Attorney East Hampton

By Riëtte van Laack —

On October 8, 2019, the California Chamber of Commerce (CalChamber) filed a lawsuit in federal district court against the State of California requesting that the Court enjoin the State, its agents and private enforcers from requiring Prop. 65 warnings on foods that contain acrylamide.  Plaintiff claims that the requirement for a Prop. 65 warning is illegal because it compels Plaintiff’s members and other entities that produce, distribute, or sell acrylamide-containing food products to make false, misleading, and highly controversial statements about their products.  In addition, the warning requirement allegedly will mislead consumers into avoiding certain foods based on incorrect information.  Further, over-warning purportedly dilutes the effectiveness of Proposition 65 warnings on other products that actually pose a risk of harm to consumers, diminishes consumers’ confidence in public health messages and the authorities who promulgate them, and may result in avoidance of foods that are part of a well-balanced diet.

Prop. 65 is officially known as the Safe Drinking Water and Toxic Enforcement Act of 1986.  With some exceptions, Prop. 65 prohibits businesses with ten or more employees from knowingly and intentionally exposing California residents to a chemical known to the State to cause cancer without providing required warnings.  Prop. 65 requires that the California Office of Environmental Health Hazard Assessment (OEHHA) maintain a list of chemicals known to the state to cause cancer or reproductive toxicity.  A chemical is “known to the state to cause cancer” if “a body considered to be authoritative by [the state’s qualified] experts has formally identified it as causing cancer.”  No warning is required if the exposure is below the No Significant Risk Level (NSRL), i.e., the level at which exposure poses no significant risk, assuming lifetime exposure at the level in question for the substance.

Prop. 65 has what is often referred to as a bounty hunter provision.  Under the statute, any person (even one who has suffered no injury) may bring a private enforcement action for an alleged failure to provide an adequate warning.  Such private enforcers are eligible to recover 25 percent of the penalty (the statute imposes penalties up to $2,500 per day for each violation) and their reasonable attorneys’ fees and costs, creating very strong incentives for private enforcement.  Such bounty hunters have a low burden.  In alleging an exposure to a listed chemical, they are not required to prove that an exposure exceeds the NSRL.  Instead, the burden is on the defendant business to prove that exposure is below the NSRL (a potentially costly endeavor).

Acrylamide is the result of a chemical reaction (known as the Maillard reaction) which takes place in certain types of starchy foods when they are cooked at high temperatures or otherwise processed using heat.  The Maillard reaction contributes to taste, aroma and color.  It occurs in a multitude of foods such as French fries, breakfast cereals, baked goods and roasted coffee.  FDA has recognized that acrylamide forms during the cooking process and is present in both store-bought foods and home-cooked foods.

Acrylamide has been on the Prop. 65 list as a potential carcinogen since 1990 based on identification by “authoritative bodies,” namely the International Agency for Research on Cancer (IARC) and the U.S. Environmental Protection Agency (“EPA”).  Both the EPA and IARC classifications of acrylamide as a “probable” human carcinogen were based on studies in laboratory animals in which virtually pure acrylamide was administered orally or via injection to rats and mice.  However, according to Plaintiff CalChamber, there is no evidence that acrylamide is a carcinogen in humans, and IARC, EPA, and as the State have acknowledged the lack of evidence that dietary acrylamide is a human carcinogen.  Further, studies have shown that certain foods that contain acrylamide, such as coffee, may reduce the risk of cancer in humans.

Nevertheless, dietary acrylamide remains on the Prop. 65 list and remains a popular target for bounty hunters.  According to CalChamber, since its addition to the list, there have been more than 500 notices for alleged violations of the Prop. 65 warning requirement related to acrylamide in food products.  Companies trying to avoid the cost of defending actions and penalties, as well as costly and complicated testing, may decide to include the warning.  Thus, consumers may be misled and be exposed to over-warning.

CalChamber requests that the Court declare that the Prop. 65 warning requirement for cancer relating to acrylamide in human food products violates the First Amendment of the United States Constitution, and enjoin the State as well as bounty hunters from enforcing or threatening to enforce the Prop. 65 warning requirement for cancer relating to acrylamide in human food products.

