA withdrew the draft guidance.  FDA indicated it would act swiftly and promised a final guidance addressing this issue early in 2019.

    Well industry need no longer wait for FDA.  The issue has been resolved by Congress.  Under section 12516 of the Agriculture Improvement Act of 2018, also referred to as the Farm Bill of 2018,

    [t]he food labeling requirements under section 403(q) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 343(q)) shall not require that the nutrition facts label of any single-ingredient sugar, honey, agave, or syrup, including maple syrup, that is packaged and offered for sale as a single-ingredient food bear the declaration “Includes X g Added Sugars.”

    In other words, single ingredient foods are exempt from the added sugar declaration.  It seems a common-sense solution.

    National Academies of Sciences Releases Report on Science of Patient Input, Citing Input from HP&M’s James Valentine

    On December 13, 2018, the National Academies of Sciences, Engineering, and Medicine released the proceedings of a May 2018 expert workshop entitled “Advancing the Science of Patient Input in Medical Product R&D: Towards a Research Agenda.  The workshop, hosted by the Academies’ Forum on Drug Discovery, Development, and Translation focused on approaches to:

    1. Understanding the experience of patients with a disease or a medical condition;
    2. Gaining insights on patient perspectives and preferences regarding the benefits and risks of treatments; and
    3. Considering way that patient input could further continuous improvement of clinical trial development.

    Experts across a range of backgrounds, including HP&M’s James Valentine, were convened at the workshop to discuss their experiences with collecting, analyzing, and applying patient input so that those approaches could be applied more broadly across medical product development.  In addition, experts in the development of patient reported outcomes (PROs) were invited to explore lessons learned from that field.  Ultimately, the goal was to explore early and clinical R&D applications for soliciting patient input that can help inform medical product decision-making.

    The report documents contributions by speakers and participants alike in a 9-page summary.  Here are some noteworthy excerpts:

    • Theresa Mullin (FDA Center for Drug Evaluation and Research): “It is important to understand what aspects of disease burden and treatment matter most to patients and their families and how to measure them, [and] what aspects of clinical trials can be better tailored to meet the needs and interests of potential clinical trial participants…”
    • Mats Hansson (Uppsala University): “…there is no consensus on the definition and role of patient preferences or on how to conduct patient preference studies []. The literature review identified 32 patient preference exploration and elicitation methods that researchers have used when developing medical products and devices.”
    • Kathryn O’Callaghan (FDA Center for Devices and Radiological Health): discussing how CDRH now used patient preference information (PPI) to assess risk tolerance in a case involving at-home renal devices, “[o]ne finding was that patients expressed a range or a heterogeneity of preferences showing the importance of not oversimplifying with assumptions that they all want the same thing. Another key finding was that a substantial portion of patients was willing to accept risk levels associated with at-home, self-care HHD. Considering the results of this study, FDA cleared a change in the indications for use to remove the care partner requirement.”
    • Lynn Hagger (AstraZeneca): discussing an onsite study simulation involving 18 clinical trial participants, “[a]fter consulting with the mock trial participants, AstraZeneca made 21 changes to its clinical trial protocol… The changes AstraZeneca made increased recruitment and retention in two subsequent trials and produced a net savings of $1.1 million.”
    • Ron Bartek (Friedreich’s Ataxia Research Alliance): “beginning discussions with trial sponsors as soon as they have a therapeutic candidate and before designing their protocols could be beneficial. Trial sponsors could use patient generated natural history data to identify the optimal population for a particular therapeutic candidate and to define their inclusion and exclusion criteria, as well as primary and secondary endpoints…”

    HP&M’s Valentine Recommends Qualitative Methods to Solicit Patient Experiences in Clinical Trials

    The National Academies of Sciences report includes a suggestion made by HP&M’s James Valentine at the workshop to incorporate patient questionnaires or other qualitative techniques (e.g., patient interviews) to help sponsors and regulators assess the success of clinical trials.  This is an approach that may be particularly useful in rare disease clinical trials, which face methodological challenges of small, heterogeneous patient populations and a lack of validated, disease-specific outcome measures.  Questions can be developed to capture changes that patients experienced during the trial, which may not be of things formally captured by trial endpoints.  When reported in the patients’ own words, this patient experience data can add context to the clinical meaningfulness of clinical trial results.

    Valentine, in partnership with a CRO and industry collaborator, has a forthcoming manuscript that will provide a methodologic overview for such an approach – so stay tuned!

