Attorney East Hampton

By Jennifer M. Thomas – 
Since the Supreme Court issued its False Claims Act (“FCA”) ruling in Universal Health Services, Inc. v. U.S. ex rel. Escobar, 136 S. Ct. 1989 (2016) courts have grappled with Escobar’s concept of FCA “materiality.” Materiality was described by the Supreme Court as a “rigorous” standard, not met where “noncompliance [with a particular requirement] is minor or insubstantial.” Id. at 1996, 2003. Of particular interest is Escobar’s emphasis on government action as a test for FCA materiality. Specifically, the Court stated that “if the Government pays a particular claim in full despite its actual knowledge that certain requirements were violated . . . [o]r, if the Government regularly pays a particular type of claim in full despite actual knowledge that certain requirements were violated . . . that is strong evidence that the requirements are not material.” Id. at 1995.
We have recently blogged on cases (here and here) where courts applied Escobar’s government action/inaction materiality test to FCA claims predicated on “fraud on the FDA,” and reached opposite results. Now the U.S. District Court for the District of Minnesota has weighed in.
The Court evaluated Escobar and its progeny in deciding a motion to dismiss Relator Steven Higgins’ claims against Boston Scientific Corp. (“BSC”) relating to that company’s sale of its Cognis CRT-D and Teligen ICD defibrillators between 2008-2009. Higgins alleged that BSC defrauded FDA by failing to inform the agency of alleged defects in its defibrillator devices that resulted in insecure connection of the device leads to the header and pulse generator, thereby “undermining the devices’ ability to reliably provide shocks.” 2017 U.S. Dist. LEXIS 138767, at *3 (D. Minn. Aug. 29, 2017). The Complaint alleged that BSC failed to supplement its pending FDA pre-market application (“PMA”) to inform FDA when doctors in Europe began to report problems. FDA cleared the devices in May 2008. After launching the devices in the U.S., BSC allegedly took steps to minimize the number of Medical Device Reports (“MDRs”) that reached FDA as a result of issues with the defibrillator devices. When BSC developed revised versions of the defibrillators to address the alleged defects, the company presented those revisions to the FDA as modifications, rather than corrections to address a defect. FDA approved BSC’s PMA supplements for the modified defibrillators, allegedly based on BSC’s misrepresentations or omissions, in March 2009. In July 2009, the Agency ultimately issued a recall for the original versions of the Cognis CRT-D and Teligen ICD based on numerous MDRs relating to the lead connection issue.
In considering BSC’s motion to dismiss, the Court first determined that Higgins’ claims survived an FCA subject-matter jurisdiction challenge, because – despite FDA’s ultimate recall notice for the defibrillators – there had been no public disclosure of key elements of the alleged fraud (e.g., withholding numerous MDRs from FDA, failure to supplement the PMA upon discovery of device malfunctions in Europe).
The Court next evaluated BSC’s motion under Fed. R. Civ. P. 12(b)(6). BSC argued that “fraud on the FDA” had been rejected as a basis for FCA liability, citing (among others) United States ex. rel. Campie v. Gilead Scis., Inc., C-11-0941 EMC, 2015 WL 106255, at *8 (N.D. Cal. Jan. 7, 2015) (Order Granting Defendants’ Motion to Dismiss); United States ex rel. Modglin v. DJO Glob. Inc., 114 F. Supp. 3d 993, 1019 (C.D. Cal. 2015) (holding that even if a defendant was required to file a PMA Supplement, failing to do so did not support the imposition of FCA liability); United States ex rel. Simpson v. Bayer Corp., No. 05-3895 JLL, 2014 WL 2112357, at *2 (D.N.J. May 20, 2014) (“Simpson II”) (“The theory underpinning the first six counts of Simpson’s Complaint is that Bayer’s compliance with the FDCA’s misbranding provisions is, in and of itself, a condition of payment. The Court again rejects this theory.”). Higgins responded that his FCA claims were predicated on theories of fraudulent inducement, false certification, and “defective device.” The Government filed a statement of interest supporting Higgins’ position that those FCA theories are viable, without taking a position on the merits of the case.
Accepting Higgins’ allegations as true, the Court appeared inclined to accept his FCA theories. The court reasoned that FDA approval is required for a Class III medical device (like the defibrillators) to be considered “reasonable and necessary,” and thus eligible for reimbursement by federal healthcare programs. Higgins had alleged that (1) BSC obtained, and maintained, FDA approval by fraud, and (2) once alerted to issues with the BSC devices, FDA had characterized BSC’s removal of those devices from the market as a “recall.” The Court emphasized that the term “recall” applies “only if the Food and Drug Administration regards the product as involving a violation that is subject to legal action, e.g., seizure.” 21 C.F.R. § 7.46(a). The “gist” of these allegations, the Court determined, might be sufficient to state a FCA claim under the theories of implied false certification and/or fraudulent inducement (the Court declined to address Higgins’ “defective device”/worthless services theory). Slip Op. at *23-24, 29.
However, after several pages of exposition on Rule 12(b)(6), ending with a resounding “maybe,” the Court declined to “decide whether the Amended Complaint states a claim as a matter of law, because” it was not plead with particularity as required by Fed. R. Civ. P. 9(b). Slip Op. at 30. While Higgins alleged particular claims that were submitted to CMS and received federal reimbursement, he did not “plead with particularity the acts taken or statements made to allegedly defraud the FDA.” Id. at 31-32. The allegations of actions taken by BSC to mislead FDA failed to identify “the time, place, and content” of BSC’s alleged false representations or omissions. Id. at 32. The Court indicated that it would expect to see identified portions of BSC’s submissions to FDA that constituted misrepresentations or omissions, and specific MDRs that should have been submitted to the Agency but were not. Moreover, and most importantly, the Court noted that Higgins had failed to plead whether any claims had actually been denied by CMS subsequent to the recall FDA issued for BSC’s defibrillator devices.
This final element – CMS’ response to the recall – appears to us to be relevant to both Rules 9(b) and 12(b)(6). Although the Court dismissed Higgins’ complaint without prejudice, giving him another opportunity to amend his complaint (by September 19, 2017), as well as a roadmap to success for his amended complaint, this point could prove extremely sticky. It is the crux of the materiality test set forth in Escobar. Did CMS actually deny payment of any claims submitted after BSC’s recall, based on that recall? Or did it continue to reimburse for procedures that were performed before the recall even after the recall issued? Given the way that hospital and outpatient services are reimbursed by federal programs, we suspect the latter. If and when Higgins is unable to plead nonpayment of claims with specificity, how will the Court respond? We will keep you posted.