By Serra J. Schlanger & McKenzie E. Cato & Alan M. Kirschenbaum —

In the Federal Register of Thursday, October 17, the Centers for Medicare & Medicaid Services (CMS) and the Department of Health and Human Services (HHS) Office of Inspector General (OIG) both published substantial amendments to the regulations implementing the Medicare physician self-referral law (commonly referred to as the Stark Law) and the safe harbor regulations under the Federal health care program anti-kickback statute (AKS).  These proposed rules are part of HHS’s Regulatory Sprint to Coordinate Care initiative, which, according to HHS’s press release, “seeks to promote value-based care by examining federal regulations that impede efforts among providers to better coordinate care for patients.”

The proposed revisions add new Stark exemptions and AKS safe harbors for value-based and other arrangements, which, if finalized, will have a substantial impact on much of the healthcare industry.  Unfortunately, CMS and OIG are considering excluding drug and device manufacturers from many (but not all) of these protected arrangements.  Below we highlight the proposed changes that may be of particular interest to our readers.

I.  CMS Proposed Stark Rule Revisions

The CMS proposed rule sets forth new exceptions to the Stark Law, 42 U.S.C. § 1395nn, for certain value-based arrangements (VBAs).  According to the CMS Fact Sheet, the goal of these new exceptions is to “unleash innovation by permitting physicians and other healthcare providers to design and enter into value-based arrangements without fear that legitimate activities to coordinate and improve the quality of care for patients and lower costs would violate the Stark Law.”

The new exceptions would be applicable to VBAs between or among value-based enterprise (VBE) participants.  The preamble explains that CMS is considering whether to exclude pharmaceutical manufacturers, manufacturers and distributors of durable medical equipment (DME), pharmacy benefit managers, wholesalers, and distributors from the definition of “VBE participant,” or, alternatively, to impose a requirement that the arrangement not be between a physician (or immediate family member of a physician) and a pharmaceutical manufacturer, manufacturer or distributor of DME, pharmacy benefit manager, wholesaler, or distributor.  Either of these limitations would have the effect of excluding these entities from the new Stark Law exceptions.

The new proposed Stark Law exceptions include:

• Full financial risk exception. This exception would apply to VBAs between VBE participants assuming “full financial risk” for the cost of all patient care items and services covered by the applicable payor for each patient in the target patient population for a specified period of time.  This would protect VBE participants that receive a prospective, capitated payment for all items and services covered by Medicare Part A or B or by Medicaid Managed Care.
• Value-based arrangements with meaningful downside financial risk to the physician. This would protect remuneration, including partially capitated and other arrangements, paid under a VBA where the physician is at meaningful downside financial risk for failure to achieve the value-based purpose(s) of the VBE.
• Value-based arrangements. CMS is proposing an exception for compensation arrangements, regardless of the level of risk undertaken by the VBE or any of its VBE participants.  The exception would permit monetary and nonmonetary remuneration between the parties.  This exception would have some requirements that are included in the meaningful downside financial risk exception.
• Certain indirect compensation arrangements. This exception recognizes that indirect compensation arrangements can meet the other exceptions.  When a VBA is the link in the chain closest to the physician (i.e., the physician is a direct party to the VBA), the indirect compensation arrangement would qualify as a VBA.
• Arrangements involving the donation of cybertechnology technology and services. This would, for example, allow hospitals to share cybersecurity software with physicians, including physicians who refer patients to the hospital.  The purpose of this exception is to protect recipients of electronic health record information from “weak links” in the health care system.
• Limited remuneration to a physician. This exception would allow for remuneration that does not exceed $3,500 per calendar year (adjusted for inflation) if the compensation is not determined in a manner that takes the volume or value of referrals into account; the compensation does not exceed fair market value; the arrangement is commercially reasonable; compensation for leased space or equipment or for the use of premises, equipment, items, supplies or services are not based on percentage of revenue raised, business generated, or per unit charges.

In addition to proposing new exceptions, CMS includes a new definition for “commercially reasonable” and revises the definition of “fair market value.”  The proposed new general definition of “fair market value” is “the value in an arm’s length transaction, with like parties and under like circumstances of like assets or services, consistent with the general market value of the subject transaction.”  Definitions of fair market value are also provided with respect to rental of equipment and of office space.

