Deference to Agency Deference

Deference to Agency Deference

By Anne K. Walsh

Companies challenging FDA in court typically face a steep uphill battle given the long-standing doctrine known as Auer deference, which (in simplified terms) requires courts to defer to FDA’s interpretation of its own regulations if they are ambiguous.  The recent Supreme Court ruling in Kisor v. Wilkie did not overturn Auer deference, as many predicted given the change in Court composition, but even in deferring to deference, the Court significantly cabined the scope and application of it.  Under this revised framework, courts first must pressure test whether a challenged regulation is genuinely ambiguous – exhausting tools of construction – and if so, courts then must make an independent inquiry of the regulation to determine whether it is entitled to Auer deference.

The majority opinion spends considerable time describing the background facts of the case and the history of Auer deference.   Of note to our blog readers, even though the underlying action is not even peripherally related to FDA regulation (Kisor challenges a decision by the Department of Veterans Affairs), the Court references FDA and its regulations in discussing when deference would be appropriate.  As an example, the Court points to an earlier challenge to an FDA regulation that grants exclusivity for drugs if they contain no “active moiety” that has been approved by FDA for any other drug.  The D.C. Circuit was asked to determine whether a company created a new active moiety “by joining a previously approved moiety to lysine through a non-ester covalent bond.”  This type of question, for the last 20 or so years, would have been entitled to Auer deference, and as related to the definition of “active moiety” specifically, the D.C. Circuit did defer to the Agency’s construction of its own regulation.  In Kisor, the Court specifically recognized the importance of preserving FDA’s ability to interpret its regulations using its expertise and policymaking function.

Nevertheless, the Court limits the situations in which Auer deference applies and sets forth the following step-wise analysis.

  • The first step in a court’s analysis is to determine whether the regulation is genuinely ambiguous. To do this, a court must carefully consider the text, structure, history, and purpose of a regulation, “exhausting” all the traditional tools of construction.
  • If there is genuine ambiguity, a court must then determine whether the agency’s reading of the regulation is “within the bounds of reasonable
  • And even then, Auer deference is not automatic. Rather, a court must make an independent inquiry into whether the “character and context of the agency interpretation entitles it to controlling weight.”  This inquiry requires a review of:
    1. Whether the regulatory interpretation is consistent with the agency’s authoritative or official position;
    2. Whether the agency’s interpretation implicates the agency’s substantive expertise; and
    3. Whether the agency’s interpretation reflects its “fair and considered judgment.”

From the Court’s perspective, this approach maintains the spirit of Auer deference, but avoids its application when the agency takes a position that is a “convenient litigation position” or that creates “unfair surprise” to regulated parties.

Even though it has not even been two months since the Kisor decision, this case already has been cited by litigants at least 16 times.  It will be interesting whether the number of challenges to FDA’s interpretations increases as companies are more optimistic about their chances of having a court freshly review rather than defer to FDA.

Note that none of this discussion of Auer or Kisor relates to an agency’s interpretation of a statute it enforces, which remains governed by the well-known Chevron test.  Perhaps the Kisor decision reflects a baby step toward the demise of Chevron, which also has been criticized.  Or a more cynical view could be that all the discussion of “deference” is merely a judicial cover to achieve a predetermined result in favor of the agency.

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The FTC Loses Big in the Seventh Circuit

The FTC Loses Big in the Seventh Circuit

By Rachael E. Hunt & Anne K. Walsh & JP Ellison

In the August 21 split panel decision issued in Federal Trade Commission v. Credit Bureau Center LLC, the Seventh Circuit held that section 13(b) of the Federal Trade Commission Act (“FTCA”), 15 U.S.C. § 53(b), does not authorize an award of restitution.  In overturning its earlier precedent, the Seventh Circuit created a circuit split.  We expect that the FTC likely will seek Supreme Court review, and if that happens, it is unclear if the Court will accept the case.  This decision, at least temporarily, represents further weakening of the Federal Trade Commission’s (“FTC”) ability to obtain monetary relief.  It also could support an argument that the authority of other agencies, such as the Food and Drug Administration (“FDA”), should be revisited.