    New Data Integrity Guidance Imposes Significant Burdens, Yet FDA Claims It Does Not Regulate by Guidance

    FDA issued its final Guidance on Data Integrity on December 12.  The federal government has sworn off regulating by guidance (see blogpost here about Brand memo).  In fact, at the Food and Drug Law Institute (FDLI) Enforcement and Litigation Conference that was occurring simultaneously with release of the guidance,FDA Chief Counsel Stacy Kline Amin repeated the principle that the government does not regulate by guidance, and cited the “Brand Memo” as authority.  Despite those assurances, it would be hard to argue that the data integrity guidance does not represent an attempt to regulate by guidance.

    To begin with, the guidance cites as support for its propositions (you guessed it!) ten other FDA Guidances; some of them are cited multiple times.  Perhaps more importantly, the final guidance, which governs manufacturing of finished dosage form drugs and by extension Active Pharmaceutical Ingredients (the guidance said that it is “consistent with CGMP for active pharmaceutical ingredients”), imposes onerous regulatory burdens.  In particular, one section jumps out at the authors of this article.

    Written in Question and Answer Format, Question 8 of the final guidance asks, “How often should audit trails be reviewed?”  (Audit trails are records showing when and how electronic manufacturing and testing data were created, whether data have been altered or deleted, and other important information.)  The answer is startling.  Answer 8 states that “[i]f the review frequency for the data is specified in CGMP regulations, adhere to that frequency for the audit trail review.  For example, 211.188(b) requires review after each significant step in manufacture, processing, packing, or holding, and 211.22 requires data review before batch release.  In these cases, you would apply the same review frequency for the audit trail”.  In other words, in these instances, the audit trails must be reviewed for each batch before the batch can be released for distribution, despite there being no regulatory authority for this requirement.

    This is a significant regulatory burden: in addition to reviewing entries on either the electronic or paper batch records to ensure all proper manufacturing steps have been performed, critical manufacturing checks have been reviewed and confirmed by a second individual, ingredients have been properly weighed and added, labels are accurate, all printed labels have been accounted for, and finished product meets required specifications (all of which are long-standing and well-understood requirements), Quality Control reviewers will now be compelled to review records maintained on electronic recording equipment (such as weight scales, laboratory testing and analysis equipment including High Performance Liquid Chromatographic equipment, and meters establishing density or acidity of finished product or in-process samples) for every batch.  This is a requirement that hardly springs naturally from the relevant regulations, 21 C.F.R. §§ 211.88(b) and 211.22.

    Even more curiously, the apparent requirement that audit trail data integrity be reviewed for every batch before the batch can be released appears to be more stringent than the answer to the same question in the draft of this guidance that was issued only a couple of years ago.  We previously blogged about the draft guidance here and here.  That draft guidance answered the same question (although it was Question 7) as follows: “FDA recommends that audit trails that capture changes to critical data be reviewed with each record and before final approval of the record.”  So, in the draft guidance it was a mere “recommendation,” and now it appears to be a requirement (“adhere to that frequency for the audit trail review” instead of “FDA recommends that you adhere to that frequency for audit trail review”).

    What has changed?  Certainly not the Federal Food, Drug, and Cosmetic Act in this regard. Not the regulations at 21 C.F.R. Part 211 on this issue.  This seems like more regulation by guidance to us.  And, although the guidance states (as do all guidance) that it does not establish legally enforceable responsibilities unless specific regulatory or statutory requirements are cited (note that none of the regulations FDA cites to make any reference, express or implied, to audit trail review), woe to the quality unit that even dares to claim that audit trail review is consistent with cGMP if done under another standard.

    Nor is this the only example of regulation by guidance in the document.  Question 15 asks: “Can an internal tip or information regarding a quality issue, such as potential data falsification, be handled informally outside of the documented CGMP quality system?”

    FDA’s response to this question is: “No. Regardless of intent or how or from whom the information was received, suspected or known falsification or alteration of records required under parts 210, 211, and 212 must be fully investigated under the CGMP quality system to determine the effect of the event on patient safety, product quality, and data reliability; to determine the root cause; and to ensure the necessary corrective actions are taken (see §§ 211.22(a), 211.125(c), 211.192, 211.198, 211.204, and 212.100).”

    Yet none of these regulatory provisions actually require that firms investigate an internal tip or information regarding a quality issue within the cGMP quality system.

    Another example is question 1(a), in which the agency asks “what is data integrity?” The answer states that “[f]or the purposes of this guidance, data integrity refers to the completeness, consistency, and accuracy of data. Complete, consistent, and accurate data should be attributable, legible, contemporaneously recorded, original or a true copy, and accurate (ALCOA).”  Under footnote 5, the agency’s stated support for the proposition that ALL data for drug manufacturing should be “contemporaneously recorded” is the regulatory requirements at 21 CFR 211.100(b) and 21 CFR 211.160(a), which granted, do provide that documentation take place “…at the time of performance…”.

