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  • The Eleventh Circuit Avoids Opining on the FTC’s Authority to Police Negligent Data Security Practices in Healthcare

    On June 6, the Eleventh Circuit vacated the Federal Trade Commission’s (“FTC’s”) data security-related cease and desist order against LabMD, Inc. (“LabMD”), a diagnostic testing company. The decision was less than satisfactory for many amici who had called on the Court to opine – one way or the other – on the FTC’s authority to police companies’ data security practices.  Instead, the Court focused narrowly on the FTC complaint and order’s lack of specificity, and left open the question of whether mere negligent failure to implement certain security measures (without tangible consumer injury) constitutes an “unfair act” cognizable under Section 5 of the FTC Act.

    The FTC filed an administrative complaint against LabMD in August, 2013, accusing the company of failing to maintain reasonable data security measures.  The FTC alleged that LabMD’s security lapses amounted to an “unfair act or practice” within the meaning of Section 5 of the FTC Act.  Issuance of the complaint followed a lengthy investigation by Commission staff into data security practices at LabMD, begun after Tiversa Holding Company (“Tiversa”) informed the FTC that it had obtained a LabMD file containing 9,300 patients’ personal and health information.  A LabMD employee had inadvertently shared the file through a peer-to-peer data file-sharing network called LimeWire.  Four FTC Commissioners voted unanimously to file the complaint against LabMD. See FTC Press Release:  FTC Files Complaint Against LabMD for Failing to Protect Consumers’ Privacy.

    LabMD moved to dismiss the FTC’s administrative complaint. Consistent with the FTC’s Rules of Practice as amended in 2009, the Commission itself ruled on LabMD’s motion to dismiss.   See 16 C.F.R. § 3.22(a).  Predictably, the Commissioners declined to dismiss a complaint that they had only three months earlier voted to issue based on “reason to believe” that LabMD violated the FTC Act.  The Commission also denied a further motion to dismiss, and a motion for summary decision.. See In re LabMD, Inc., 2014 FTC LEXIS 2, 2014-1 Trade Cas. (CCH) P78,784 (January 16, 2014), ; In re LabMD, Inc., 2015 FTC LEXIS 215, at *4-6 (Sept. 14, 2015); In re LabMD, Inc., 2014 FTC LEXIS 126, *1-2, 2014-1 Trade Cas. (CCH) P78,785 (F.T.C. May 19, 2014).  During the course of the administrative proceedings that followed, it came out that Tiversa — the entity that informed on LabMD to the FTC – had regularly engaged in the practice of “monetize[ing]” documents it downloaded from peer-to-peer networks by “using those documents to sell data security remediation services to the affected businesses, including by representing to the affected business that the business’ information had ‘spread’ across the Internet . . . when such was not necessarily the case . . .” See In re LabMd, Inc., Docket No. 9357, ALJ’s Initial Decision at 9 (F.T.C. Nov. 13, 2015).  Tiversa reported its discovery of the LabMD file to the FTC in retaliation for LabMD’s failure to purchase Tiversa’s security remediation services, and inflated the scope of “spread” of the LabMD file. Id. at 9-10.

    On November 13, 2015, ALJ D. Michael Chappell issued an Initial Decision dismissing the FTC’s complaint against LabMD.  The ALJ cited Section 5(n) of the FTC Act (15 U.S.C. § 45(n)), which states that the FTC cannot declare an act or practice to be “unfair,” and therefore unlawful, unless (1) the act or practice causes or is likely to cause substantial injury to consumers, (2) which is not reasonably avoidable by consumers themselves, and (3) not outweighed by countervailing benefits to consumers or to competition. Id. at 13 (citing 15 U.S.C. § 45(n)).  The ALJ held that the FTC had failed the first prong of this test, because it did not adequately prove that LabMD’s “unreasonable” data security practices caused, or were likely to cause, substantial injury to consumers.  Intangible emotional harm was not cognizable as a substantial injury under the FTC Act.

    The FTC Staff appealed the ALJ’s ruling to the full Commission, and on January 29, 2016, the Commission – again predictably – reversed the ALJ in favor of its Staff.   The Commission held that the ALJ had applied the wrong legal standard for unfairness, and that LabMD’s lax security practices did constitute an “unfair act or practice within the meaning of Section 5 of the FTC Act.” In re LabMd, Inc., Docket No. 9357, Op. of the Comm’n at 1 (F.T.C. Jan. 29, 2016).  The Commission issued a cease and desist order against LabMD, requiring that the company implement an information security program and submit to biennual assessments and monitoring by the FTC.  LabMD appealed the FTC ruling and order to the Eleventh Circuit.

    In its appeal to the Eleventh Circuit LabMD argued, among other things, that the FTC erred in finding that LabMD’s alleged security failure “causes or is likely to cause substantial injury” as required to deem an act “unfair” under FTC Act Section 5(n), because the only injury that could have possibly occurred was intangible and even conjectural, and could only have incurred in the past. LabMD further argued that a finding of “unfairness” necessitates a showing that goes beyond negligence.  The act in question must be “deceptive or reckless,” which the FTC did not adequately demonstrate in LabMD’s case.  LabMD argued that the FTC’s order was impermissibly vague because it did not specify how LabMD should meet the requirement to establish a “reasonably designed” information security program.

    The Eleventh Circuit ultimately decided to vacate the FTC’s cease and order based on LabMD’s last argument: The order was not enforceable because it, and the accompanying FTC complaint, were insufficiently specific. See LabMD, Inc. v. FTC, No. 16-16270, 2018 U.S. App. LEXIS 15229, at *26 (11th Cir. June 6, 2018).  The Court held that a lack of specific prohibitions would put a future court in the position of weighing the opinions of various experts about what is, and isn’t “reasonable” in terms of an information security program – in other words “managing LabMD’s business in accordance with the Commission’s wishes.”  The Court determined that “this micromanaging is beyond the scope of court oversight contemplated by injunction law.” Id. at 32.  Lack of specificity and its counterweight, regulatory overreach, are perennial issues in the context of FTC orders, and the Court’s predictions regarding a potential battle of the experts are well-founded. See, e.g., Basic Research, LLC v. FTC, No. 09-cv-779 (D. Utah, Jun. 1, 2012), United States v. Bayer Corp., 2015 U.S. Dist. LEXIS 74118 (D.N.J. June 8, 2015), POM Wonderful, LLC v. FTC, 777 F.3d 478, 490 (D.C. Cir. 2015).

    The Court’s ruling likely will result in the FTC pursuing more specific data security measures in administrative orders and injunctions going forward.   However, the fact that the Eleventh Circuit did not conclusively address the FTC’s authority over negligent information security practices could also provide some protection to companies facing FTC action where tangible injury is lacking. At the very least, despite the increasing focus on privacy and data security, this decision should make the Commission more circumspect about the details behind its next data security-related complaint.

    The Commission has stated that it is still evaluating next steps after the Eleventh Circuit’s ruling. It has 45 days after the entry of judgment to petition for rehearing or rehearing en banc (see Fed. R. App. P. 40), and 90 days to petition the Supreme Court for review (more, if it first seeks a rehearing) (see S. Ct. R. 13).