The preamble explains that CMS is considering whether to include a requirement related to price transparency in every exception for VBAs.  For example, CMS is considering whether to require that a physician provide notice or have a policy to provide public alerts to patients that their out-of-pocket costs for items and services for which they are referred by the physician may vary based on the site where the services are furnished and the type of insurance they have.

II.  OIG Proposed Safe Harbor Revisions

The OIG proposed rule revises the safe harbors under the AKS, 42 U.S.C. § 1320a-7b(b), and provisions on civil money penalties for beneficiary inducements, 42 U.S.C. § 1320a-7a(a)(5).  As described in the OIG Fact Sheet regarding the proposed rule, HHS has determined that these provisions, as currently written, potentially inhibit “beneficial arrangements that would advance the transition to value-based care and improve the coordination of patient care among providers and across care settings in the both the Federal health care programs and commercial sector.”

A.  Safe Harbors From Which Pharmaceutical Manufacturers and DME Manufacturers/Distributors are Excluded

1.  Value-Based Care Safe Harbors

OIG has proposed three new safe harbors for remuneration exchanged VBAs that foster better coordinated and managed patient care: (1) care coordination arrangements to improve quality, health outcomes, and efficiency, (2) VBAs with substantial downside financial risk, and (3) VBAs with full financial risk.  As currently proposed, pharmaceutical manufacturers, manufacturers and distributors of DME, and laboratories would be excluded from the new safe harbors for VBAs.  OIG expressed concern that these entities, which are heavily dependent upon practitioner prescriptions and referrals, would misuse the new safe harbors to promote products, rather than creating value by coordinating care.  OIG stated that it is considering future rulemaking to address “pharmaceutical manufacturers’ role in coordination and management of care” or create a “specifically tailored safe harbor … for value-based contracting and outcomes-based contracting for the purchase of pharmaceutical products (and potentially other types of products).”  OIG is seeking comments on whether other entities – pharmacies (including compounding pharmacies), pharmacy benefit managers, wholesalers, and distributors – should also be excluded from the VBA safe harbors.

The proposed safe harbor for care coordination arrangements to improve quality, health outcomes, and efficiency could include, for example, providing data analytics systems, remote monitoring technology, or care coordinators to ensure patients receive appropriate follow-up care.  For example, if a hospital provided a behavioral health nurse to a nursing facility to follow discharged patients with mental health disorders, savings shared between the hospital and nursing facility from managing the care of mental health patients and reducing emergency room visits would be eligible for protection.  The care coordination safe harbor would protect in-kind (but not monetary) remuneration exchanged between participants in the VBA.  The safe harbor would include other limitations and requirements.  For example, parties would be required to establish one or more specific evidence-based, valid outcome measures against which the recipient of remuneration will be measured, and which the parties reasonably anticipate will advance the coordination and management of care of the target patient population.  Additionally, the VBA must be commercially reasonable, in that it must make commercial sense if entered into by reasonable entities of a similar type and size.

Similar to the CMS proposed Stark rule revisions, the value-based care safe harbor for VBAs with full financial risk would protect VBE participants that receive a prospective, capitated payment for all items and services covered by Medicare Part A or B or by Medicaid Managed Care.  Since providers are fully at risk for the cost of the items and services provided to patients, the potential for overspending and overutilization is reduced, and the conditions of this safe harbor are therefore more flexible than those of the care coordination safe harbor.  The third value-based care safe harbor, for VBAs with “substantial downside financial risk,” would apply to partially capitated and other arrangements where a VBE participant is partly responsible for loss.  The full financial risk and substantial downside risk safe harbors would protect both in-kind and monetary remuneration that meets the conditions of the safe harbor.

2.  Safe harbor for outcomes-based payments

The OIG proposed rule adds to the current safe harbor for personal services and management contracts (42 CFR 1001.952(d)) protection for outcomes-based payments.  The outcomes-based payment safe harbor is intended to protect payments for improving or maintaining an improvement in patient health by achieving outcomes measures that coordinate care across care settings, or achieve outcomes measures that reduce payor costs while improving or maintaining the quality of patient care.  Similar to the VBA safe harbors discussed above, OIG proposes to exclude pharmaceutical manufacturers, manufacturers and distributors of durable medical equipment, and laboratories from the outcomes-based safe harbor.  OIG is seeking comments on whether other entities – pharmacies (including compounding pharmacies), pharmacy benefit managers, wholesalers, and distributors – should also be excluded from the outcomes-based safe harbors.