By Riëtte van Laack –
As readers of this blog may recall, last year on July 29, 2016, the National Bioengineered Food Disclosure Standard Act (“the Act”) was signed into law.  This Act directs the Agricultural Marketing Service of the USDA to develop “a national mandatory bioengineered food disclosure standard” and establish regulation necessary to carry out the standard by July 29, 2018. The Act includes the possible option of an electronic disclosure rather than a written disclosure. To be sure that the electronic disclosure is effective, the Act directs USDA to “[n]ot later than 1 year after the date of enactment of [the Act], . . . conduct a study to identify potential technological challenges that may impact whether consumers would have access to the bioengineering disclosure through electronic or digital disclosure methods.” In its request for proposal, USDA indicated that it interprets this provision to require the publication of the final report by July 29, 2017.   
Since July 29, 2017 came and went without a study report having been published, USDA presumably failed to meet its deadline. Concerned that this delay will jeopardize the timing of the final rule, the Center for Food Safety (CFS) went to court (CFS is a public interest organization that describes itself as a “champion” of mandatory GMO labeling.). On August 25, 2017, CFS filed a Complaint for Declaratory and Injunctive Relief. CFS requests that the court establish a court-ordered timeline for USDA to finish and publish the study, as soon as reasonably practicable, and to solicit and consider public comments.