    Categories: Enforcement

    DEA, Nunc Pro Tunc Rulings, and Hearings That Never Happened

    A couple of months ago, the DEA Acting Administrator issued an order revoking the registration of David A. Ruben, M.D., on the grounds of lack of state authority (the Arizona Medical Board suspended his medical license in 2017). The same doctor was the subject of another frequently cited decision from 2013. This time around, DEA issued an order to show cause (OSC) against the doctor, dated June 12, 2017.  DEA’s regulations require that a request for hearing must be filed “within 30 days after the date of receipt of the [OSC].”  21 C.F.R. § 1301.43(a).  The doctor requested a hearing, and the hearing request was received by DEA’s Office of Administrative Law Judges (OALJ) on July 18, 2017.  The Administrative Law Judge found that the request was timely, and proceeded with summary disposition proceedings.

    When the Acting Administrator received the case from the OALJ, he made the determination that the doctor’s request for hearing was not timely, and, thus “cancel[led]” the ALJ’s hearing proceedings “nunc pro tunc” (legalese meaning “now for then” and used to retroactively correct an earlier ruling).  83 Fed. Reg. 12027, 12028 (Mar. 19, 2018). The Acting Administrator noted that there was no evidence in the record as to when the doctor received the OSC.  As such, the Acting Administrator explained that he could only have found the doctor’s request to be timely if it was within 30 days of the date of the OSC (which it was not).  Notwithstanding no request from DEA counsel to do so, the Acting Administrator treated the case file transmitted from OALJ as a request for final agency action, and made a determination on his own that the doctor’s registration should be revoked for lack of state authority.

    The Acting Administrator’s decision to find the doctor’s request for hearing untimely—without any evidence of when the doctor received the OSC—was arguably both wrong and an abuse of due process. DEA has a duty to provide each registrant with proper notice before a hearing.  5 U.S.C. §§ 554(b), 558(c).  The Agency’s regulations require that, after “receipt” of the OSC, a recipient has 30 days in which to request a hearing.  21 C.F.R. § 1301.43(a).  With no evidence of when the OSC was received by the doctor, the Acting Administrator had no justifiable basis for finding the doctor’s request untimely.  The burden to show that it was untimely was on DEA who, it appears, never raised the issue throughout the process (possibly because the request was timely in light of the OSC service date). See 21 C.F.R. § 1316.56 (“At any hearing, the proponent for the issuance, amendment, or repeal of any rule shall have the burden of proof.”).

    Ultimately, even if the Acting Administrator did not find the request for hearing untimely, the matter still would have been decided on summary disposition (i.e., without a hearing) because DEA alleged that the doctor did not have state authority to handle controlled substances.  But a word to DEA registrants if ever a victim of this “catch-22”:  If you are filing a request for hearing more than 30 days from the date of the OSC (but within 30 days of your receipt of the OSC), make sure you provide evidence of the date of receipt with your hearing request.  Otherwise, DEA may deem that you (unwittingly and unintentionally) waived your right to a hearing—even after the hearing has already occurred, and the ALJ has issued an opinion!

    FDA Finalizes 510(k) Exemptions for Certain Class II Devices

    On June 5, 2018, FDA published a notice in the federal register finalizing the 510(k) exemption for several devices. The proposed list for 510(k) exemption was published last November and included two new devices that had been granted marketing authorization through the de novo process earlier last year. These were the total 25-hydroxyvitamin D mass spectrometry test system (21 C.F.R. § 862.1840) and genetic health risk assessment system (21 C.F.R. § 866.5950).

    The de novo reclassification letter for the total 25-hydroxyvitamin D mass spectrometry test system (DEN170019) specifically noted FDA’s plan to exempt this device type from the 510(k) requirements. On the other hand, FDA announced its planned partial exemption for genetic health risk assessment systems last November (see our earlier post here). The partial exemption requires manufacturers to obtain 510(k) clearance for their first genetic health risk assessment test, and then all subsequent 510(k)s for tests of this same type are exempt.

    According to the Notice, FDA received only one comment regarding the planned exemptions, and it related to need for 510(k) clearance for genetic health risk assessment tests. FDA responded emphatically that its new plan to exempt such tests after a manufacturer obtains clearance for its first such assay will ensure the safety and effectiveness of these assays.  FDA’s further documented support for this strategy demonstrates the Agency’s commitment to this plan for certain direct-to-consumer genetic tests.  The Notice does not directly address FDA’s authority to regulate laboratory developed tests (LDTs).  However, it is inherent in this exemption that FDA firmly believes it has regulatory authority over at least some LDTs.  While the partial exemption is not specific to direct-to-consumer LDTs, we anticipate that laboratories will be those who will benefit most from this exemption.  We also expect that some laboratories that had been deterred by the prospect of submitting multiple 510(k)s to obtain FDA clearance for multiple tests, may find the 510(k) process more attractive if one submission can effectively result in obtaining clearance for multiple assays.

    Finally, the notice also finalized the 510(k) exemption for three other devices: endoscope disinfectant basins, ultraviolet medical water purifiers, and genital vibrators for therapeutic use. Interestingly, this final exemption comes approximately one year after the first final exemption mandated by the 21st Century Cures Act.  The Agency is required to issue a new list once every five years thereafter.  This publication, however, may be a sign that the Agency will be publishing 510(k) exemption notices more frequently.

    Categories: Medical Devices

    FDA Narrows Interpretation of “Same Product as Another Product” under PDUFA VI; 505(b)(2) Applicants Will Primarily be Affected

    Over the years, we’ve been critical at times of FDA policies and regulations that cause companies to have to pay user fees under the Prescription Drug User Fee Act (“PDUFA”) (see, e.g., “FDA’s Unauthorized User Fee Money Grab” and “The Drug User Fee Catch-22”)  Well, we have a new gripe with a policy change FDA has implemented under the sixth iteration of PDUFA (“PDUFA VI”).  The policy change has to do with what constitutes the “same product as another product” under FDC Act § 736(a)(2)(B)(ii) for purposes of assessment of the new annual prescription drug program fee, which was set at $304,162 per product for Fiscal Year 2018.  (The new PDUFA user fee structure is described in our memo summarizing the 2017 FDA Reauthorization Act.)

    But before we get to FDA’s policy change, let’s take a look at what changed between PDUFA V and PDUFA VI with respect to FDC Act § 736(a)(2)(B)(ii). Under PDUFA V (and going all the way back to PDUFA I), when FDA was authorized to assess both annual product and establishment user fees, FDC Act § 736(a)(2)(B) provided for the following exception to payment of a product fee (which also carried over to payment of the annual establishment fee):

    A prescription drug product shall not be assessed a fee under subparagraph (A) if such product is . . .

    (ii) the same product as another product that—

    (I) was approved under an application filed under section 505(b) or 505(j) of this title; and

    (II) is not in the list of discontinued products compiled under section 505(j)(7) of this title;

    (iii) the same product as another product that was approved under an abbreviated application filed under section 507 of this title (as in effect on the day before the date of enactment of the Food and Drug Administration Modernization Act of 1997); or

    (iv) the same product as another product that was approved under an abbreviated new drug application pursuant to regulations in effect prior to the implementation of the Drug Price Competition and Patent Term Restoration Act of 1984.

    Under PDUFA VI, which disposed of the annual product and establishment user fees in lieu of a new annual prescription drug program fee assessed for each product approved under an NDA (up to five), FDC Act § 736(a)(2)(B) provides for the following exception to payment of a program fee:

    A prescription drug program fee shall not be assessed for a prescription drug product under subparagraph (A) if such product is . . .