3.  Patient Engagement and Support

The OIG proposed rule includes a new safe harbor for certain tools and supports furnished under patient engagement and support arrangements to improve quality, health outcomes, and efficiency.  According to the OIG, “[a]ppropriate patient engagement tools and supports can foster successful behavior modifications that improve health, ensure that patients receive the medically necessary care and other nonclinical, but health-related, items and services they need, and improve adherence to an appropriate treatment regimen.”  The HHS press release provided the example of a smart pillbox given to patients without charge to help them remember to take their medications on time.  Once again, pharmaceutical manufacturers, manufacturers and distributors of durable medical equipment, and laboratories are excluded from this safe harbor.

B.  Safe Harbors and Safe Harbor Revisions That Do Not Exclude Pharmaceutical or Device Manufacturers

1.  Modification of personal services and contract safe harbor

Heretofore, this safe harbor has contained two conditions that have limited its usefulness in protecting arrangements between drug and device manufacturers and consultants and other service providers.  First, for part-time or sporadic arrangements, the “agreement must specify exactly the schedule of intervals, their precise length, and the exact charge for such intervals.”  Few consulting arrangements that are not full-time are capable of meeting this exacting requirement.  Another current requirement is that the aggregate compensation for the term must be set in advance – also a requirement that is difficult to meet under many circumstances, for example where an investigator agreement provides for per-patient compensation, or a speaker arrangement provides for compensation per speaking engagement.  The OIG is now proposing to eliminate the part-time schedule requirement entirely, and in place of the aggregate compensation condition, to substitute a requirement that the methodology for determining compensation be set in advance.  These changes, if finalized, will substantially expand the scope of consulting and other service arrangements eligible for safe harbor protection.

2.  Modification of warranty safe harbor

OIG is also proposing a modification of the existing safe harbor for warranties that would (1) protect warranties for one or more items and related services upon certain conditions, (2) exclude beneficiaries from the reporting requirements applicable to buyers, and (3) define “warranty” directly, and not by a reference to the definition at 15 U.S.C. § 2301(6).  This proposed modification would allow for “bundled warranties” that cover certain services in addition to items, as long as the items and services are reimbursed by the same Federal health care program and in the same Federal health care program payment (e.g., the same Medicare Severity Diagnosis Related Group for hospital inpatients, the same Ambulatory Patient Classification for hospital outpatients, or the same Medicaid managed care payment).  However OIG raised concern that certain warranted services, such as medication adherence services, could increase risk or patient harm and inappropriate utilization.  OIG also noted that free or reduced-price items or services provided as part of a bundled warranty agreement or ancillary to a warranty agreement (for example, laboratory tests to determine if an outcome was achieved) could still implicate the AKS.

3.  Donations of cybersecurity equipment

As with the CMS proposed Stark rule revision, the OIG proposed rule includes a new safe harbor for donations of cybersecurity technology and services.  Although pharmaceutical and device manufacturers are permitted donors under the proposal, the OIG solicits comments on whether such entities should be prohibited as donors.

4.  CMS sponsored models

A new safe harbor would protect certain remuneration provided in connection with a CMS-sponsored model, which is aimed to reduce the need for OIG to issue separate fraud and abuse waivers for new CMS-sponsored models.  This safe harbor would (1) permit remuneration between and among parties to arrangements under a model or other initiative being tested or expanded under CMS-sponsored models and (2) permit remuneration in the form of incentives and support provided by CMS model participants under a CMS-sponsored model to patients covered by the CMS-sponsored model.

*     *     *

Comments on the CMS and OIG proposed rules are due by 5 pm on December 31, 2019.  The link to submit comments on the CMS proposed rule can be found here.  The link to submit comments on the OIG proposed rule can be found here.

By Jeffrey K. Shapiro —

A warning letter issued earlier this year by the Food and Drug Administration (FDA) to Inova Genomics (Inova) prompts some reflections on where things stand now with the regulation of laboratory developed tests (LDTs) under the Federal Food, Drug, and Cosmetic Act (FDCA).  An LDT, as FDA views it, is an in vitro diagnostic test that is designed, manufactured and used within a single laboratory.