By Kurt R. Karst –      
Earlier this week, the U.S. Court of Appeals for the District of Columbia Circuit isued a 31-page Opinion handing FDA a victory in a dispute kicked off by Otsuka Pharmaceutical Development & Commercialization, Inc. and Otsuka Pharmaceuticals Co., Ltd. (collectively “Otsuka”) after FDA’s October 5, 2015 approval of Alkermes plc’s (“Alkermes”) 505(b)(2) NDA 207533 for ARISTADA (aripiprazole lauroxil) Extended-release Injectable Suspension, a prodrug of N-hydroxymethyl aripiprazole (and which N-hydroxymethyl aripiprazole is a prodrug of aripiprazole), for the treatment of schizophrenia. Otsuka is the sponsor of several NDAs for aripiprazole drug products marketed under the proprietary name ABILIFY, including ABILIFY MAINTENA (NDA 202971), which is currently listed in the Orange Book with two unexpired periods of 3-year exclusivity expiring on December 5, 2017 (identified in an Orange Book addendum as “ADDITION OF THE RESULTS OF A CONTROLLED CLINICAL STUDY TREATING ADULT PATIENTS WITH SCHIZOPHRENIA EXPERIENCING AN ACUTE RELAPSE”) and July 27, 2020 (identified in the Orange Book as “NEW INDICATION OF MAINTENANCE MONOTHERAPY TREATMENT OF BIPOLAR I DISORDER IN ADULTS”).
As we previously reported (see our previous posts here , here, and here), Otsuka alleged in its October 2015 Complaint that FDA violated the FDC Act’s 3-year exclusivity provisions (FDC Act § 505(c)(3)(E)(iii) and (iv), and referred to as “romanette iii” and “romanette iv” throughout the case), the Agency’s regulations governing 3-year exclusivity (21 C.F.R. §§ 314.108(b)(4) and (5)), and the Administrative Procedure Act (“APA”) in approving ARISTADA in light of unexpired 3-year exclusivity applicable to ARISTADA. As Judge Ketanji Brown Jackson of the U.S. District Court for the District of Columbia noted in her July 2016 57-page Memorandum Opinion granting summary judgment for FDA, all three allegations boil down to a single issue:

What is at issue in the instant case is the scope of the exclusivities that were conferred to Abilify Maintena and its supplement by statute. . . .  In essence, Otsuka maintains that the FDA was plainly prohibited from approving Alkermes’s drug Aristada during the relevant time period, and thus the agency’s authorization of the marketing of Aristada was arbitrary, capricious, and in violation of the law, because the three-year periods of marketing exclusivity that Abilify Maintena and its supplement received under romanettes iii and iv (and their accompanying regulations) were broad enough to block the approval of subsequent drug applications that have the same “conditions of approval.”
But the FDA has taken the position that the exclusivity provisions in the FDCA and the agency’s regulations only prohibit approval of a subsequent new drug application that pertains to a drug that has the same active moiety as the drug that received exclusivity, regardless of any overlap with respect to the conditions of approval, and so, the FDA argues, because Aristada and Abilify Maintena have different active moieties, the agency was permitted to approve the Aristada NDA within Abilify Maintena’s exclusivity periods.  [(emphasis in original)]

In ruling for FDA (and intervenor Alkermes), Judge Jackson held that the FDC Act “does not unambiguously prevent the FDA from determining that the [statute’s] three-year exclusivity bar blocks only subsequent applications for drugs with the same active moiety,” and that “it was not unreasonable for the FDA to have employed that interpretation” in the context of approving ARISTADA.
On appeal to the DC Circuit, and in affirming Judge Jackson’s decision, the Court set up the dispute in a rather simple and elegant manner:

When a drug earns a period of exclusivity, [FDA] must withhold approval of certain competing drugs if various conditions are satisfied. But how does the FDA determine if a new drug bears a sufficiently close relationship to a pioneering drug to fall within the latter’s zone of exclusivity?  This case concerns the FDA’s test for making that determination.

According to Otsuka, 3-year exclusivity “broadly covers any two drugs that are ‘legal equivalents,’” which the Court notes is “a term of Otsuka’s invention that draws an equivalence between two drugs whenever one relies upon the other to receive approval.” In contrast, FDA argued that 3-year exclusivity “applies as between two drugs sharing the same active moiety.” 
Citing the familiar deference principles articulated by the U.S. Supreme Court in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), the Court concluded that it “must sustain the FDA’s interpretation of the scope of exclusivity afforded by romanettes iii and iv as long as it is consistent with the statutory terms and is reasonable,” and that FDA’s “understanding comfortably meets those standards.”  Although we won’t get into the nuances of all of the arguments Otsuka raised, suffice it to say that the 3-judge panel was not convinced by any of them:

Congress perhaps could have written a statute under which, if one drug relies on the safety or efficacy of a previously approved drug to obtain approval, the two drugs must be considered “legally equivalent” for purposes of defining the previously approved drug’s zone of exclusivity. But the statutory romanettes nowhere expressly set out any concept of legal equivalence in describing the scope of marketing exclusivity.  Instead, Otsuka claims to find a footing for its theory in the FDCA’s provisions governing new drug applications, which in turn, the company contends, informs the proper interpretation of the romanettes. . . .
For Otsuka’s theory to prevail, it would need to show not only that its interpretation is permissible, but that the agency’s alternative understanding is not. Otsuka falls far short of making that showing. . . .
[T]he agency’s reading of “made to show”/“such drug” in § 355(b)(1) is fully reasonable, and considerably more straightforward than Otsuka’s. And because the agency understands “such drug” to refer solely to the applied-for drug, its reading, unlike Otsuka’s, does not involve any concept of legal equivalence between an applied-for drug and other drugs on which it may rely.
Even if we assume Otsuka’s reading of “such drug” in § 355(b)(1) is controlling, Otsuka again falls short in its effort to transport its preferred understanding of “such drug” from § 355(b)(1) into the statutory romanettes. Because Otsuka cannot make that essential showing, its statutory argument, independent of any other shortcomings, must fail. [(internal citation omitted)]