    (ii) the same product as another product that—

    (I) was approved under an application filed under section 505(b) or 505(j); and

    (II) is not in the list of discontinued products compiled under section 505(j)(7);

    (iii) the same product as another product that was approved under an abbreviated application filed under section 507 (as in effect on the day before the date of enactment of the Food and Drug Administration Modernization Act of 1997); or

    (iv) the same product as another product that was approved under an abbreviated new drug application pursuant to regulations in effect prior to the implementation of the Drug Price Competition and Patent Term Restoration Act of 1984.

    That’s right . . . other than the description of the fee in the opening sentence of FDC Act § 736(a)(2)(B), nothing has changed. Nevertheless, FDA’s interpretation of the statute has changed.  And the change means that the holders of some 505(b)(2) NDAs (as well as some 505(b)(1) NDA holders) will now be paying the annual program fee.

    You see, for decades FDA interpreted the “same product as another product” exception at FDC Act § 736(a)(2)(B)(ii) to mean that drug products listed in the Orange Book with any therapeutic equivalence rating – either an “A” code or a “B” code – are exempt from annual PDUFA user fees. This is apparent from a 1994 revised guidance document stating that “an exception [exists] from product fees for products that are ‘the same product as a product approved under an application filed under 505(b)(2) or (j).’ . . .  ‘Same’ means the same active ingredient, strength, potency, dosage form, and route of administration.”  In other words, “same” means pharmaceutically equivalent drug products.  And both “A-rated” and “B-rated” drug products are pharmaceutical equivalents.  (“A-rated” products are pharmaceutical equivalents for which bioequivalence has been shown, and “B-rated” products are pharmaceutical equivalents for which bioequivalence has not been shown.)  Although the 1994 revised guidance also notes that “[t]he products need not have the same ‘Orange Book’ Therapeutic Equivalence Code to be considered the same,” FDA has required publication of a therapeutic equivalence code in the Orange Book before applying the user fee exemption.

    In a recent guidance document, titled “Assessing User Fees Under the Prescription Drug User Fee Amendments of 2017,” FDA announced a new interpretation of the “same product as another product” user fee exception at FDC Act § 736(a)(2)(B)(ii). According to FDA:

    For purposes of this section, we interpret the term same product as another product to mean a drug product that FDA has determined is therapeutically equivalent to another drug product.  Therapeutically equivalent products are approved drug products that are pharmaceutical equivalents for which bioequivalence has been demonstrated and that can be expected to have the same clinical effect and safety profile when administered to patients under the conditions specified in the labeling.  Generally, products classified as therapeutically equivalent can be substituted with the full expectation that the substituted product will produce the same clinical effect and safety profile as the prescribed product. FDA publishes its conclusions regarding therapeutic equivalence in the Orange Book.

    The “same product” provision in section 736(a)(2)(B)(ii) of the FD&C Act is intended to provide drugs with a user fee exception if they are subject to competition from generic drug products.

    The term generic drug is often used to refer to a drug named in an ANDA submitted under section 505(j) of the FD&C Act. For purposes of section 736(a)(2)(B)(ii) of the FD&C Act, we believe Congress also meant to provide the exception to products not named in an ANDA whose therapeutic equivalence to another product makes them generally substitutable for that other product, because such products could offer the same type of competition as products approved under an ANDA.

    If FDA’s guidance document wasn’t clear on the policy change, then FDA’s Fiscal Year 2019 PDUFA Dear Colleague Letter makes the change explicit in a section titled “Policy Changes Under PDUFA VI” explaining FDA’s new interpretation of the “Same Product as Another Product” Program Fee Exception. According to FDA:

    Section 736(a)(2)(B)(ii) of the FD&C Act provides that a prescription drug product will not be assessed a program fee if it is the same product as another product that was approved under an application filed under section 505(b) or 505(j) of the FD&C Act and is not in the list of discontinued products compiled under section 505(j)(7) of the FD&C Act.

    To be considered the “same product as another product,” a product must be determined by FDA to be therapeutically equivalent to another drug product. Therapeutically equivalent products are approved drug products that are pharmaceutical equivalents for which bioequivalence has been demonstrated and that can be expected to have the same clinical effect and safety profile when administered to patients under the conditions specified in the labeling.

    FDA publishes its conclusions regarding therapeutic equivalence in the Approved Drug Products with Therapeutic Equivalence Evaluations (the Orange Book) available at https://www.accessdata.fda.gov/scripts/cder/ob/. Therapeutically equivalent products are identified by “A” codes. Therefore, FDA considers a product to be the same product as another product for the purpose of the program fee exception if a product has been assigned an “A” code published in the Orange Book.

    As noted above, FDA’s policy change means that the holders of some 505(b)(2) NDAs will now be paying the annual program fee. And with a maximum of five program fees per NDA, or $1,520,810 for Fiscal Year 2018 (and likely a higher rate in Fiscal Year 2019), the change will not be cheap for some companies.

    While many 505(b)(2) NDAs are approved for drug products that differ pharmaceutically from another drug product, and thus are not assigned a therapeutic equivalence rating, there are also many 505(b)(2) NDAs approved for drug products that are pharmaceutically the same as another approved drug product but for which bioequivalence has not been established (i.e., “B-rated” drug products).  To make matters worse, there are several instances in which the Orange Book fails to identify two products as pharmaceutical equivalents because of changes to FDA policies on dosage form and route of administration nomenclature.  In addition, FDA may not automatically undertake an evaluation to assign a therapeutic equivalence rating to a drug product approved under a 505(b)(2) NDA.  Instead, the Orange Book Preface instructs: “We recognize that certain drug products approved in 505(b)(2) applications may not have therapeutic equivalence codes, and that FDA may undertake therapeutic equivalence evaluations with respect to such drug products.  A person seeking to have a therapeutic equivalence rating for a drug product approved in a 505(b)(2) application may petition the Agency through the citizen petition procedure (see 21 CFR 10.25(a) and 21 CFR 10.30).”

    All of the above factors, when taken together, mean that 505(b)(2) NDA holders will be facing a higher PDUFA user fee burden. To that end, 505(b)(2) NDA holders should review their Orange Book listings and request (or petition) FDA for changes/corrections, and, when appropriate, request an “A” therapeutic equivalence rating.  After all, there’s no reason to pay a user fee that should not have been assessed in the first place.

    Burden of “Right to Try” Implementation on Sponsors (for Now); Risk of Unexpected SAEs Negatively Impacting Development and Approval Still Remains

    On May 30, 2018, the federal “Right to Try” law was enacted, creating a new legal framework for access to investigational drugs in limited situations outside of a clinical trial. See S. Rep. No. 204, 115 Cong. (2018). “Right to Try” was intended to reduce the regulatory burden of including FDA in the process for access, as well as to mitigate the risk that a negative clinical outcome, such as an unexpected serious adverse event (SAE), would have on development or approval.  As a result, the role of FDA in “Right to Try” use is minimized compared to that of Expanded Access (often referred to as “compassionate use”).  Instead, the burden of implementation is left to sponsors.