The specifics of the case against Michael Brown and his company, Credit Bureau Center, are not important to the key holding in this case.  The long and short of it is that Michael Brown defrauded consumers into signing up for a monthly credit-monitoring service, resulting in millions of dollars of revenue.  Consumers complained to the FTC, which opened an investigation.  Under Section 13(b), the FTC may seek an injunction in federal court “[w]henever the Commission has reason to believe … that any person, partnership, or corporation is violating, or is about to violate, any provision of law enforced by the [FTC].”  In January 2017, the FTC sued Brown under section 13(b) of the FTCA seeking an injunction and restitution.

On the Commission’s motion, the district court issued a temporary injunction, froze Brown’s assets, and appointed a receiver to manage his company.  Brown and the Commission later filed cross-motions for summary judgment.  In addition to contesting liability, Brown argued that section 13(b) does not authorize an award of restitution.

The Majority Opinion

The Seventh Circuit dedicated the bulk of its 66-page majority opinion to the issue of whether section 13(b) allows for restitution.  (It summarily upheld the lower court’s finding of liability and the permanent injunction.)  FTC did not seriously contest that the statutory authorization for injunctions in section 13(b) encompasses other forms of equitable relief like restitution, but contended that section 13(b) implicitly authorized restitution, pointing to Seventh Circuit precedent in FTC v. Amy Travel Service, Inc., 875 F.2d 564, 571 (7th Cir. 1989).

The court overturned Amy Travel, stating that it had erred in endorsing the notion that section 13(b) authorizes awards of restitution, not just restraining orders and injunctions.  The court noted that its current analysis was primarily one of statutory interpretation that had previously been “obscured in layers of caselaw.”  In acknowledging its creation of a circuit split, with the Ninth and Eleventh Circuits pitted directly against the finding here, the Seventh Circuit noted, “No circuit has examined whether reading a restitution remedy into section 13(b) comports with the FTCA’s text and structure.  Nor has anyone determined whether § 45 forecloses this remedy.”  Note that this very issue has arisen in other courts, including a district court case within the Eleventh Circuit that reached the same result as the Seventh Circuit did here.

Further, the court stated that stare decisis alone could not overcome the earlier case’s clear incompatibilities with the FTCA’s text and structure as well as the U.S. Supreme Court’s instruction in Meghrig v. KFC W., Inc., 516 U.S. 479, 487–88 (1996), “not to assume that a statute with ‘elaborate enforcement provisions’ implicitly authorizes other remedies.”  Because the FTCA has two detailed remedial provisions that expressly authorize restitution if the Commission follows certain procedures, allowing implied restitution through section 13(b) allows the Commission to circumvent these elaborate enforcement provisions.  Moreover, reading an implied restitution remedy into section 13(b) would make these other provisions largely pointless.  Thus, the court concluded that section 13(b)’s grant of authority to order injunctive relief does not authorize an award of restitution.

The Dissent

Chief Judge Wood, joined by Circuit Judges Rovner and Hamilton, wrote a dissent that focused on both a belief that the majority was making a mistake, and that it was doing so in a procedurally inappropriate way by avoiding en banc review.  The dissent characterized the majority opinion as incorrectly extrapolating from cases addressing whether a private party has an implied right of action to whether a government agency, which enjoys an express right of action under a statute for injunctive relief, is entitled to a restitutionary remedy that is ancillary to, or part of, the injunction.  The dissent further noted that the distinction of a government plaintiff “is especially important to the public-interest component of the analysis when the government seeks remedies that (1) lie uniquely within its toolbox and (2) are aimed squarely at undoing public harms and preventing future ones through deterrence.”

According to the dissent, the majority opinion “upends what the agency and Congress have understood to be the status quo for thirty years, and in so doing grants a needless measure of impunity to brazen scammers like the defendant in this case.”

The Final Word?

As the court noted, for 30 years the FTC has employed Section 13(b) as its go-to mechanism for obtaining restitution and other equitable remedies from entities that the FTC believes have violated the law.  As noted above, this case creates a circuit split about the authority of a federal government agency, which seemingly sets the stage for an FTC cert petition and a better than average chance for Supreme Court review.  So what would happen if the Supreme Court were to agree with the Seventh Circuit’s ruling?  Barring a change in the statute (which one FTC Commissioner recently sought in Congressional testimony) the FTC would be precluded from seeking restitution without going through the time-consuming and burdensome process of seeking and obtaining an administrative cease and desist order after a full trial, and then having to file a separate court action to get that relief.  For all practical purposes, an adverse ruling by the Supreme Court without a change in the wording of the statute would effectively take the FTC out of the business of obtaining restitution and other equitable remedies.