The DC Circuit’s decision caps off a recent spate of disputes and FDA decisions concerning the scope of 3-year exclusivity, including some recent decisions in the abuse-deterrent drug product space (see our previous post here).

By Etan J. Yeshua –
Facing a lawsuit from the food industry and pressure from FDA, the City of New York agreed on Friday to not enforce menu labeling requirements against many restaurants, convenience stores, and other retail food establishments until May 7, 2018. The move aligns the City’s enforcement timeline with FDA’s nationwide compliance date and marks a reversal for the City, which previously announced that it would issue fines and notices of violation beginning on August 21, 2017.
The policy change was the result of a legal challenge brought by food industry trade groups who argued that the City’s early enforcement of its own regulations was unlawful. As we previously reported here, the Federal Food, Drug, and Cosmetic Act, which establishes national menu labeling requirements, permits local menu labeling rules that are identical to the federal requirements. The City has said that its menu labeling rules are substantively identical to the federal statutory and regulatory requirements. But in a motion for preliminary injunction against the City, the plaintiffs (National Association of Convenience Stores, New York Association of Convenience Stores, Food Marketing Institute, and National Restaurant Association) argued that the City’s imposition of an earlier compliance date would be an additional, non-identical obligation. Therefore, plaintiffs argued, the City was preempted from early enforcement.
Though not a party to the lawsuit, the FDA weighed in and agreed with the plaintiffs in a Statement of Interest filed with the court on August 14: “Acknowledging that the federal requirements have come into effect, the City asserts that it is not bound by the terms of one of those requirements, the date of compliance. Because the governing statutory and regulatory framework established by the Act expressly preempts the City from making such a unilateral determination, the City should not be allowed to begin enforcement of [its menu labeling requirements] in advance of the FDA’s national compliance date.”
Before oral arguments could be heard, the City and the trade groups reached an agreement, which was filed with the Court on Friday August 25. The City agreed that it will not take enforcement action against noncompliant establishments that are members of the plaintiff trade groups, until the federal compliance date. In exchange, the trade groups agreed to “continue to educate and encourage their members to continue the process of coming into compliance . . . as soon as practicable” and to encourage those members who are already complying to stay in compliance. The agreement does not prevent the City from “continuing to educate” establishments about its menu labeling requirements.
Earlier on Friday, FDA Commissioner Scott Gottlieb issued a statement that highlighted the preemptive effect of the federal menu labeling requirements. “Americans should not have to navigate variable information about the foods they eat when traveling from state to state — or city to city,” Gottlieb said. “Inconsistent state and local requirements may also drive up the cost of food, and sow confusion, by requiring restaurants and other covered establishments to post different information based on location.” The Commissioner’s statement also announced that the Agency would issue “additional, practical guidance on the menu labeling requirements by the end of this year.”
The statement did not address whether FDA planned to revise its final menu labeling regulations. Earlier this year, the Agency said it was reconsidering certain aspects of the final rule and invited comments about how FDA “might further reduce the regulatory burden or increase flexibility.” To date, FDA has received over 69,000 public comments. The Commissioner gave no indication that the reconsideration would result in an extension of the compliance date beyond May 7, 2018. The forthcoming guidance, he said, “should allow covered establishments to implement the requirements by next year’s compliance date.”