    This reality became very evident when, in a June 1, 2018 email on implementation of the new law, Dr. Janet Woodcock, Director of the FDA Center for Drug Evaluation and Research (CDER), instructed the Center’s staff “…if you receive inquiries about the legislation from patients or physicians about a specific product, please refer them to the sponsor of the investigational drug or biological product.”  This is, at least in part, because Dr. Woodcock believes “…sponsors are in the best position to provide information on the development status of their products (which is critical to determining whether a drug or biological product is eligible for use under Right to Try)…”

    As this post will highlight, patient access to an investigational drug under the “Right to Try” legislation requires that both the patient and the investigational drug be eligible. For now, sponsors must bear the burden of determining eligibility as FDA, in the words of Dr. Woodcock, is “reviewing the legislation…and working expeditiously to develop further information on how to respond to such inquiries.”  It remains unclear how much guidance FDA will provide given the Congressional intent for the Agency to be hands-off.

    Determining Eligibility for “Right to Try” Use

    Under the new law, for a patient to eligible for “Right to Try” use, s/he must have:

    • Been diagnosed with a severely-debilitating or life-threatening disease as defined at 21 C.F.R. § 312.81;
    • Exhausted approved treatment options and is unable to participate in a clinical trial involving the particular investigational drug (this must be certified to by a qualifying physician); and
    • Provided written informed consent to the physician regarding the particular investigational drug.

    It is not clear whether the sponsor or the physician is required to document either the certification regarding patient eligibility or the informed consent. It is also not clear how much information the sponsor should provide to the physician in order for that subject to be truly informed about the potential risks and benefits of the investigational drug.

    For a particular investigational drug to be eligible, it must:

    • Have completed a Phase 1 study (as described in 21 C.F.R. § 312.21);
    • Have not been approved or licensed for any use;
    • Be subject to a filed New Drug Application (NDA) or Biologics License Application (BLA) ; or be under investigation in a clinical trial that is both “intended to form the primary basis of a claim of effectiveness in support of approval or licensure” and is the subject of an active IND, as applicable; and
    • Be under active development or production and not been discontinued by the manufacturer or be on clinical hold.

    S. Rep. No. 204 § 2(C)(I)(II)(D). These final two eligibility requirements could be problematic for some sponsors that may not wish to disclose details of their development program that might otherwise be confidential, commercial information. Such details might include that the company has opened an IND, that a product is on clinical hold, that a particular study is intended to serve as the primary basis of a claim of effectiveness for approval, and the submission/filing status of its NDA or BLA.

    For sponsors that would like to provide access to patients, but do not want to disclose such information, they can instead pursue traditional Expanded Access (note, a section of the law entitled “Sense of the Senate” explains that “Right to Try” is intended to act as “an alternative pathway alongside” the existing Expanded Access program).

    The Extent of Regulatory Exemptions under ‘Right to Try’

    While ‘Right to Try’ use of investigational drugs are exempt from many of FDA’s IND requirements (sections 502(f), 503(b)(4), 505(a), and 505(i) of the Federal Food, Drug, and Cosmetic Act, section 351(a) of the Public Health Service Act, and parts 50, 56, and 312 of title 21, Code of Federal Regulations), it is still subject to the regulations requiring certain labeling of an investigational drug (21 C.F.R. 312.6), prohibitions against preapproval promotion of the drug (21 C.F.R. § 312.7), and limitations on costs that can be charged for an investigational drug (21 C.F.R. § 312.8(d)(1)).

    There is also a separate new requirement for sponsors who allow “Right to Try” use to submit an annual report to FDA that includes:

    • Number of doses supplied;
    • Number of patients treated and for what uses; and
    • Any known serious adverse events.

    Ultimately, and similar to Expanded Access, there is no requirement for a sponsor to provide access to an investigational drug. In fact, the law exempts sponsors from any litigation related to not supplying an investigational drug under ‘Right to Try,’ and shields the sponsor and physician from most litigation in cases that the sponsor does supply of the investigational drug.

    Protections Against Using ‘Right to Try’ Outcomes in FDA Decision-Making?

    While generally, the new law proscribes that clinical outcomes associated with the “Right to Try” use of an investigational product may not be used to delay or adversely affect the review or approval of a drug, the law also allows for the use of this information by FDA if it determines that such clinical outcomes are “critical to determining the safety” of the product. This authority is broad so the fact that an unexplained SAE may occur in the “Right to Try” context could still be a disincentive to companies from offering such access.  Even if FDA issues regulations or guidance to provide information on how it plans to implement this authority, and even if such a policy provides that an unexpected SAE would only result in a clinical hold or other impact on drug development in rare instances, this is still a risk that must be taken into account by responsible sponsors when deciding whether to offer an investigational drug under “Right to Try.”

    It is also worth noting that a sponsor may request that FDA use outcomes from “Right to Try” use of its product.

    As a way to put a “check” in place on FDA, Congress requires FDA to publish an annual report to its website that provides how many times it utilized clinical outcomes from “Right to Try” use, broken down by whether it was requested by the sponsor or not, as well as the number of times such clinical outcomes were not used.

    CDRH Issues Draft Guidance Regarding Test Reports for Nonclinical Bench Studies in Premarket Submissions

    On May 31, 2018, CDRH issued the draft guidance, “Recommended Content and Format of Complete Test Reports for Non-Clinical Bench Performance Testing in Premarket Submissions.” The draft guidance is intended to provide an outline of the type of information to be included in non-clinical bench test reports included in medical device premarket submissions, including 510(k)s, PMAs, and de novos. There’s nothing earth shattering in this guidance.  In fact, in my experience, it mirrors the content of test reports I’ve seen from companies with well-established, FDA-compliant systems.  Some smaller companies or those new to FDA regulation may find this guidance helpful in creating a model format for its test reports and ensuring that the content of test reports included in its submissions meet FDA’s requirements in an effort to avoid unnecessary questions.

    The guidance recommends including full test reports for each non-clinical bench test included in a submission, with the exception of Special 510(k)s or when a declaration of conformity to a recognized standard is included, for example in an Abbreviated 510(k). This recommendation is consistent with FDA’s refuse to accept checklist, which for 510(k)s states that for each performance test a sponsor must include a “full test report . . . for each completed test. A full test report includes: objective of the test, description of the test methods and procedures, study endpoint(s), pre- defined pass/fail criteria, results summary, conclusions.”  The topics listed in the RTA checklist are consistent with the draft guidance, with the exception that the draft guidance omits “study endpoint(s)” from its list of suggested elements.

    The draft guidance elaborates on the type of information that should be included in each of these sections. For example, test results should contain all data points from a test, a summary of the individual results (e.g., minimum, maximum, average, and standard deviation), data analysis, and a discussion of any protocol deviations.  Most of these sections are logical and consistent with the documentation companies use to prepare these types of reports.  What this guidance appears to forget is that many “full test reports” are generated as part of the design and development process as part of the design history file, not specifically for the premarket submission.

    While the two are related, there is certain information that the engineers performing the tests may not know. For example, in the “description of test methods and procedures” section, the Agency suggests stating whether the device is the final version of the product or if it is not the final version of the product, an explanation as to why the unit tested is representative of the final unit tested.  First, non-clinical bench tests are generally part of design verification, not validation, and therefore, testing can be performed on prototype units, which may differ slightly from the final product.  Second, at the time engineering is testing a device, they may not know whether it is identical to the finished product for which a company will submit to FDA.  It may be the tentative final design or a prototype.  We agree with the Agency that this is important information to know as part of a premarket review, but it seems odd to suggest that this information should appear in the full test report itself – it seems more appropriate to appear in a summary report (discussed below).