In the meantime, this decision represents yet another blow to how the FTC has historically asserted its authority.  As we covered here, here, here, here, and here, the Third Circuit earlier held that the FTC may only bring a case under Section 13(b) of the FTCA when it can articulate specific facts that a defendant “is violating” or “is about to violate” the law.  And there could be broader implications to other government agencies that seek restitution without explicit authority to do so.  As noted in articles published by John Fleder and Jeff Gibbs in 2003 and 2006, here and here, FDA’s authority to obtain restitution or disgorgement is not grounded in statute, and may not withstand scrutiny if subject to the same analysis the Seventh Circuit applied here.

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You Don’t Have to Be Old to Be Mature – FDA Likes “Mature” Quality Organizations, and Offers Tips

You Don’t Have to Be Old to Be Mature – FDA Likes “Mature” Quality Organizations, and Offers Tips

By Douglas B. Farquhar

At the cGMP conference sponsored by earlier this month, FDA’s compliance wing encouraged pharmaceutical companies to ensure that they demonstrate “quality maturity,” and offered specifics about what FDA wants to see.  Like my grandmother used to say this time of year about the best corn to make corn pudding, there is a difference between “old” and “mature.”  You don’t have to be old, to be mature.  The quality organization recipe FDA is promoting applies equally to startups and to established manufacturers and sponsors of medical products.  FDA’s advice on mature quality systems also applies equally to medical device companies and to pharmaceutical companies.

Preliminarily (a word I doubt my grandmother used very often), we should note that FDA’s advice on these points is not incorporated in binding statute or regulations, or even in published guidance documents.  Nonetheless, by following the advice offered by FDA on these issues, regulated industry can more likely avoid adverse findings during regulatory inspections, and find pathways to remediation that FDA will more likely accept, after adverse inspections.

Several FDA speakers at the conference (agenda here) discussed the importance of having mature quality systems, but the most specific advice was offered in a PowerPoint delivered by Theresa Mullin, FDA’s Associate Director for Strategic Initiatives for the Center for Drug Evaluation and Research and entitled “Update from FDA CDER.”

Summarizing the Quality Metrics Research Final Report by the University of St. Gallen in Switzerland, Morrison described the appropriate steps to ensure “quality maturity” as follows (emphasis is added):

  1. Optimized set-up and cleaning procedures are documented as best practice process and rolled out throughout the whole plant.
  2. A large percentage of equipment on the shop floor is currently under statistical process control.
  3. For root cause analysis, the firm has standardized tools to get a deeper understanding of the influencing factors for problems.
  4. Goals and objectives of the manufacturing unit are closely linked and consistent with corporate objectives and the site has a clear focus.
  5. Manufacturers have joint improvement programs with suppliers to increase performance.
  6. All potential bottleneck machines are identified and supplied with additional spare parts.
  7. For product and process transfers between different units or sites, standardized procedures exist that ensure a fast, stable and complied [probably should read “compliant” instead of “complied”] knowledge transfer.
  8. Charts showing the current performance status such as current scrap rates and current up times are posted on the shop floor and visible for everyone.
  9. The firm regularly surveys customers’ requirements.
  10. The firm ranks its suppliers and conducts supplier qualifications and audits.

Critically, a mature quality system should not be stagnant, nor should advice about the maturity of the quality system be considered in isolation.  FDA wants industry to produce and report quality metrics, as discussed in prior blogposts (here, here, and here).  Moreover, FDA encourages industry to aim for continuous improvement in manufacturing, laboratory, and quality systems.

So, back to corn pudding recipes.  What my grandmother meant by “mature” was that corn that had stayed a long time on the stalk might be past its prime, if eaten on the cob, but was the best to use to make corn pudding.  She didn’t recommend corn that had been picked days ago (“old” corn).  As to whether the best corn pudding is made just with eggs, or with eggs and flour, that is a whole ’nother controversy (here).

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Petition to Allow Generic Label Approval for Labels on Products from Exotic Species that Received Voluntary Inspection

Petition to Allow Generic Label Approval for Labels on Products from Exotic Species that Received Voluntary Inspection

By Riëtte van Laack

As we previously reported, in 2013, the Food Safety and Inspection Service (FSIS) of the USDA updated its regulations to expand the type of labels that can be generically approved, i.e., are not subject to FSIS pre-market review and approval.  Under the revised regulations, only labels that include so-called special claims are subject to pre-market review and approval. FSIS took this action in an effort to reduce the time for approval of labels that do not qualify for generic approval and to free up agency resources for more targeted review of materials that are potentially false or misleading.  Unfortunately, the time for label approval has increased again; in June 2019, FSIS reported that it is experiencing a 20+ business delay in label approval.