By Mark I. Schwartz –
On Monday, August 28th, FDA announced the outlines of a long overdue policy change on stem cells. Based on Dr. Gottlieb’s statements in the FDA press release, it appears to have two prongs. First, the agency announced a crackdown on stem cell clinics that claim “…that their unproven and unsafe products will address a serious disease, but instead put patients at significant risk.”
To this end, on Friday, August 25th, the U.S. Marshals Service, on behalf of FDA, seized vials of Vaccinia Virus Vaccine (Live) from StemImmune Inc. in San Diego, California. These vaccines were purportedly being administered to cancer patients at the California Stem Cell Treatment Centers in Rancho Mirage and Beverly Hills, California.
According to the FDA press release on the seizure: “…the vaccine was used to create an unapproved stem cell product (a combination of excess amounts of vaccine and stromal vascular fraction – stem cells derived from body fat), which was then administered to cancer patients with potentially compromised immune systems and for whom the vaccine posed a potential for harm, including myocarditis and pericarditis (inflammation and swelling of the heart and surrounding tissues). The unproven and potentially dangerous treatment was being injected intravenously and directly into patients’ tumors.”
In a separate action, on August 24th, the agency issued a Warning Letter to U.S. Stem Cell Clinic Inc., LLC, alleging that the autologous stem cells manufactured from adipose tissue at this clinic were more than minimally manipulated and not intended for a homologous use, thereby rendering the products unapproved new drugs, and biologics requiring licensure under 351 of the Public Health Service Act (PHSA).
According to the Warning Letter, the company’s promotional materials stated that the stem cell product: “…is intended to treat a variety of diseases and conditions, including, but not limited to, Parkinson’s disease, amyotrophic lateral sclerosis (ALS), chronic obstructive pulmonary disease (COPD), heart disease, and pulmonary fibrosis…” among other ailments.
In fact, the Washington Post reports that, in March of 2017, the clinic was the subject of a New England Journal of Medicine article that stated that three women with age-related macular degeneration were blinded, or had their vision badly impaired, after undergoing procedures at the U.S. Stem Cell Clinic which involved injecting stem cells into their eyes.
The issuance of a Warning Letter in these circumstances is not new. The agency has issued several regulatory letters to such facilities over the past several years, though it has rarely taken the subsequent step of initiating litigation, or seizing product, when the facility in question didn’t stop selling the stem cell products after an FDA admonition to do so. It will be interesting to see what further steps, if any, FDA takes in this direction with other such stem cell facilities.
Second, Dr. Gottlieb stated that the agency is developing a “comprehensive and efficient,” science-based policy with the aim of accelerating the proper development of stem cell products. According to the Commissioner, FDA will put forward a new framework on this subject this fall.

This comprehensive policy will establish clearer lines around when these regenerative medicine products have sufficient complexity to fall under the agency’s current authority, and then define an efficient process for how these products should be evaluated for safety and effectiveness. The policies will be set forth in a series of guidance documents that are the result of a public process we have held in recent years. The new policy will build upon the agency’s current risk-based, flexible regulatory framework. It will also serve to implement provisions of the 21st Century Cures Act related to regenerative medicine. The FDA has already held public meetings to inform its thinking in these areas, so much of the agency’s approach is already part of the public record. We’ll continue to work with industry and the scientific community to perfect the process for bringing safe and effective treatments to patients.

At the same time that this regenerative medicine policy will be put forward, FDA will apparently also issue a compliance policy that will give current product developers “…a very reasonable period of time…” to interact with the FDA in order to determine if they need to submit an application for marketing authorization and to come into the agency and work on a path towards approval.
As CBER’s former Deputy Director for Compliance and Biologics Quality (2012-2015), I’m thrilled to see that Dr. Gottlieb is proposing changes to CBER’s thus far unworkable approach to stem cells. The 351 PHSA pathway used for vaccines and related biological products has not shown itself to be an effective regulatory tool for facilities that manufacture cells and tissues on a small scale (often personalized to a patient’s needs), as these firms usually do not have the resources to conduct large-scale trials, and pay significant user fees. This is evidenced by the dearth of approvals of these products and the commensurate dearth of sponsors that appear to be actively conducting clinical trials in this area. In addition, the lack of clarity in the Part 1271 regulations (21 CFR Part 1271 and following), and the draft guidance documents that, at times, appear unhinged from their authorizing regulatory texts, have significantly hindered capital investment and product development in this area.
From the enforcement perspective, the outlines of Dr. Gottlieb’s approach are also salutary, as FDA appears to have taken on paper tiger status because the agency has issued several Warning Letters (as well as numerous untitled letters) in the area of Human Cells, Tissues, and Cellular and Tissue-based Products (HCT/Ps) over many years, and has almost never taken enforcement action against recalcitrant firms that the agency claims continue to violate the law and put the public health at risk (the sole exception to this statement being the case of Regenerative Sciences – see here). 
In addition, the Commissioner’s statements regarding enforcement appear to focus on those firms that market unsubstantiated therapies, where those therapies also pose significant risks to the health and safety of patients.  That would appear to exclude amniotic tissue products and the like that have been the subject of the agency’s ire over the past few years (see, for example, the untitled letter to Surgical Biologics from 2013). This would seem to be an equitable resolution to the standoff between CBER and this segment of the HCT/P industry.
Finally, it is also noteworthy that Dr. Gottlieb’s statement, in referencing the criteria under 21 CFR 1271.10(a), never explicitly calls out the fourth criteria, namely, that HCT/Ps should not have a systemic effect and should not be dependent on the metabolic activity of living cells for their primary function. This fourth prong has received much criticism from industry because, read literally, it would preclude most products with viable cells from regulation exclusively under Part 1271.
Indeed, in the proposed rule promulgating the HCT/P regulations (63 FR 26749, May 14, 1998), FDA stated that: “[t]he agency would consider the insertion of pancreatic islet cells, or stem cells into an individual to have a mainly systemic effect…FDA recognizes that some products may have both systemic and structural effects but intends that a product’s primary effect be determinative.” [Emphasis added]
We can only hope that Commissioner Gottlieb’s announcement leads to much needed reforms in the HCT/P arena, particularly in the areas summarized above. Patients and industry participants deserve nothing less. We will, of course, update our readers regarding all FDA developments in this area.