    Another example of this disconnect appears in the conclusions. The draft guidance suggests that the conclusion should explain how the test supports substantial equivalence, in the case of a 510(k) submission.  Again, the connection between an engineering test and a planned 510(k) submission may not be known by an engineer performing testing and writing a test report. The conclusion typically discusses how the test is supportive of a company’s design verification activities because that is the purpose of the test.  As discussed above, a conclusion as to how a test supports substantial equivalence seems more appropriate for a summary report, which is developed specifically for a premarket submission, than for the test report.  For review purposes, the key should be that this information is included in the application, and not that it appears in the test report.

    As mentioned above, in addition to the full test reports, FDA also recommends including a summary report for each test in a premarket submission. According to the guidance, the summary test should include the following information:

    • Test performed;
    • Objective of the test;
    • Brief description of test methods/procedures, including sample size, device tested, and any standards utilized;
    • Pre-defined pass/fail criteria, including a clinical/scientific justification for such criterion;
    • Results summary, including for quantitative tests the mean, maximum, minimum, and standard deviation, whether the acceptance criteria were met, and a brief explanation of any failures or deviations;
    • Discussion of conclusions, including for 510(k) submissions only, how the data support substantial equivalence; and
    • Location of where the full test report can be found in the submission.

    In sum, the guidance appears to be potentially useful to new, small companies that have less experience with FDA regulatory requirements. For larger, more established companies, it may serve as a good reminder to update their template test reports to ensure all of this information is covered.

    Categories: Medical Devices

    Connecticut Becomes Seventh State to Enact Drug Price Transparency Law

    With the enactment of Public Act 18-41 on May 31, 2018, Connecticut joined the growing list of states (see our posts here and here) requiring drug manufacturers to submit reports on price increases. Three different reporting requirements are imposed on manufacturers under the law. First, beginning January 1, 2020, a sponsor of an NDA or BLA for a new molecular entity must notify the Connecticut Office of Health Strategy (OHS), within 60 days after receiving an action date from FDA, that the marketing application has been submitted. (FDA typically informs a sponsor of the action date (PDUFA date) in the Filing Communication, or “Day-74 letter”.)

    Second, beginning January 1, 2020, OHS may conduct a study, not more frequently than annually, of each drug that is subject to the above notice requirement and that may have a significant impact on state drug expenditures. The manufacturer of the drug must report information on the disease or condition for which the drug was studied, the route of administration, clinical trial comparators (if applicable), the estimated year of market entry, whether the drug has orphan drug, fast track, or breakthrough therapy designation, and whether it has been designated for accelerated or priority review.

    Third, similar to list-based price transparency laws in other states, the Connecticut law requires OHS, by March 1, 2020 and annually thereafter, to compile a list of no more than 10 outpatient prescription drugs, including at least one generic, that meet the following criteria: (1) the drug is determined to impose substantial costs on the state, or to be critical to public health; (2) the course of treatment costs at least $60 for a 30-day supply or for a course of treatment less than 30 days; and (3) the WAC, minus all rebates paid to the state, for the immediately preceding calendar year increased by at least 20% during that calendar year or 50% during the immediately preceding three calendar years. Manufacturers of drugs on this list must submit a narrative description, “suitable for pubic release,” of all factors that caused the WAC increase, as well as aggregate research and development costs and relevant capital expenditures. The information is to be submitted on a standardized form that will be developed after consulting with pharmaceutical manufacturers, and the type of information submitted will be consistent with the quality and types of information included in the manufacturer’s SEC Form 10-K or any other public disclosure. There is no provision for confidentiality of this information.

    The law also requires PBMs to report to the state (subject to confidentiality protections) on formulary rebates received from drug manufacturers, including the portion of such rebates provided to health insurance carriers, and requires health insurance carriers to report a variety of information on spending for drugs covered under the carrier’s health plans.

    The Connecticut law is unique among state price transparency laws in requiring notifications to the state before FDA approval. Development stage companies not yet marketing drugs can no longer assume they can wait until launch before state reporting requirements are triggered.

    FDA Draft Guidance for GRAS Panels: Unintended Consequence?

    Much to our surprise, we found the following recommendation for GRAS Panel members in FDA’s draft Guidance on GRAS Panels issued in November 16, 2017:

     . . . avoid filling a gap in the available data and information through theoretical considerations and relevant experience – e.g., making overly broad inferences . . . about safety of the substance in question based on the properties of other substances that are related in some way, or based on professional familiarity with a particular class of substances.

    Inclusion of this recommendation in a Guidance that purports to address the potential for conflict of interest and procedures to avoid bias by GRAS panel members is inappropriate because:

    1.  The statement falls outside the subject matter of the draft guidance

    By including information that falls outside of the scope of the Guidance, the regulated industry and expert scientific community does not receive notice of the Agency’s “thinking.” In the Federal Register notice announcing the availability of the Guidance (82 Fed. Reg. 53433 (Nov. 16, 2017)), FDA stated that the draft guidance provides [the Agency’s] current thinking on best practices to identify GRAS panel members who have appropriate and balanced expertise; to take steps to reduce the risk that bias (or the appearance of bias) will affect the credibility of the GRAS panel’s output (often called a “GRAS panel report”), including the assessment of potential GRAS panel members for conflict of interest and the appearance of conflict of interest; and to limit the data and information provided to a GRAS panel to public information (e.g., by not providing the GRAS panel with information such as trade secret information).

    Notably absent in the list of topics for the draft guidance is any mention of the Agency’s current thinking on the use of various safety assessment methodologies.

    2.  Moreover, the statement can be interpreted as an FDA recommendation against the use of well-established and accepted safety assessment methods based on surrogate data derived from sources such as structure activity relationship, quantitative structure activity relationship, read-across and cluster-analysis, notwithstanding the fact that such approaches are widely applied in safety evaluations by various regulatory agencies, including FDA itself.

    In comments submitted to FDA on May 15, 2018, we asked the agency to remove this statement from the guidance or, at the very least, revise the statement so it cannot be misinterpreted as excluding well-accepted and well-conducted surrogate/read-across rationales for safety assessments.

    FDA to Modernize Drug Review Office Structure and Processes

    On June 4, 2018, FDA posted a statement from CDER Director Janet Woodcock announcing a multi-pronged FDA initiative to modernize FDA’s drug review offices and processes.  The initiative will involve:

    • Staffing increases
    • Increasing the number of review offices from the current 5 to 9 and the review divisions from the current 19 to 30
    • Establishing a multi-disciplinary review team at the outset of an application review, replacing the current system where the review division consults with other FDA offices as necessary during the course of a review
    • Centralizing review procedures so that they are consistent across all review divisions, rather than having division-specific procedures, and concentrating administrative management within a group of regulatory experts
    • Establishing a unified post-market safety surveillance system to monitor safety both pre- and post-approval
    • Enhancing the patient’s voice in drug development

    Click here for Dr. Woodcock’s statement, and here for a related statement from FDA Commissioner Gottlieb.  Although this appears to be a significant internal initiative and reorganization, both statements contain very limited detail. There is only preliminary information on what the 30 review divisions will be, as captured in the illustration below from BioCentury.  We’ll be monitoring this initiative and posting more information as we receive it.