    However, these regulatory provisions are very narrowly tailored and refer specifically to, in the first instance, production and process control functions and, in the second instance, laboratory controls.  The agency does not cite to any additional regulatory authority for the general notion enunciated in the answer to question 1(a) that ALL data must be contemporaneously recorded.

    Later in the document, in response to question 1(c) the guidance states: “CGMP-compliant record-keeping practices prevent data from being lost or obscured and ensure that activities are documented at the time of performance (see §§ 211.68, 211.100, 211.160(a), 211.188, and 211.194)” [Emphasis added], and yet none of these additional regulatory citations speak to the requirement that all data must be contemporaneously recorded.

    Another example is the requirement that ALL data generated and recorded in all drug facilities be “attributable” (meaning ascribed to a particular individual in the facility) as described by answer 1(a) and footnote 5.  Yet, again the regulatory citations for this requirement are sorely lacking.  Of the ones cited in the guidance (§§ 211.101(d), 211.122, 211.186, 211.188(b)(11), and 212.50(c)(10)) only the last three regulatory provisions speak directly to the “attribution” issue, and again they are very narrowly tailored and only speak to, in the first instance, master production and control records, in the second instance, batch production and control records and, in the third instance, Positron Emission Tomography drug production and process control records!

    We could go on and on but suffice it to say that the guidance on data integrity is replete with instances of regulation by guidance.  We had hoped that an administration that claims to be concerned about over-regulation would make sure to prevent this, whether it is the result of notice and comment rulemaking, or the result of the more pernicious “regulation by guidance.”

    Comments on FDA’s Proposed Rule Governing the De Novo Classification Process

    On December 4, 2018, FDA issued a proposed rule that would govern the de novo classification process.  After a comment period, it may be re‑issued as a final rule to take affect 90 days after publication.   While we agree with FDA’s goal of creating greater consistency and predictability in the de novo process, the proposed rule appears in some respects to unduly increase the burden on applicants.  In this regard, the proposed rule would make the de novo process look more like review of a premarket approval (PMA) application than a 510(k) submission.  It is also not clear if FDA has statutory authority to implement certain features of the proposed rule.

    As a reminder, de novo classification allows the placement of novel device types into Class I and Class II, rather than burdening them with the Class III, PMA approval process that applies by statutory default to all new device types.  After a new device type is classified in Class I or Class II via de novo classification, similar devices within the same generic type can proceed to market based upon 510(k) clearance.

    Most of FDA’s classification regulations were adopted for devices on the market in the 1970s and 1980s.  As time has passed, more novel device types have been developed.  The de novo process is an important way to expand the classification regulations to incorporate new Class I and Class II device types.

    Until recently, there was little written guidance from FDA as to how de novo reviews would be conducted.  In recent years, FDA has issued several guidance documents on various aspects of the de novo program (for example: here, here and here).  A regulation would harden “recommendations” in a guidance document into “requirements” that must be followed.  A regulation gives both industry and FDA less flexibility, but it also gives greater certainty about the rules of the road.

    In general, the proposed rule is consistent with FDA’s current administrative practice in processing de novo submissions.  The proposed rule appears structurally similar to the 510(k) regulation (21 C.F.R. Part 807, Subpart E) and the PMA regulation (21 C.F.R. Part 814), in setting forth requirements for (i) the format and content of a de novo submission, (ii) the procedures governing FDA’s review, and (iii) grounds for denial.

    The proposed content requirements are nearly the same as those FDA proposed in its draft guidance, Acceptance Review for De Novo Classification Requests (Nov. 2017) (see our blog post here).  But, there are several additions that will likely increase the burden on applicants.  For example, de novo sponsors will be required to submit:

    • a bibliography of all published and unpublished reports on the device and any other information relevant to a device’s safety or effectiveness;
    • samples of the device and its components, if requested by FDA; and
    • advertisements for the device.

    These requirements are elements of a PMA application, not the 510(k) submission.  21 C.F.R. § 814.20(b)(8)‑(10).  With regard to advertisements, in particular, the PMA regulation is limited to “advertising that constitutes labeling under section 201(m) of the act.”  Id., § 814.20(b)(10).  In contrast, this proposal is broader.  It is not clear what the justification is, since FDA does not have authority to over the advertising of devices classified into Class I or II.  Perhaps they would justify this request based on the need to determine the intended use.  See id., § 801.4 (defining intended use to include labeling and advertising).