One of the categories of labels that remain subject to pre-market review are labels for products derived from so-called exotic species, including bison, water buffalo, cattalo, deer, and elk.  Exotic species are not subject to mandatory inspection because they are non-amenable species.  Under 9 C.F.R. Part 352, FSIS provides a voluntary inspection and certification service for wholesomeness relating to the slaughter and processing of exotic animals and the application of a triangular shaped mark of inspection.  Even if the label for a product derived from these exotic species does not contain special claims, the label is subject to premarket review and approval by FSIS.  Compared to companies marketing products from amenable species, the requirement for label review and approval puts companies marketing products derived from exotic species at a significant disadvantage because they will need to wait 3 weeks or more for approval of a “generic” label whereas there is no waiting time for a similar product derived from an amenable species.

Frustrated by the resulting delay in label review and approval, the National Bison Association petitioned FSIS to amend the regulation for generic label approval to allow generically approved labels for product generated at an establishment receiving voluntary inspection under 9 C.F.R. Part 352.  Concerned with the time involved in notice-and-comment rule making, the NBA asks that FSIS amend the regulation via a direct rule without notice and comment.

FSIS’ regulations permit interested persons to submit comments on petitions filed with the Agency within 60 days of the posting date of the petition.  Thus, comments should be submitted by Sept. 30, 2019.

Just recently, the North American Meat Institute (NAMI) submitted comments in support of allowing generic approval for labels for products from exotic species as the “proposed change would benefit all FSIS regulated entities because reducing the number of label submissions for exotic species will likely result in a quicker turnaround generally for labels requiring submission.”  NAMI did not endorse the amendment via a direct rule, however.

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“Wine-ing” about FDA Involvement in Regulating Alcohol Labels

“Wine-ing” about FDA Involvement in Regulating Alcohol Labels

By Anne K. Walsh

This case caught our eye for a few reasons, none of which directly relates to the business activities of most of our blog readers but may relate to their happy-hours activities.  As most know, FDA regulates foods, including beverages, but Congress delegated most of the authority to regulate alcoholic beverages to other federal agencies.  Nevertheless, FDA is more involved than you would think – recent litigation illuminates the close relationship FDA holds with those regulatory agencies.

In a cleverly drafted opinion from Judge Boasberg (D.D.C.), in which the court pours alcohol humor throughout (e.g., “Whichever way the Court tilts the wineglass, Bellion’s vintage is wanting,” “Not so fast, Plaintiffs say – the Court’s methodology is corked.”), the question was whether the plaintiffs could make certain health claims on labels of its vodka products.  Plaintiffs, Bellion Spirits and Chigurupati Technologies, were manufacturers of vodka infused with a proprietary compound called NTX.  Plaintiffs sought to advertise their vodka as having benefits associated with NTX, claiming that NTX could help protect against, or reduce, damage to DNA caused by the alcohol.

The Alcohol and Tobacco Tax and Trade Bureau (TTB), an agency under the Department of Treasury, requires mandatory pre-approval for any health claims made on alcohol beverage labels.  Bellion petitioned TTB for approval of these health claims, and TTB determined that the claims were unsubstantiated and misleading and denied Bellion’s petition.  TTB explained that the claims lacked substantiation and that they were misleading as to the “serious health consequences of both moderate and heavy levels of consumption of alcohol beverages containing NTX.”   The claims also implied that drinking the beverages would reduce the risk of damage to the liver and to the brain.  In short, TTB rejected the idea that NTX-infused vodka was less harmful to a person’s DNA than other vodka.

Bellion submitted to TTB several animal and in vitro studies purportedly supporting the health claims.  TTB, in turn, forwarded the full petition along with these studies to FDA for its scientific and medical review of whether the data provided adequate substantiation for the proposed claims.  Bellion sued TTB, claiming the government had overstepped its authority by involving FDA in its review of the claims and arguing the restrictions infringed on Bellion’s First and Fifth Amendment rights. The court patiently addressed each of Bellion’s constitutional and APA arguments, which are far too detailed for this blog post, and affirmed TTB’s conclusion that any claims about salutary health effects are misleading, and thus not subject to First Amendment protection.