    Fifth Delay for 340B Final Rule Implementation

    On June 1, 2018, the Health Resources and Services Administration (“HRSA”) released a final rule delaying the effective date of implementation and enforcement of the previously issued final rule implementing the 340B Drug Discount Program (“Substantive Final Rule”). The Substantive Final Rule, which was originally published on January 5, 2017, established the methodology for calculating the 340B ceiling price (including the so-called penny pricing policy) and civil monetary penalties (“CMPs”) for knowing and intentional overcharges of 340B covered entities. (See our original post regarding the Substantive Final Rule here.) After repeated delays (see our posts here, here, here, and here), today’s final rule (“”) further delays the effective date until July 1, 2019.

    HRSA reiterated the points it has made previously regarding its rationale for delayed implementation. The agency stated that it continues to believe that a delay of the effective date is necessary to provide regulated entities with additional time to implement the requirements of the Substantive Final Rule, and also to provide “a more deliberate process” for HRSA to consider “alternative and supplemental regulatory provisions.” Thus, implementation of the penny pricing policy and CMPs would be “counterproductive” prior to the issuance of additional or alternative rulemaking. A new point raised in this Effective Date Final Rule is that HHS’s efforts to address prescription drug pricing in government programs broadly provides another reason to delay implementation of the Substantive Final Rule. To that point, HRSA stated that the “complexity and changing environment warrants further review of the [Substantive Final Rule] and delaying [it] affords HHS the opportunity to consider alternative and supplemental regulatory provisions and to allow for sufficient time for any additional rulemaking.”

    The fact that the effective date of this Obama-era rule has now been delayed five times strongly suggests that the Administration has no intention of implementing it in its current form. We will continue to track and report on further developments regarding implementation of the Substantive Final Rule and other updates concerning the 340B Drug Pricing Program.

    Categories: Health Care

    FDA’s Ninth Annual Report to Congress on 505(q) Citizen Petitions: New Numbers and a New Tone

    More than 10 years after the enactment of FDC Act § 505(q), titled “Petitions and Civil Actions Regarding Approval of Certain Applications,” interest in citizen petitions remains high. Each year we see several analyses of the effects of citizen petitions on generic competition, as well as recommendations to improve the petitioning process (see here, here, here, and here).  Another annual occurrence is the publication of FDA’s Report to Congress on 505(q) Citizen Petitions.  FDA recently released this report – the Ninth Annual Report to Congress on Delays in Approvals of Applications Related to Citizen Petitions and Petitions for Stay of Agency Action for Fiscal Year 2016.  The Report, which is required by FDC Act § 505(q)(3), gives us the skinny on FDA’s experience during Fiscal Year 2016 (“FY 2016”) with citizen petitions subject to FDC Act § 505(q).  While the Report provides updated numbers for FY 2016 and largely repeats both FDA’s concerns about petitioning expressed in previous reports (see our previous posts here, here, here, here, here, here, here, and here) and the trends the Agency has been seeing in petitioning, FDA appears to be adopting a new tone and an action plan to address petitioning concerns.

    By way of background, FDC Act § 505(q) was added to the law by the 2007 FDA Amendments Act (“FDAAA”) and is intended to prevent the citizen petition process from being used to delay approval of pending ANDAs and 505(b)(2) applications.  The law was amended by Section 301 of Pub. L. No. 110-316 (2008), and again by Section 1135 of the 2012 FDA Safety and Innovation Act (“FDASIA”).  Among other things, FDASIA changed the original 180-day response deadline to 150 days, and made the law applicable to citizen petitions concerning biosimilar applications submitted to FDA pursuant to PHS Act § 351(k). In June 2011, FDA issued final guidance on FDC Act § 505(q).  That guidance was revised in November 2014 to account for changes made to the law by FDASIA.  In January 2012, FDA issued proposed regulations to amend the Agency’s citizen petition regulations to implement changes made to the law by Section 505(q). FDA issued a final rule in November 2016.

    Under FDC Act § 505(q), FDA shall not delay approval of a pending ANDA, 505(b)(2) application, or 351(k) biosimilar application as a result of a citizen petition submitted to the Agency pursuant to 21 C.F.R. § 10.30 (citizen petition) or § 10.35 (petition for stay of action), unless FDA “determines, upon reviewing the petition, that a delay is necessary to protect the public health.” FDA is required to “take final agency action on a petition not later than 150 days after the date on which the petition is submitted.”  FDA may not extend the 150-day period “for any reason,” including consent of the petitioner.  Although the statute provides that FDA may summarily deny a petition submitted with the primary purpose of delaying ANDA, 505(b)(2) application, or 351(k) biosimilar approval, the Agency has never done so.

    FDC Act § 505(q)(3) requires that each Report to Congress specify: “(A) the number of applications that were approved during the preceding 12-month period; (B) the number of such applications whose effective dates were delayed by petitions . . . during such period; (C) the number of days by which such applications were so delayed; and (D) the number of such petitions that were submitted during such period.”  FDA says in its Ninth Annual Report to Congress that:

    During the FY 2016 reporting period, the Agency approved 651 ANDAs, 51 505(b)(2) applications, and 3 biosimilar biological product applications. No approvals for biosimilar biological product applications or ANDAs were delayed because of a 505(q) petition in this reporting period.  The approval of one 505(b)(2) application was delayed because of one 505(q) petition.  During FY 2016, FDA received 19 505(q) petitions.

    The delayed 505(b)(2) approval was delayed by 28 days. “FDA was concerned that if it approved the 505(b)(2) application before resolving the issues raised in the petitions and later concluded that one or more of the arguments against approval were meritorious, then the presence on the market of a drug product that did not meet the requirements for approval could negatively affect public health,” says FDA in the report (in what is now boilerplate language).  FDA does not identify by name or application number the particular approval delayed.

    As to the number of 505(q) citizen petitions submitted in FY 2016, the Report says that the Agency received 19 petitions. From FY 2008 through FY 2016, FDA received a total of 194 505(q) petitions, and responded to all but 14 of them within the statutory timeframe (i.e., 180 days or 150 days).  That’s a pretty good track record; however, in many cases FDA merely denies a petition without substantive comment (see, e.g., here).  According to FDA, “[t]here is no evidence that in enacting section 505(q) of the FD&C Act, Congress intended to bypass the application review process or to lessen the procedural rights of an ANDA or NDA applicant by requiring that the Agency make decisions that constitute final Agency action regarding the approvability of certain aspects of pending applications on a piecemeal basis outside of the process established under the FD&C Act and FDA regulations.”

    The outcomes of FDA’s 182 petition responses from FY 2008 through FY 2016 are shown in a table included in the report. Approximately 70% (127 petitions) of the 182 petition decisions have been denials, while another 23% (42 petitions) have been denied in part and granted in part.  Only about 4% (8 petitions) have been granted.  The remaining 5 petitions (3%) were voluntarily withdrawn by the petitioner.

    As to 505(q) petitioning trends and FDA concerns, the Agency continues a trend of paring down comments that appeared in previous reports. That being said, FDA’s bottom line in the FY 2016 Report differs in tone from the bottom line in the Agency’s FY 2015 Report.  Here’s what the FY 2015 Report said:

    The Agency continues to be concerned that section 505(q) may not be discouraging the submission of petitions that are intended primarily to delay the approval of competing drug products and do not raise valid scientific issues. The statute requires FDA to prioritize these petitions above other matters, such as safety petitions, that do raise important public health concerns. As a result, FDA remains concerned about the resources required to respond to 505(q) petitions within the 150-day deadline at the expense of completing the other work of the Agency.