    Unlike the 510(k) regulations, and more like the PMA regulations, the proposed de novo rule specifies the types of information required in a submission, including various types of non‑clinical data.  Compare 21 C.F.R. § 807.92(b)(1) with id. § 814.20(b)(6)(i).  This specification will at least provide greater certainty about what is required.  One potential omission is acknowledgement of the types of tests done for in vitro diagnostic devices, which have been a significant percentage of de novo clearances.

    The procedure for review of submissions in the proposed rule generally follows FDA’s current administrative approach.  Interestingly, the proposed regulation states that a de novo request can be refused for filing if “the requester has not responded to, or has failed to provide a rationale for not responding to, deficiencies identified by FDA in previous submissions for the same device.”  In the preamble to the proposed rule, FDA states that a de novo can be refused for filing if a requester has not provided “a complete response” to such deficiencies.

    The completeness of a response is, of course, in the eye of the beholder.  We hope that FDA will clarify in the final rule that a submission will be accepted if there is a response to prior deficiencies, with evaluation of the completeness and adequacy of the response occurring during the review on the merits.  This issue is of particular concern in light of problems in the 510(k) Refuse‑to‑Accept (RTA) process in the early days of its implementation, in which substantive questions were improperly raised.

    The proposal sets forth 11 grounds on which the Agency may deny a de novo request.  In the PMA context, the grounds for denial are set forth in the Federal Food, Drug, and Cosmetic Act (FDCA) and are mirrored in the implementing regulation.  In the 510(k) context, the statute defines “substantial equivalence” and the implementing regulation provides that failure to establish substantial equivalence in accordance with this definition is grounds for denial.  In the de novo context, the statute authorizes only two potential grounds for denial:  (i) existence of a predicate device that provides a reasonable basis for a substantial equivalence review; or (ii) a determination by FDA that “the device submitted is not of low‑moderate risk or that general controls would be inadequate to control the risks and special controls to mitigate the risks cannot be developed.”  It seems potentially unauthorized for the implementing regulation to exceed the FDCA by specifying, as it does, nine additional grounds for denial.

    Currently, FDA promptly posts letters granting de novo authorization in its de novo database.  Unfortunately, FDA takes considerably longer to post decision summaries, and it has taken months (and sometimes years) before new classification regulations are published in the Federal Register.  For example, the classification regulation for 23andMe’s DEN140044 was published nearly three years after the de novo classification was granted.

    More recently, FDA has been posting decision summaries more promptly in the de novo database.  FDA should add a provision to the proposed rule establishing a definite timeline for posting both decision summaries and issuing Federal Register notices.  FDA publishes 510(k) Summaries (and decision summaries for 510(k)s for IVDs) within 30 days of clearance.  That would be a reasonable timeline for publishing the results of de novo classification decisions.

    We found it interesting that the proposed rule states that FDA will decide a de novo request within 120 days.  That deadline is already in the statute, so FDA had to adopt the same timeline in the proposed rule.  In actuality, though, FDA routinely misses this deadline.  In the MDUFA IV Commitment Letter, FDA publicly agreed only to approve/deny 50% of de novo requests within 150 days (i.e., 30 days beyond the statutory deadline), with the other 50% presumably being decided somewhere north of 150 days.  In conjunction with the proposed rule, FDA should request appropriate funding from Congress to staff the de novo program to meet the 120‑day statutory requirement.  All parties would benefit.

    Possibly the most controversial feature of the proposed rule is that it would give FDA authority to inspect submitter’s manufacturing facilities and clinical trial sites.  Here is the proposed regulatory provision (§ 860.256(c)):

    (c) Prior to granting or declining a De Novo request, FDA may inspect relevant facilities to help determine:

    (1) That clinical or nonclinical data were collected in a manner that ensures that the data accurately represents the benefits and risks of the device; or

    (2) That implementation of Quality System Regulation (part 820 of this chapter) requirements, in addition to other general controls and any specified special controls, provide adequate assurance that critical and/or novel manufacturing processes produce devices that meet specifications necessary to ensure reasonable assurance of safety and effectiveness.

    Start with manufacturing inspections:  In the 510(k) context, the FDCA expressly forbids FDA from conducting inspections for Quality System Regulation (QSR) compliance, unless “there is a substantial likelihood that the failure to comply with such regulations will potentially present a serious risk to human health.”  FDCA § 513(f)(5).  FDA has declared that it may conduct preclearance inspections for a few device types, e.g., infusion pumps.  Most device types do not meet this standard and preclearance manufacturing inspections are rare.