It may not ever be clear without a FOIA request or congressional inquiry how often FDA is consulted by TTB for its scientific expertise.  In this case, FDA’s involvement was significant: FDA reviewed the scientific and medical evidence submitted by Bellion, which included 112 articles or studies; and assessed whether the data adequately substantiated the proposed claims.  FDA and TTB took over a year to respond to plaintiffs’ petition.  It would be interesting how many competing priorities of FDA were deprioritized or postponed for this project.

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First Warning Letter for Failure to Develop Foreign Supplier Verification Program

First Warning Letter for Failure to Develop Foreign Supplier Verification Program

By Riëtte van Laack

On August 13, 2019, FDA announced that it has issued the first Warning Letter (WL) for a violation of the requirements for a Foreign Supplier Verification Program (FSVP).  This is a good reminder for importers that they must have a FSVP for each food for which they are the FSVP importer.

The Food Safety Modernization Act (FSMA) provided FDA with a new tool to enhance FDA’s oversight of foreign food facilities and farms.  Under the FSVP requirements, a U.S.-based FSVP importer must conduct a range of activities to ensure that food from foreign suppliers is produced in compliance with applicable U.S. food safety provisions.  The first FSVP compliance date was May 30, 2017.   By now, most importers of human foods are past the compliance date and all FSVP importers of food, unless exempted, must have developed a FSVP.

The FSVP regulations for the first time assigned importers of food (including dietary supplements) the responsibility to ensure that the products they bring into the United States are held to the same safety standards as domestically produced food.  FDA recognized that this was a new concept to a lot of importers which previously may not have had any dealings with FDA.  FDA indicated that it would apply the same approach as it had done previously with the introduction of other new FSMA regulations, i.e., educate while regulating to create a culture of compliance but take swift action when it becomes aware of food safety problems that pose an imminent public health risk.

The first WL concerning the FSVP was issued to Brodt Zenatti Holdings LLC in Jupiter, Florida.  The Company imported tahini which, in May 2019, had been implicated in a Salmonella outbreak.  After identifying the importer, FDA conducted an FSVP inspection.  According to the WL, FDA found that the importer did not develop an FSVP for the imported tahini as required.  As with everything imported, the consequences of a violation of the applicable regulations may have serious consequences.  As mentioned in the WL, if it fails to take the appropriate corrective actions, FDA may place the Company on the newly created import alert 99-41 resulting in all foods that the Company imports being detained without physical examination.  (The tahini contaminated with Salmonella already is subject to DWPE under import alert 99-19).

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HP&M is Pleased to Welcome Suchira Ghosh to the Firm

HP&M is Pleased to Welcome Suchira Ghosh to the Firm

Hyman, Phelps & McNamara P.C. (“HP&M”) is pleased to announce that Suchira Ghosh has joined the firm as Counsel.  Suchira comes to HP&M with more than 10 years of FDA and Hatch-Waxman legal experience, as well as several years of experience working as a process engineer in R&D at a global pharmaceutical company.  Most recently Suchira was Counsel at Axinn LLP where she helped develop the firm’s FDA practice and worked as a patent litigator.

As part of the Hatch-Waxman practice at HP&M, Suchira will continue to provide counseling and litigation services to pharmaceutical companies on the Hatch-Waxman Act, the BPCIA, and the Orphan Drug Act.  Suchira has extensive experience with coordinating IP and regulatory strategy for her clients, including advising them on exclusivity, forfeiture, and labeling issues.  She also counsels drug sponsors on approval requirements, lifecycle strategies, post-marketing requirements, and REMS issues, and frequently represents clients before FDA via citizen petitions, formal dispute resolution, and comments to rulemaking and guidance.  In addition to her work with drug sponsors, Suchira provides regulatory counseling to medical device and HCT/P manufacturers.

Suchira has been recognized as a “Rising Star” in Life Sciences, and she frequently presents and comments on emerging issues in FDA law.  She graduated from the University of Michigan Law School and received her B.S. in Chemical Engineering from Columbia University.  Prior to law school, she worked at Schering-Plough where she was responsible for developing and scaling up the manufacturing processes for new sterile drugs.