By Serra J. Schlanger & Jeffrey N. Wasserstein –
In an advisory opinion posted on August 25, 2017, the Office of the Inspector General of the Department of Health and Human Services (“OIG”) determined that enforcement action would not be taken against a drug manufacturer’s proposal to replace products that require specialized handling that could not be administered to patients for certain reasons, at no additional charge to the purchaser.
Advisory Opinion 17-3 was requested by a company that manufactures and sells biologics and other products that may be sensitive to temperature changes, direct sunlight or movement, or may require reconstitution in a controlled environment. The labeling for the company’s products includes specific storage and handling requirements, and, if applicable, limits on the amount of time that may pass between when a product is reconstituted and when it is administered to a patient. Failure to meet these requirements results in product spoilage.
Under the proposed program, the manufacturer would replace, without charge, products purchased by physicians, clinics, and hospitals if the products became spoiled or otherwise unusable after purchase. Under the program, products could only qualify for replacement if it was not administered to a patient after having been rendered unusable due to:

Being mishandled, dropped, or broken;
Being inappropriately stored or refrigerated, or frozen;
An admixture error; or
Being reconstituted but not administered due to an unforeseen patient condition or missed appointment.

Purchasers would be informed about the program and policies for replacement before purchase. The program would only allow for the replacement of spoiled products and would not provide purchasers with credit for any spoiled product or replacements for free samples. In addition, a purchaser could not receive replacement product if the spoiled product had been administered or billed to an insurer or patient. The program was designed to replace single spoilage claims; however, in the event of a multi-unit loss (e.g., a refrigeration failure), the purchaser could claim a loss of up to five products. In order to receive the replacement product, the purchaser would be required to submit documentation describing how the spoilage occurred and return the spoiled product. In the event that the product could not be returned (e.g., a broken vial), the purchaser must attest to how it became unusable and provide a photograph of the spoiled product, if available. The purchaser would also be required to sign an acknowledgement that neither a patient nor insurer was billed for the spoiled product.
In analyzing this program under the Federal anti-kickback statute (“AKS”, 42 U.S. C. § 1320a-7b(b)), the OIG recognized that, although potentially applicable, the safe harbor for warranties (42 C.F.R. § 1001.952(g)) would not protect the proposed replacement product program because the safe harbor for warranties protects actions taken by suppliers to address products that do not meet specification. In the proposed program, the products intended to be replaced would meet specification but would then be spoiled or rendered unusable after they had been delivered to the purchaser due to the purchaser’s error or an unforeseen inability to administer the product after it was prepared for a patient.
Nevertheless, the OIG concluded that the proposed replacement product program presented a low risk of fraud and abuse for four reasons.

The replacement of product would be restricted to certain unintentional unplanned circumstances and could increase patient safety and quality of care (e.g., by decreasing the possibility that a purchaser would administer potentially spoiled product in order to avoid financial loss).
There was low risk of increased cost or overutilization because the program would only apply to products that the purchaser had already selected and intended to use, but did not administer to a patient or bill to a patient or insurer.
The program would only cover individual claims of spoiled products and not large losses. In addition, the only remedy would be replacement of the same product that the purchaser had intended to use.
The program is similar to an insurance program, which OIG believes is unlikely to cause a purchaser to its change behavior (e.g., the purchaser would be unlikely to reduce costs that are currently expended to prevent spoilage). In addition, the fact that the purchaser would be required to complete an administrative process, including providing proof or an attestation of the spoilage and returning the product or explaining why it cannot be returned, reduces the risk that the program would unduly influence the purchase of products.