    In the PMA context, the statute permits FDA to withhold approval if manufacturing facilities do not conform to QSR requirements.  FDCA § 515(d)(2)(C)).  The implementing regulation expressly authorizes conditioning approval on a successful manufacturing inspection.  21 C.F.R. § 814.44(e)(1)(iii).  As a matter of administrative practice, FDA routinely performs QSR inspections prior to granting PMA approval.

    As to de novo classification, the FDCA is silent on whether preclearance inspections are authorized.  Yet, in the proposed rule, FDA grants itself authority to conduct manufacturing inspections when deciding de novo classification requests.  Perhaps recognizing this legal weakness, FDA’s proposal is not a straight‑up right to inspect for QSR compliance.  Rather, FDA purports to authorize itself to inspect whether the applicant’s “implementation” of the QSR “in addition to other . . . controls” (whatever that means) will “provide adequate assurance that critical and/or novel manufacturing processes” will “produce devices that meet specifications necessary to ensure reasonable safety and effectiveness” (proposed § 860.256(c)).

    The actual meaning of this convoluted language is anybody’s guess.  It seems like a questionable effort to tie QSR compliance to device classification.  There is no support in the FDCA for doing so.  On the contrary, the statutory provision that authorizes all the various classification proceedings (FDCA § 513) does not authorize manufacturing inspections, with an express limited exception in the 510(k) context (discussed above).  In practice, none of the classification regulations promulgated in the 1970s and 1980s were associated with manufacturing inspections.  Since a de novo review is in fact the promulgation of a new classification regulation, it would seem that likewise a manufacturing inspection is not authorized for de novo review.  Certainly, there is no express statement anywhere in § 513 that FDA may conduct manufacturing inspections in conjunction with de novo classification proceedings (in contrast to the express authorization in § 515 in connection with PMA approval).

    Apart from the uncertain statutory grounds, this process of inspecting de novo applicants for QSR compliance would create an undue burden on a first comer.  After a de novo is granted, subsequent applicants will proceed through the 510(k) process (for non-exempt devices).  As noted above, FDA is expressly prohibited from inspecting 510(k) applicants for QSR compliance, unless there is a serious risk to health.  Therefore, these second comers will have a lower bar to clearance than the de novo applicant, creating an unevenly applied regulatory scheme.

    The proposed rule is on more solid ground with clinical study site inspections.  FDA has authority to inspect data and information related to investigational devices, including the results of clinical studies evaluating such devices.  E.g., 21 C.F.R. § 812.145.  The statutory authority underlying that regulation is not open to question.

    One wonders also how practical is will be for FDA to routinely conduct clinical and/or manufacturing inspections in a 120‑day time frame for de novo review?  It would be resource‑intensive to complete inspections in this time frame, possibly detracting from the ability to conduct routine inspections or causing FDA to frequently miss the deadline for completing de novo reviews.  With regard to manufacturing, there will also be a substantial burden on companies that have developed novel device types.  These firms are frequently start‑ups that have not completed building out their manufacturing facilities and procedures.  It might be better to conduct an early inspection once they are engaged in actual commercial distribution.

    As to clinical data, although we do not question FDA’s authority or even the need in some cases to conduct inspections, we are already aware of two past de novo requests for which FDA has inspected clinical data and the review time significantly exceeded the 120-day statutory decision deadline.  It is not clear how routine clinical inspections would work as a practical matter or whether FDA envisions such inspections taking place only if there are “for cause” concerns about the integrity or validity of the clinical data.  This point at least needs to be clarified.

    Overall, in our view, the proposed rule is a good idea to bring greater certainty to the de novo process.  If the proposed rule is finalized as‑is, though, it will materially increase the burden on applicants seeking de novo marketing authorization for a low‑risk novel device.  That potential impact is concerning, especially in light of FDA’s recent statements about an intent to increase utilization of the de novo pathway.

    Those in industry who would be subject to the proposed rule may wish to submit comments on the legalities and burdens associated with the proposed rule.  Comments are due by March 7, 2019.

    Categories: Medical Devices

    The FTC and FDA May Face New Hurdles in Injunction Actions

    On December 11, 2018, the authors of this blog post attended the oral argument in Federal Trade Commission v. Shire ViroPharma, Inc., No. 18-1807 (3d Cir. filed Apr. 12, 2018).  We have previously blogged about the case here, here, and here. In a nutshell, Shire examines the FTC’s statutory authority to bring suit in federal court seeking injunctive and equitable relief where the alleged statutory violations at issue have long since ceased. Section 13(b) of the Federal Trade Commission Act (“FTC Act”) (15 U.S.C. § 53(b)) gives the FTC authority to file a case only when the FTC has reason to believe that a defendant “is violating” or “is about to violate” the FTC Act.