    Now compare that to the FY 2016 Report:

    The Agency continues to be concerned that section 505(q) allows the submission of petitions that are intended primarily to delay the approval of competing drug products and do not raise valid scientific concerns. The FDA statute requires FDA to prioritize these petitions above other matters, such as safety petitions, that do raise important public health concerns.  The Agency remains concerned about the resources required to respond to 505(q) petitions within the 150-day deadline at the expense of completing the other work of the Agency, when these petitions are not based on public health concerns.  Accordingly, as part of the Drug Competition Action Plan, FDA is reviewing what actions can be taken to address these issues.

    FDA Commissioner Dr. Scott Gottlieb announced the Agency’s Drug Competition Action Plan (“DCAP”) in Spring 2017 (here).  The intent of the DCAP is to encourage generic drug development and competition.  Since the creation of the DCAP, FDA has taken several steps to implement that plan, including holding a public meeting in July 2017 and issuing REMS guidance earlier this week (here).   Given FDA’s statement that the Agency is reviewing what actions can be taken under the DCAP to address citizen petition concerns, new citizen petition initiatives appear to be on the horizon.

    ACI’s 6th Annual Legal, Regulatory & Compliance Forum on Dietary Supplements

    The American Conference Institute (“ACI”), together with the Council for Responsible Nutrition, are sponsoring ACI’s 6th Annual Legal, Regulatory, and Compliance Forum on Dietary Supplements. The conference is scheduled to take place in Ney York, New York from June 18-20, 2018.

    This “must-attend” event for legal, regulatory, and compliance stakeholders in the dietary supplement industry will not only provide “state of the union updates,” but will also allow for the opportunity to discuss and assess the politics and policy shaping the industry’s current political, legislative, and regulatory atmosphere. Conference speakers will provide their insights into the most pressing topics affecting the space.  In addition, FDA’s Robert Durkin, Deputy Director, Office of Dietary Supplements Programs CFSAN, is scheduled to give a keynote address.  Hyman, Phelps & McNamara, P.C.’s Riëtte van Laack will be speaking at a session titled “Unraveling the Complexities of FSMA Regulation.”

    FDA Law Blog is a conference media partner. As such, we can offer our readers a special 15% discount. The discount code is: P15-999-FDAB18. You can access the conference brochure and sign up for the event here. We look forward to seeing you at the conference.

    A Future Regulatory Paradigm with Potential Broader Implications

    Since our last post on Digital Health, FDA has continued their public campaign to raise awareness and seek input on the Software Precertification (Pre-Cert) Program. This blog post covers topics that don’t affect only software companies. While the focus is on software, the potential implications are much broader.  For example, in a recently released document, FDA asked for feedback on the precertification process, from where data could be leveraged so that FDA could adopt a risk-based, streamlined approach to Software as a Medical Device (SaMD) review that could replace the need for a premarket submission or allow for a streamlined premarket review for higher risk products.  Such a program could ultimately affect other 510(k)s as well.

    In addition to a draft guidance entitled “Multiple Function Device Products: Policy and Considerations; Draft Guidance for Industry and Food and Drug Administration Staff” which we blogged about here, FDA spoke about Digital Health several times at the Food and Drug Law Institute (FDLI) Annual Conference, held on May 3 and 4, 2018. During one of these sessions, the concept of a streamlined review of software-based medical devices taking 5 – 10 days was floated. FDA acknowledged Digital Health, with its faster, iterative design and development, is not well suited for the current regulatory paradigm. (The same holds true in other areas, such as diagnostic devices using next generation sequencing.) For instance, software-based technologies are regularly updated to fix bugs and provide enhancements to drive further innovation in response to real world performance and user feedback. Unlike most traditional medical device products, Digital Health has the potential to offer real-time learning through real world performance data (e.g., real world health data, user experience data, and product performance data) that can be used to further monitor performance and enable improvements.

    Then, on May 10, 2018, FDA held an online interactive user session, led by Associate Director for Digital Health at CDRH, Bakul Patel, to share a program update and answer attendee questions. The session walked through an action plan to align with the 21st Century Cures Act and discussed a working model of a new regulatory paradigm designed to keep up with the quicker software design cycle. The working model identified the areas FDA is interested in developing through their Pre-Cert program through the challenge questions FDA posed. There are over 50 challenge questions, ranging from specific to the excellence appraisal models and precertification status to review pathway determination, streamlined premarket review process, and real world performance.

    FDA correctly recognizes that organizations seeking precertification will have different levels of maturity. Accordingly, FDA is proposing two levels: Level 1 is awarded to an organization who has demonstrated capabilities in all five excellence principles but lacks a record in marketing and maintaining medical devices; Level 2 is awarded to an organization who has both demonstrated excellence and has a demonstrated track record.

    The Agency also wants to refine the SaMD International Medical Device Regulators Forum (IMDRF) Risk framework for application in the Pre-Cert Program. This framework is designed to facilitate harmonized risk categorization of SaMD based on intended use where IMDRF type has been introduced as I to IV and subtype is 1 to 9 and is illustrated below:

    State of Healthcare situation or conditionSignificance of information provided by SaMD to healthcare decision
    Treat or diagnoseDrive clinical managementInform clinical management
    CriticalIV (9)III (7)II (4)
    SeriousIII (8)II (6)I (2)
    Non-seriousII (5)I (3)I (1)

    Based on current thinking, FDA laid out the following table to describe when the precertification of organizations and commitment to leverage real world performance replaces the need for a premarket submission (No Review) or allows for streamlined premarket review (SR), based on the Pre-Cert level of organization: 

    IMDRF Risk CategorizationLevel of Review for Level 1 and Level 2 Precertified Organizations’ SaMD
    TypeSubtypeDescriptionInitial ProductMajor ChangesMinor Changes
    Type IV(9)Critical x diagnose/treatSRSRNo Review
    Type III(8)Critical x driveSRL1 – SR

    L2 – No Review

    No Review
    Type III(7)Serious x diagnose/treatSRL1 – SR

    L2 – No Review

    No Review
    Type II(6)Serious x driveL1 – SR

    L2 – No Review

    L1 – SR

    L2 – No Review

    No Review
    Type II(5)Non-serious x diagnose/treatL1 – SR

    L2 – No Review

    No ReviewNo Review
    Type II(4)Critical x informL1 – SR

    L2 – No Review

    No ReviewNo Review
    Type I(3)Non-serious x driveNo ReviewNo ReviewNo Review
    Type I(2)Serious x informNo ReviewNo ReviewNo Review
    Type I(1)Non-serious x informNo ReviewNo ReviewNo Review

    Naturally, such a complicated table will present challenges in implementation, but it provides a valuable framework for analyzing the key questions. These coordinated  efforts to share a Multiple Function Device Products draft guidance, working model, challenge questions, and roadmap, in addition to holding in person and online sessions, demonstrate FDA’s commitment to be transparent and build collaboratively. Interested individuals should provide feedback and help drive the next steps for the program either via questions to FDAPre-CertPilot@fda.hhs.gov, comments to the working model, and/or comments to the draft guidance.