It is encouraging that OIG has recognized that such a program has a public health benefit and low risk of fraud and abuse.

By Mark I. Schwartz –
According to a European Medicines Agency (EMA) press release issued on August 23, 2017, the FDA, the European Commission (EC), and the European Medicines Agency (EMA) recently signed a new confidentiality commitment that allows the FDA to share non-public and commercially confidential information, including trade secret information, contained in drug inspection reports with these European Agencies.
As you may recall, back in March, we reported that the United States and the European Union had agreed to recognize each other’s drug cGMP inspections. The agreement reached (see here and here) amended the Pharmaceutical Annex to the 1998 U.S. – E.U. Mutual Recognition Agreement, with a view to avoiding duplicative inspections and saving millions of dollars in repetitive inspections.
At the time, FDA stated that they believe this “…initiative will result in greater efficiencies for both regulatory systems and provide a more practical means to oversee the large number of drug manufacturing facilities outside of the U.S. and EU.” Until then, the EU and FDA would sometimes inspect the same facilities within a brief period of time. With the agreement announced earlier this year, such duplication is expected to become the exception, rather than the rule.
Fundamentally, the problem has been that while European regulators have, for years, shared with FDA unredacted inspection reports from their European inspections, FDA has shared only redacted inspection reports with our European counterparts.  These redacted reports have been of limited utility to European regulators in determining whether any regulatory action needed to be taken against U.S. based pharmaceutical facilities.
Then, in 2012, with the enactment of The Food and Drug Administration Safety and Innovation Act (FDASIA), FDA was provided with the statutory authority to enter into memoranda of understanding for purposes of information exchanges with foreign governments, and specifically with the authority to share trade secret information under certain circumstances. Section 708(c) of the Federal Food, Drug, and Cosmetic Act, codified at 21 USC 379(c), reads in part as follows:

(c) AUTHORITY TO ENTER INTO MEMORANDA OF UNDER- STANDING FOR PURPOSES OF INFORMATION EXCHANGE.—
The Secretary may enter into written agreements to provide information referenced in section 301(j) to foreign governments subject to the following criteria:
(1) CERTIFICATION.—The Secretary may enter into a written agreement to provide information under this subsection to a foreign government only if the Secretary has certified such government as having the authority and demonstrated ability to protect trade secret information from disclosure. Responsibility for this certification shall not be delegated to any officer or employee other than the Commissioner of Food and Drugs.
(2) WRITTEN AGREEMENT.—The written agreement to provide information to the foreign government under this subsection shall include a commitment by the foreign government to protect information exchanged under this subsection from disclosure unless and until the sponsor gives written permission for disclosure or the Secretary makes a declaration of a public health emergency pursuant to section 319 of the Public Health Service Act that is relevant to the information.
(3) INFORMATION EXCHANGE.—The Secretary may provide to a foreign government that has been certified under paragraph (1) and that has executed a written agreement under paragraph (2) information referenced in section 301(j) in only the following circumstances: (A) Information concerning the inspection of a facility may be provided to a foreign government if— (i) the Secretary reasonably believes, or the written agreement described in paragraph (2) establishes, that the government has authority to otherwise obtain such information; and (ii) the written agreement executed under paragraph (2) limits the recipient’s use of the information to the recipient’s civil regulatory purposes. (B) Information not described in subparagraph (A) may be provided as part of an investigation, or to alert the foreign government to the potential need for an investigation, if the Secretary has reasonable grounds to believe that a drug has a reasonable probability of causing serious adverse health consequences or death to humans or animals.
(4) EFFECT OF SUBSECTION.—Nothing in this subsection affects the ability of the Secretary to enter into any written agreement authorized by other provisions of law to share confidential information. [Emphasis added]

As a result, since the enactment of FDASIA, FDA has had the statutory authority to share inspectional information containing trade secrets with European counterparts, however, until recently, FDA had presumably been unwilling or unable to certify under 21 USC 379(c)(1) that such governments “…had the authority and demonstrated ability to protect trade secret information from disclosure.”
That appears to have changed, as stated in the EMA press release: “[t]he new confidentiality commitment formally recognizes that FDA’s EU counterparts have the authority and demonstrated ability to protect the relevant information. This step now allows the sharing of full inspection reports, allowing regulators to make decisions based on findings in each other’s inspection reports and to make better use of their inspection resources to focus on manufacturing sites of higher risk.”
We will continue to monitor the implementation of this inspection initiative with the EU, and to assess whether it bears the fruits its FDA proponents advertise, without the drawbacks that many fear.