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Note to Pharma: Stop With the Dancing! (And Get Off My Lawn)

Note to Pharma: Stop With the Dancing! (And Get Off My Lawn)

By Dara Katcher Levy

After reading OPDP’s latest enforcement letter, we had déjà vu all over again and were transported back to 2016 when we blogged that OPDP was Not Dead Yet.  At that time, OPDP had posted two enforcement letters on the same day relating to TV ads and alleging misleading risk presentations.  Both letters cited to individuals dancing during the major statement.  Fast forward almost 3 years and OPDP’s fourth letter of 2019 asserts the following:

Additionally, the presentation of certain risk information in the “major statement” of risks through audio and SUPERs is undermined by the simultaneous presentation of fast-paced visuals that feature choreographed dancing to instrumental background music and multiple scene changes. . .  As a result, it is difficult for consumers to adequately process and comprehend the risk information, resulting in a misleading impression of the drug’s risks.

The language is almost identical to the language used in one of OPDP’s 2016 Letters:

The TV ad communicates the “major statement” of serious risks through the audio and onscreen SUPERS. At the same time, the TV ad presents fast-paced visuals that feature a man continuously dancing to music from the song “Let’s Groove” throughout multiple scene changes . . .   As a result, it is difficult for consumers to adequately process and comprehend the risk information. The overall effect undermines the communication of the important risk information and thereby misleadingly minimizes the risks associated with the use of Toujeo.

Putting OPDP’s apparent disdain for dancing aside, allegations of misleading risk presentations in TV ads due to distractions are not new.   It is consistent with previous enforcement letters (see, e.g., here) as well as FDA research on consumer comprehension of risk.   And, in fairness, OPDP’s latest letter did not simply allege that dancing was the issue – OPDP cited omissions and other mechanisms for minimizing risk in this 30 second commercial.

So, what are the key takeaways here (the tl; dr if you will): The subject of OPDP’s latest letter ticks off at least two boxes from previously stated enforcement priorities – the ad was a far-reaching campaign (DTC TV) and was the subject of a complaint (brought to FDA’s attention through the “Bad Ad” program).  Other enforcement priorities for OPDP are drugs new to the market; drugs that have serious risks; and drugs cited for past violations.

One need only look at OPDP’s research page to see the emphasis put on consumer comprehension and understand that DTC is a high enforcement priority.  Given the number of studies specific to TV ads, industry should holistically consider visuals, audio and timing (both overall length of the commercial as well as narration cadence) and how these play into consumer comprehension.

And then there’s another key takeaway – don’t include dancing in TV ads for drugs.  While not a specifically stated enforcement priority, it doesn’t seem to go well.

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Is Promoting a 361 HCT/P for Its Clinical Effects Compatible with a Homologous Intended Use?

Is Promoting a 361 HCT/P for Its Clinical Effects Compatible with a Homologous Intended Use?

By Jeffrey K. Shapiro

The Food and Drug Administration (FDA) regulates human cell, tissue, and cellular and tissue-based products, or HCT/Ps, under a unique regulatory regime set forth in 21 C.F.R. Part 1271 (Part 1271).   An HCT/P that meets certain requirements is eligible for regulation as a “361 HCT/P.”  This term is a shorthand way to designate a product that is regulated solely under section 361 of the Public Health Service Act (PHSA) and Part 1271, both of which are aimed at preventing the transmission of communicable disease.  Such a product is not subject to additional regulation by FDA as a device, drug, or biologic under the Food, Drug, and Cosmetic Act (FDCA).

This discussion will focus on the requirement that a 361 HCT/P be labeled and advertised only for homologous use.  We will look first at the basic regulatory definition and guidance.  Then, we will ask the specific question of whether advertising the clinical effects (performance characteristics) of an HCT/P 361 is compatible with meeting the homologous use requirement.

Homologous Use

The regulation defines homologous use to mean “the repair, reconstruction, replacement, or supplementation of a recipient’s cells or tissues with an HCT/P that performs the same basic function or functions in the recipient as in the donor.”  In determining whether a product is “intended” for homologous use, FDA considers only “the labeling, advertising, or other indications of the manufacturer’s objective intent.”  21 C.F.R. § 1271.10(a)(2).