    Although it is often hard to predict the outcome of an appeal after hearing the questions and comments of the three-judge court, in this case the Court’s questions and comments suggested that odds are leaning heavily against the FTC winning.  If the FTC does lose, the question will then be how severe an effect the Court’s ruling will have on other FTC enforcement cases. And this is not the only recent court case that poses significant litigation concerns for the FTC.  Two other recent court rulings suggest that courts are revisiting the FTC’s authority to seek equitable relief (including restitution and disgorgement) under the FTC Act § 13(b).  These rulings also may raise an issue that our firm opined on fifteen years ago, namely whether FDA has the authority to seek equitable remedies when it pursues injunctive relief in court.

    What Will an FTC Loss in Shire Mean for FTC Act Enforcement?

    The questions presented to the Third Circuit panel (Smith, J., McKee, J., and Fisher, J.) in Shire centered on what legal standard the FTC must meet in order to adequately allege reason to believe that a defendant “is violating, or is about to violate” the FTC Act under Section 13(b), and whether the FTC met its burden in this case. The judges’ questioning at oral argument strongly suggested that the answer to the latter question will be “no.” The answer to the former question is less clear.

    The FTC’s primary argument in Shire is that the “about to violate” language must be analogized to the standard applied for injunctive relief under other statutes, which would only require the FTC to adequately plead that an alleged violation was reasonably likely to recur. The FTC cited the Third Circuit case of SEC v. Bonastia, 614 F.2d 908 (3d Cir. 1980) for the factors used to determine likelihood of recurrence – factors that do not include a temporal element. The panel appeared to reject the FTC’s proposed standard, with at least Judges Smith and McKee indicating their belief that some temporal consideration must be involved in a determination of whether someone is “about to violate” the law. Chief Judge Smith, in particular, emphasized that the plain language “about to” seems to reflect a degree of imminence.

    The Third Circuit Court’s emphasis on the relatively extreme facts of the Shire case – a five-year delay between the alleged violative conduct and initiation of the FTC’s suit, and no allegations of future circumstances in which Shire could be expected to repeat the alleged misconduct – suggest that the court could simply hold that the FTC had failed to adequately plead even a reasonable likelihood of recurrence and leave the matter there. However, the FTC’s position that the “likelihood of recurrence” includes no explicit consideration of timing may make it difficult for the Court to rule under that standard without altering it to include a temporal factor.

    Assuming that the Court does rule against the FTC with respect to the applicable legal standard under Section 13(b), of course the Commission may seek rehearing or rehearing en banc, and may ultimately seek Supreme Court review. Moreover, a loss in the Third Circuit would still permit the FTC to seek a different result in any state other than New Jersey, Pennsylvania, and Delaware (in those three states, the FTC will have to follow an adverse Third Circuit ruling unless and until it is overturned by the Supreme Court).

    Still, an ultimate loss for the FTC on this issue, particularly if the Court’s reasoning is adopted by courts outside the Third Circuit, would likely result in a longer process to resolve many FTC Act violations. As Shire’s counsel pointed out at oral argument, the FTC clearly has authority to bring an administrative action for violations of the FTC Act without any statutorily imposed temporal limitation (See 15 U.S.C. § 45(b); 16 C.F.R. Part 3). However, the Commission cannot obtain consumer redress through an administrative proceeding. To obtain recompense for consumers in consumer protection cases, the FTC would have to bring and successfully complete an administrative case, overcome a court challenge to a final order, and then file and win a court case seeking equitable relief pursuant to 15 U.S.C. § 57b. Even that process is inapplicable in “competition” cases such as Shire, because 15 U.S.C. § 57b is focused on consumer protection cases. This means that, practically speaking, in a case of harm to consumers where the FTC cannot make a showing of “imminent” future violation, the FTC may well be unable to provide relief to affected consumers.

    The delay associated with pursuing an administrative cease and desist order is one of the reasons that the FTC has filed hundreds if not thousands of cases where the FTC bypasses the administrative process and goes straight to court seeking an injunction.  In consumer protection cases, the FTC seeks relief such as restitution and disgorgement of profits in most such cases.  In many cases, the FTC also seeks and obtains “emergency” relief such as a total freeze of the defendants’ assets. All of this authority would be in jeopardy if the FTC cannot seek and obtain such relief at all, or only after a long administrative process and later court case.

    Of course, even if the FTC loses this case, it can collaborate with other government agencies with consumer protection and antitrust authorities, including the U.S. Department of Justice and State Attorneys General. Such coordination takes additional time, as well as the balancing of agency investigative and enforcement resources. Additionally, the FTC would lose its independence to bring these actions without needing to go through another federal or state agency — the FTC has been fiercely fighting to obtain and retain independent litigating authority for almost fifty years.