By Riëtte van Laack –
In November 2013, the Food Safety Inspection Service (FSIS) of the USDA issued a regulation expanding the circumstances in which labels were eligible for generic label approval (see our previous post here). Under that regulation, meat and poultry labels need not be submitted for label review unless the labels fall within one of four categories, i.e., 1.) labels for “religious exempt products,” 2.) labels for products for export that are subject to requirements different from those applicable to products for marketing in the United States, 3.) labels that include special statements and claims, and 4.) labels for temporary approval. All other product labels need not be submitted for review but are generically approved provided that they are in compliance with applicable regulations. At the time that it issued the regulation, FSIS also issued guidance with a long list of examples of special statements and claims that needed to be submitted to FSIS for approval and a list of examples of claims that could be generically approved.
On August 18, 2017, FSIS issued the second update to its guidance.  According to its press release, this update “include[s] new examples of special statements and claims that require submitting for approval, factual statements and claims that are generically approved, changes that can be made generically to labels previously approved with special statements and claims, and changes that cannot be made generically to labels previously approved with special statements and claims.”
FSIS asserts that new special statements are marked with an asterisk. New special statements that require approval include egg free, family farm raised, certain implied nutrient content claims (e.g., made with olive oil, protein snack), Paleo Certified, and Paleo Friendly. Some of the information is reorganized. Notably, information about label approvals regarding approval requirements for labels for religious exempt products, export labels that are different from domestic labels, and labels for temporary approval (for labeling errors that do not pose a potential health or safety issue) has been moved to a new Appendix (Appendix 7) making it easier to locate.
FSIS invites comments. The comment period is open for 60 days. Meanwhile, FSIS advises companies to use the updated guidance when determining whether they need to submit a label for approval. Questions regarding labeling statements that are not included in the guidance can be submitted any time via askFSIS.

By Ricardo Carvajal –
In a blog posting that cited the agency’s goal of educating while regulating, FDA released the Food Safety Plan Builder (FSPB) – a software program “designed to assist owners/operators of food facilities with the development of food safety plans that are specific to their facilities and meet the requirements of the Current Good Manufacturing Practice, Hazard Analysis, and Risk-Based Preventive Controls for Human Food regulation (21 CFR Part 117).”  The FSPB web page makes clear that use of the FSPB is voluntary and does not necessarily ensure compliant food safety procedures.  Nonetheless, the FSPB can be expected to find an audience, especially among smaller manufacturers that are subject to extended compliance dates and might not have yet invested substantial resources in developing a food safety plan.  Even larger manufacturers who have already developed their plans may be tempted to delve into the FSPB as a point of reference.
In conjunction with the software, FDA released 16 (!) training videos on YouTube that address various aspects of FSPB.  FDA also released a user guide with more detailed information.  Perhaps not surprising in light of the subject matter, the user guide includes a lengthy legal disclaimer putting users on notice that FDA makes no warranties of any kind and admits of no liability for any damages, and that “[r]esponsibility for the interpretation and use of the [FSPB] and of the accompanying documentation lies solely with users.”  

By Ricardo Carvajal –
In a blog posting that cited the agency’s goal of educating while regulating, FDA released the Food Safety Plan Builder (FSPB) – a software program “designed to assist owners/operators of food facilities with the development of food safety plans that are specific to their facilities and meet the requirements of the Current Good Manufacturing Practice, Hazard Analysis, and Risk-Based Preventive Controls for Human Food regulation (21 CFR Part 117).”  The FSPB web page makes clear that use of the FSPB is voluntary and does not necessarily ensure compliant food safety procedures.  Nonetheless, the FSPB can be expected to find an audience, especially among smaller manufacturers that are subject to extended compliance dates and might not have yet invested substantial resources in developing a food safety plan.  Even larger manufacturers who have already developed their plans may be tempted to delve into the FSPB as a point of reference.
In conjunction with the software, FDA released 16 (!) training videos on YouTube that address various aspects of FSPB.  FDA also released a user guide with more detailed information.  Perhaps not surprising in light of the subject matter, the user guide includes a lengthy legal disclaimer putting users on notice that FDA makes no warranties of any kind and admits of no liability for any damages, and that “[r]esponsibility for the interpretation and use of the [FSPB] and of the accompanying documentation lies solely with users.”