    * Senior Medical Device Regulation Expert

    Categories: Medical Devices

    AMS’s Proposal for BE (Bioengineered) Labeling; A Number of Questions Remain

    At long last, the Agricultural Marketing Service (AMS) of the USDA has issued the proposed rule for the National Bioengineered Food Disclosure Standard for food products that have been bioengineered. As readers of this blog know, the Agricultural Marketing Act of 1947 was amended on July 29, 2016 to provide for the establishment of a National Bioengineered Food Disclosure Standard.  Congress gave AMS two years to establish a national standard and the procedures necessary for implementation of the standard.  AMS, however, has had some trouble staying on schedule.  First, the market research required was delayed.  Then, AMS did not publish an ANPR early on, but eventually published questions and asked for feedback.  Now AMS has published a proposed rule a short three months before the deadline that Congress specified for establishing the standard.  Even in the best of circumstances, finalizing a proposed rule in less than three months would be highly optimistic.  And in this instance, it is not the best of circumstances.   The recent proposal raises many questions and undoubtedly will generate many comments.

    According to AMS’s summary of the proposed rule, the rule’s purposes are sharing information with consumers and, at the same time, minimizing implementation and compliance costs which would otherwise be passed on to consumers. Some noteworthy aspects of the proposal:

    • Terminology: AMS proposes to require the use of the term “bioengineering” (BE) or “BE foods” instead of GMO or genetically engineered foods. Although use of the term BE is consistent with the law, query whether consumers have any idea what BE means. After decades of the use of the term GMO, the introduction of a new term is surprising and may lead to confusion. The first wave of comments to the proposal shows that this may become a contentious issue.
    • AMS has punted on the interpretation of “BE food.” In relevant part, the law defines BE as referring to a food that contains genetic material. The question is whether this means that a highly refined food product derived from BE material, but that does not contain genetic material, is a BE food. In response to its questions last year, AMS received comments for two opposing positions, one favoring the interpretation that any food derived from a BE material is subject to a disclosure requirement irrespective of whether it contains genetic material, and one favoring a narrow interpretation limiting the term BE foods to only those food products that contain genetic material. AMS invites comments on the two opposing positions including studies, cost considerations, and which position is more defensible in light of the law.
    • Lists of BE commodities: In an effort to make it easier and less burdensome for both industry and consumers to understand what products may need a disclosure statement, AMS proposes a list of highly adopted commercially available BE foods/commodities (canola, field corn, cotton, soybean and sugar beet) and a list of non highly adopted commercially available BE foods/commodities (non-browning cultivars of apples, sweet corn, papaya, potato and summer variety of squash). If other BE foods become available, the list(s) would need to be updated. AMS’s proposal describes the process for updating the lists annually. The lists include commodities, but not all food products derived from those commodities, e.g., it lists corn but not grits, corn syrup, corn flour, etc. However, all foods derived from the listed commodities would be subject to the same disclosure statement as foods on the list. Foods derived from the not highly adopted products could note that the product “may contain” rather than “contains bioengineered ingredients.”
    • AMS proposes several options for the BE disclosure statement.
      1. A one-sentence label declaration, such as “contains a bioengineered food ingredient”;
      2. A standardized icon. AMS proposes three alternatives (images and permutations in color and black and white are provided in a separate document). As AMS explains, these icons are designed so they would not disparage biotechnology or suggest BE food is more or less safe than non-BE food.  These standardized icons can be expected to generate comments.
      3. A QR code or other digital marker that directs shoppers to a website for more information, e.g., “Scan here for more food information.” AMS proposes this while acknowledging that it has not yet completed the study on potential challenges associated with electronic disclosures. If AMS were to conclude that electronic disclosure does not provide sufficient access, the agency proposes text message as alternative option.
      4. The proposed rule provides for additional disclosure options for small food manufacturers.
    • The 2016 amendment also called on USDA to determine a threshold of bioengineered food present that would necessitate disclosure. The proposed rule includes three different possibilities and invites comments on all three.
    • To minimize the burden of recordkeeping, AMS proposes different approaches for regulated entities to keep records that are reasonable and customary to verify the disclosure. For products derived from commodities on the two lists, evidence that the food is derived from the product is sufficient, e.g., for corn tortillas that are labeled with a BE disclosure statement, a record that shows the product is made from corn is sufficient. However, if the label does not disclose that the food is BE or contains a BE food ingredient, then the manufacturer of the retail product would be required to maintain documentation that verifies that the food is not BE.
    • AMS enforcement powers are limited. It proposes, in accordance with the law, to perform audits. Companies will have an opportunity to object to the audit findings and request a hearing. Once the audit is final (and challenges have been considered), AMS will publish a summary of the audit findings. The publication of this summary will constitute final agency action. In all likelihood, the real “bite” of a finding of violation would come in the form of follow-on litigation.
    • AMS sets Jan. 1, 2020 as the date for compliance for large food companies, and a year later for small companies, defined as those with less than $10 million in annual receipts. These dates coincide with the new compliance dates for the updated nutrition labeling regulations.

    Comments may be submitted through July 3, 2018. AMS has indicated that it will not grant an extension because it needs to get the final rule issued as soon as possible.

    Supreme Court Denies Cert. Petition Accusing Fifth Circuit of “Sabotage of Off-Label Enforcement”

    Last September, we posted on the Fifth Circuit’s decision to uphold summary judgment and award of costs in favor of Solvay Pharmaceuticals, Inc. in a False Claims Act (FCA) case (see post here). The relators pursued an FCA theory against Solvay based on allegations of widespread off-label marketing and violations of the Anti-Kickback Statute.  However, the Fifth Circuit agreed with the district court that relators (the government declined to intervene) had failed to establish, beyond mere speculation, that any alleged kickbacks or off-label marketing caused the submission of a false claim.

    Although it appeared in dicta, the Fifth Circuit’s discussion of the FCA’s materiality element in Solvay was of particular interest to us.  The court noted that, if it is true that Medicaid pays for claims “without asking whether the drugs were prescribed for off-label uses or asking for what purpose the drugs were prescribed,” then “given that it is not uncommon for physicians to make off-label prescriptions, we think it unlikely that prescribing off-label is material to Medicaid’s payment decisions under the FCA.”  Slip Op. at 13 n.9.  The Fifth Circuit was not required to reach the materiality element in upholding the lower court’s ruling, because it had already determined that relators failed to establish causation.

    Relators filed a petition for writ of certiorari with the Supreme Court, but the Supreme Court declined to hear the case. In their petition, relators raised the Fifth Circuit’s discussion of materiality in off-label promotion FCA cases, claiming that the court’s comments constituted “sabotage of off-label enforcement” that “may well have been intentional.”  Pet. Cert. at 17 n.15.  Asserting that Solvay never raised this issue, relators argued that the court’s comment “suggests hostility to claims based on off-label prescriptions.” Id. Despite the charged rhetoric and accusations, the Supreme Court refused to be persuaded by the specter of a “chilling effect” on relators bringing FCA cases, id. at 17, and the argument will have to wait for another day.  Until then, the Fifth Circuit’s brief analysis of materiality in off-label promotion FCA cases remains a helpful reference for companies facing such claims in a world governed by Escobar’s heightened materiality standard.

    Categories: Enforcement