    Does Shire Affect the FTC’s (and FDA’s) Pursuit of Equitable Remedies?

    In Shire, the FTC’s brief argued in the alternative that even if the FTC had not adequately alleged a likelihood of recurring violations, the FTC should nevertheless be permitted to go forward with its claim for restitution to consumers who presumably overpaid for one of Shire/ViroPharma’s drugs.  Shire’s brief countered that the FTC failed to adequately plead the statutory prerequisites to bring suit under Section 13(b), thus, the Commission had no right to alternatively seek monetary relief. Shire also noted the Supreme Court’s 2017 ruling in Kokesh v. SEC, 137 S. Ct. 1635, that cast doubt upon agencies’ authority to seek equitable remedies not expressly referenced by the applicable statute.

    This week’s oral argument did not address the question of alternative equitable remedies.  Thus, it is quite possible that the Court will simply rule that the entire case must be dismissed because it was brought too late, without reaching the question of whether the FTC has the right under Section 13(b) to seek restitution and other equitable relief such as disgorgement of profits.

    However, in many respects, the issue of the FTC’s right to obtain equitable remedies in a Section 13(b) suit is of greater importance to the FTC than the standard for determining whether the FTC has satisfactorily alleged that it has reason to believe that the defendant is about to violate the FTC Act.  That issue is largely a timing question, and the FTC usually brings suit much closer to the violative events than it did in Shire.  In contrast, if the courts definitively rule that the FTC has no authority to seek equitable relief in Section 13(b) cases, that result would severely damage most of the FTC’s consumer protection 13(b) cases, where the Commission typically seeks such remedies.

    The question is one of statutory interpretation:  Does Section 13(b) authorize the FTC to seek all forms of equitable relief assuming the court has power to grant any relief at all?  The statute itself specifically authorizes a court to issue a temporary restraining order, a preliminary injunction, or a permanent injunction, but is silent on other forms of equitable relief.  Although the FTC has been successful in arguing to many courts that once a court has jurisdiction over a case seeking injunctive relief, that court has the authority to award equitable relief such as asset freezes, the payment of restitution, and/or the payment of disgorgement of profits, this previously established authority is now being reexamined by the courts.

    Aside from the Third Circuit in Shire, other courts have recently looked at the FTC Act and questioned the FTC’s authority to seek and obtain equitable relief not expressly referenced by Section 13(b). FTC v. Hornbeam Special Situations, an October 2018 decision in the Northern District of Georgia, is a similar case we have blogged about.  More recent is the December 3, 2018 Ninth Circuit ruling in FTC v. AMG Capital Mgmt., LLC.  There, the court ruled in favor of the FTC’s pursuit of equitable remedies: The court conceded that defendant’s argument regarding the FTC’s lack of statutory authority “has some force but it is foreclosed by our precedent.”  However, one Ninth Circuit judge (O’Scannlain) also filed a concurring opinion arguing that the Ninth Circuit’s earlier rulings authorizing the FTC to obtain equitable remedies under Section 13(b), while binding, were “no longer tenable.”  Judge O’Scannlain’s opinion suggested that the Ninth Circuit should hear the case en banc to reconsider its precedent on the issue.  He specifically noted that a separate provision of the FTC Act (15 U.S.C. § 57b), applicable in different circumstances, expressly authorizes alternative equitable relief in certain consumer protection cases, while Section 13(b) is tellingly silent on those remedies. Although the ultimate disposition of the AMG Capital case is not yet clear, Judge O’Scannlain’s concurring opinion should give the FTC reason to worry.

    In light of the developing case law, FDA may also need to be more circumspect in seeking equitable relief when it (through the Department of Justice) files an injunction action under 21 U.S.C. § 332.  That provision authorizes courts to “restrain violations” of the Federal Food, Drug, and Cosmetic Act, but is silent on the court awarding equitable relief as part of the injunction.  The issue of FDA’s authority to seek restitution or disgorgement in a Section 332 action was hotly debated fifteen years ago, when our firm argued in a law review article that FDA lacks this authority.  See Jeffrey N. Gibbs and John R. Fleder, Can FDA Seek Restitution or Disgorgement?, 58(2) Food & Drug L.J. 129 (2003).  FDA disagreed, and in several subsequent court rulings FDA’s position was adopted.  See United States v. Kaminski, 501 F.3d 655, 670 (6th Cir. 2007); United States v. Rx Depot, Inc., 438 F.3d 1052, 1063 (10th Cir. 2006); United States v. Lane Labs-USA, Inc., 427 F.3d 219, 236 (3d Cir. 2005).  FDA has also successfully received such equitable relief via consent decrees.  See, e.g., FDA: Michigan Heart-Lung Bypass Machine Manufacturer (disgorgement of $35 million, E.D. Mich. 2011, link); Bristol-Myers Squibb to Pay More than $515 Million to Resolve Allegations of Illegal Drug Marketing and Pricing (disgorgement of over $25 million, D. Mass. 2007, link). Nevertheless, FDA’s authority to obtain equitable remedies in an injunction suit may now be in as much in jeopardy as the authority of the FTC.