In the preamble to the regulation, FDA clarified that homologous use does not require use of tissue in its native anatomic location:  “a use of a structural tissue may be homologous even when it does not occur in the same location as it occurred in the donor.  For example, the use of bone for repair, replacement, or reconstruction anywhere in the skeleton of the recipient (including the vertebral column) would be considered homologous use.”  66 Fed. Reg. 5447, 5457 (Jan. 19, 2001).

In addition, as a general matter, FDA indicated that the homologous use test merely would be a coarse screen for unproven uses:  “We intend to interpret ‘nonhomologous’ narrowly. Examples of uses that would be considered nonhomologous include:  The use of dermis as a replacement for dura mater . . .  and the use of cartilage in the bladder.”  Id.   And:  “For example, promotion of an HCT/P for an unproven therapeutic use, such as curing cancer, would clearly make it inappropriate to regulate the HCT/P [as a 361 HCT/P].”  Id.  Instead, an HCT/P intended for an unproven therapeutic use would be regulated under both Part 1271 (to prevent disease transmission) and the Federal Food, Drug, and Cosmetic Act as a drug, device or biologic.  These preamble statements are legally entitled to great weight in interpreting and applying the regulation.

In a recent guidance, FDA elaborated on the concept of the “same basic function or functions” of an HCT/P:

The basic function of an HCT/P is what it does from a biological/physiological point of view, or is capable of doing when in its native state.  By “basic” we mean the function or functions that are commonly attributed to the HCT/P as it exists in the donor.  Basic functions are well understood; it should not be necessary to perform laboratory, pre-clinical, or clinical studies to demonstrate a basic function or functions for the purpose of applying the HCT/P regulatory framework.

FDA, Guidance for Industry, Regulatory Considerations for Human Cells, Tissues, and Cellular and Tissue-Based Products: Minimal Manipulation and Homologous Use, 16 (Dec. 2017) (footnotes omitted) (2017 Guidance).

FDA adds:  “Also, clinical effects of the HCT/P in the recipient that are not basic function or functions of the HCT/P in the donor would generally not be considered basic function or functions of the HCT/P for the purpose of applying the definition of homologous use.”  Id. at 16‑17.

As an example, FDA cites different uses of amniotic membrane.  The basic functions of amniotic membrane “include serving as a selective barrier for the movement of nutrients between the external and in utero environment, protecting the fetus from the surrounding maternal environment, and serving as a covering to enclose the fetus and retain fluid in utero.”  Id. at 18.  Accordingly, FDA concludes that when “an amniotic membrane product is used for wound healing and/or to reduce scarring and inflammation,” this intended use “is not homologous use because wound healing and reduction of scarring and inflammation are not basic functions of amniotic membrane.”  Id. at 18.  In contrast, amniotic fluid as a covering is homologous.  For instance:

amniotic membrane product is applied to the surface of the eye to cover or offer protection from the surrounding environment in ocular repair and reconstruction procedures.  This is homologous use because serving as a covering and offering protection from the surrounding environment are basic functions of amniotic membrane.  [Id.]

Clinical Effects

This sounds like a fair distinction – an amniotic membrane intended as a wound cover in the recipient is essentially performing its native covering function.  On the other hand, the same amniotic membrane when “intended” to reduce scarring or inflammation is likely not performing the same function as it did in utero.

But what exactly does it mean for the amniotic membrane to be “intended” to reduce scarring or inflammation?  Is it not possible for an amniotic membrane to be intended as wound cover (a homologous use) and, as such, have the clinical effect of reducing scarring and inflammation compared to other wound covers?

There are at least two ways one could establish this proposition.  One way is to claim that the biological/physiological composition of amniotic tissue (e.g., presence of cytokines) is such that it is likely to have anti‑scarring and anti‑inflammatory effects in a skin wound.  This approach may be what FDA implicitly meant to convey in the example above.  It is not homologous because, says FDA, preventing scars or inflammation is not a well understood biological/physiological function of native amniotic membrane.  On this view, it is an unproven functional claim.

A second way to establish the proposition is to conduct a well‑controlled randomized clinical trial to substantiate it.  Imagine a clinical trial showing that an amniotic membrane used as a skin wound cover provides a 10% statistically significant reduction in scarring as compared to a synthetic wound cover.

The question is whether presenting this study in labeling or advertising would generate a new, non‑homologous “intended use.”  This question has important ramifications.  Increasingly, manufacturers seek to study 361 HCT/Ps and quantify their clinical effects.  These studies help advance the science of medicine and benefit patients.  Such studies, however, may never be undertaken if the results cannot be disseminated without exposing a 361 HCT/P to regulation as a drug, device or biologic under the FDCA or PHSA.