    We will continue to monitor this area of developing case law, and keep readers informed.

    Categories: Enforcement |  Hatch-Waxman

    Failure to File Adverse Event Reports Results in Criminal Pleas for Medical Device Company and Quality Manager

    Duodenoscopes are flexible, lighted tubes that are threaded through the body into the top of the small intestine (duodenum) and allow doctors to see potential problems in the pancreas and bile ducts. Because duodenoscopes are reusable devices, they must be reprocessed (cleaned) after each use to ensure that tissue or fluid from one patient is not transferred when used on a subsequent patient.

    For several years, FDA has been concerned about the reprocessing of duodenoscopes. In 2015, FDA required all manufacturers who make and sell duodenoscopes in the United States to conduct postmarket studies to allow FDA to better understand how duodenoscopes are reprocessed in real-world settings; in March of this year, FDA issued Warning Letters to all U.S. duodenoscope manufacturers for failing to meet their postmarket surveillance study requirements; and just this week, FDA provided interim results of the reprocessing studies and its recommendations.

    Despite all this scrutiny, or maybe because it was already on the government’s radar, one of the manufacturers, Olympus Medical Systems Corporation, and its former quality manager were targeted for their failure to file reports related to known adverse events associated with its duodenoscopes. FDA requires medical device manufacturers to submit Medical Device Reports (MDRs) under 21 C.F.R. Part 803 for an event when they “become aware of that reasonably suggests that one of their marketed devices”:

    (i) May have caused or contributed to a death or serious injury, or

    (ii) Has malfunctioned and that the device or a similar device marketed by the manufacturer [or importer] would be likely to cause or contribute to a death or serious injury if the malfunction were to recur.

    A failure to submit an MDR renders a medical device “misbranded,” and the FDC Act prohibits the introduction of a misbranded medical device into interstate commerce.

    On December 10, 2018, Olympus agreed to plead guilty to three misdemeanor counts of introducing misbranded duodenoscopes into interstate commerce. The plea agreement contains a stipulation of facts describing Olympus’ receipt of information requiring submission of an initial or supplemental MDR, and requires the company to distribute to its U.S. customers a notice about the plea agreement. The company also is required to undertake certain compliance measures specific to MDR processes, akin to those contained in FDA civil consent decrees:

    • Retain an independent MDR expert to inspect and review the company’s policies and procedures;
    • Have the MDR expert conduct periodic reviews of the company’s continued compliance with MDR requirements;
    • Report to FDA and DOJ periodically for 3 years; and
    • Require the President and Board of Directors to periodically review MDR compliance measures and provide certifications to FDA and DOJ regarding those reviews.

    The global settlement was authorized by DOJ’s Assistant Attorney General Joseph Hunt, which permitted the lead prosecutor from the U.S. Attorney’s Office in New Jersey to bind “the United States Attorney’s Offices for each of the other 93 judicial districts of the United States,” a provision that assures the company that another aggressive prosecutor will not bring follow-on charges against the company.

    Hisao Yabe, the former Division Manager for the Quality Assurance and Environment Division, agreed to plead guilty to one count for the same conduct. He stipulated that he was aware of the obligation to file and supplement MDRs, and that he failed to make such submissions even when required. Interestingly, the stipulation notes that he considered whether to submit a supplemental MDR in 2013, but did not file it until 2015. In reviewing the underlying Information, it appears Yabe was in the process of evaluating whether the information it received in 2013 required reporting (e.g., whether the methodology and conclusions of the information were appropriate), and agreed that if a supplemental MDR was required, the company should file it. It is unclear, however, why the company waited until 2015 and what ultimately motivated the filing decision at that time. One can only speculate that the coincident timing of FDA scrutiny resulted in the MDR filing, which three years later, now forms the basis for the criminal charge.

    In addition to the mandatory compliance measures, the company agreed to pay an $80 million criminal fine (which was 2.5 times the profit earned from the duodenoscopes sold during the time period), and a $5 million forfeiture. Yabe faces up to a year in prison and a $100,000 fine; he will be sentenced in March 2019.