As discussed above, the concept of homologous use does not derive from the treatment intent of an HCT/P.  Rather, it is based upon the biological or physiological functioning of an HCT/P.  For instance, if an HCT/P is being used to perform a covering function, the definition of homologous use is satisfied, regardless of where the covering is applied.  That is why FDA agrees that homologous use is not dependent upon an HCT/P being used in the same location as the native tissue.  It also why FDA correctly asserts (as quoted above) that clinical effects in a recipient are not to be considered in determining homologous use.

This principle logically cut both ways.  If clinical effects in the recipient cannot contribute to a determination that an intended use is homologous, then providing information about such clinical effects cannot contribute to a determination that an intended use is non‑homologous.  The homologous use test is not a general inquiry into the objectively intended therapeutic effects of an HCT/P.  Rather, it is a limited inquiry into the biological or physiological functioning that is objectively claimed for the HCT/P.  If this limited intent meets the requirement of homologous use, the inquiry should be over.  Claims as to clinical effects, of course, require adequate substantiation and must be presented in a truthful and non‑misleading manner.  But they are not properly part of a homologous use analysis.

To return to the amniotic membrane example, a white paper describing the results of a study comparing the two types of wound coverings (amniotic membrane and synthetic) is not relevant to whether the amniotic membrane covering is intended for homologous use.  That is because the study results are based upon observed clinical effects in the recipient; they do not address the putative biological or physiological function involved, which is the basis of a homologous intended use determination.  On the other hand, if the white paper also discusses the role of native cytokines in the amniotic membrane in inhibiting scar formation as an explanation for the study results, that would properly be considered in determining whether the intended use is homologous.  If FDA finds that native cytokines in the donor are not commonly understand to prevent scarring, then it could find that the amniotic membrane has a non‑homologous intended use.

None of this is to say that FDA has accepted this approach.  Frankly, the discussion around homologous use has not proceeded in these terms.  Yet, the framing here seems implicit in the logic of FDA’s regulatory definitions and guidance.  It would certainly be helpful to have more explicit guidance from FDA, because this confusion around homologous use may inhibit sponsors from initiating valuable clinical studies of 361 HCT/Ps.  Any clarity FDA could provide around its position on this issue would be very welcome.

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CMS Proposes Regulations to Expand Sunshine Reporting

CMS Proposes Regulations to Expand Sunshine Reporting

By Alan M. Kirschenbaum

Among the provisions contained in CMS’ proposed Physician Fee Schedule revisions for 2020, which appeared in today’s Federal Register, were proposed changes to the Open Payments program (sometimes called the Physician Payment Sunshine Law).  See 84 Fed. Reg. 40482, 40713-16 (Aug. 14, 2019).  Some of the proposals implement an expansion of the Open Payments program enacted in October 2018 as part of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (SUPPORT Act), which we reported on here.  CMS proposes additional changes as well.  Here are the highlights:

  • New covered recipients: To implement the SUPPORT Act amendments, CMS proposes to add to the current covered recipients (physicians and teaching hospitals) the following new covered recipients (with a definition for each):  physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, and certified nurse midwives.
  • New “nature of payment” categories: Three new types of payment categories are proposed to be added:  (1) debt forgiveness; (2) long-term loans of covered devices or medical supplies (as distinct from the current category of short-term loans of 90 days or less); and (3) acquisitions, comprising buyout payments to covered recipients in an acquisition of a company in which a covered recipient has an ownership interest.
  • DIs for devices: Currently, applicable manufacturers are not required to report device identifiers (DIs) or other numerical identifiers of specific devices to which a payment or other transfer of value relates.  CMS now proposes that the DI of a device, if any, must be reported.  See 21 C.F.R. § 801.20 et seq. (FDA requirements for unique device identifiers).
  • Consolidation of continuing education program nature of payment categories: There are currently two nature of payment categories for direct compensation for serving as faculty or speaker – one for accredited/certified medical education programs and another for unaccredited/noncertified programs.  These would be consolidated into one category for medical education programs generally.

The new requirements would go into effect for payments and other transfers of value made in CY 2021, which will be reported in March 2022.  Comments on the proposed changes will be accepted until September 27, 2019.

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