In general, the Centers for Medicare and Medicaid Services (CMS) regulates clinical laboratories pursuant to the Clinical Laboratory Improvement Amendments of 1988 (CLIA) and implementing regulations (42 U.S.C. § 263a; 42 C.F.R. Part 493).  According to CMS, CLIA covers approximately 260,000 laboratory entities.  This regulation extends to LDTs.

In 1976, the Congress amended the FDCA to give the FDA significant new statutory authority to regulate medical devices.  The FDA maintains that LDTs fall under this authority.  At the same time, the FDA never actively followed through on this assertion of authority.  To this day, it is the FDA’s announced position that the FDCA’s requirements apply to all LDTs.  Therefore, these tests are subject to 510(k) clearance or premarket application (PMA) approval and a panoply of post‑market requirements, including the Quality System Regulation (QSR), Medical Device Reporting (MDR) and labeling requirements.  Yet, clinical laboratories make little effort to comply with these requirements.  If FDA’s position is accepted, then these clinical laboratories are massively violating the law every day.

This state of affairs continues because, FDA does not “generally” enforce these requirements.  In a handful of cases during a period spanning more than 30 years, FDA has singled out specific LDTs, or a specific class of LDTs, for active enforcement.  In the vast majority of cases, though, the FDA has conferred a dispensation upon clinical laboratories under the rubric of “enforcement discretion.”

This state of affairs is troubling.  FDA has repeatedly acknowledged that “LDT’s are important to the continued development of personalized medicine.”  Nonetheless, the agency’s official position is that clinical laboratories are serious and persistent lawbreakers, absolved only by the agency’s grace.

In 2018, FDA issued a public safety notice foreshadowing that pharmacogenetic testing (using a person’s genetic variants to predict their response to certain drugs) would likely be targeted.  FDA apparently contacted Inova among other companies in this space.  In correspondence, Inova told FDA that:  “Inova believes it is properly operating within the scope of FDA’s LDT exemption and thus is not subject to FDA’s premarket review or labeling requirements.”  In a 2019 warning letter, FDA replied:

FDA has not created a legal ‘carve-out’ for LDTs such that they are not required to comply with the requirements under the Act that otherwise would apply.  FDA has never established such an exemption.  As a matter of practice, FDA, however, has exercised enforcement discretion for LDTs, which means that FDA has generally not enforced the premarket review and other FDA legal requirements that do apply to LDTs.  Although FDA has generally exercised enforcement discretion for LDTs, the Agency always retains discretion to take action when appropriate, such as when it is appropriate to address significant public health concerns.

The word “appropriate” is a tell, because it requires decision‑making.  How do FDA officials decide what is “appropriate”?  The letter does not provide any criteria for this exercise of broad discretion.  The letter provides a single example — “significant public health concerns.”  This phrase is a vague and not a statutorily authorized basis for distinguishing this class of LDTs from the vast majority of LDTs against whom the statute is not enforced.

In United States v. Franck’s Lab, Inc., 816 F. Supp. 2d 1209 (M.D. Fla. 2011), for example, FDA claimed for 70 years that bulk compounding of animal medications was subject to the FDCA, but on the ground of enforcement discretion had not brought any enforcement actions against state‑licensed pharmacies.  The Franck’s Lab case was the first and only instance in which FDA had sought to do so.  The court ruled against FDA on summary judgment.  It found, among other things, that forcing compounders to rely on the good graces of FDA’s enforcement discretion “invites arbitrary enforcement, which is antithetical to our system of criminal justice.”  Id. at 1254‑1255 (This case was vacated on appeal on joint motion of the party.  United States v. Franck’s Lab, Inc., No. 11-15350, 2012 U.S. App. LEXIS 27100 (11th Cir. Oct. 18, 2012).  It cannot be cited as precedent but can be discussed based upon its persuasive value.).  If FDA were to attempt to enforce the Inova warning letter, a number of the considerations in Franck’s Lab would apply. In particular, FDA’s purported lifting of enforcement discretion as to a single targeted type of LDT based upon unstated and/or nebulous criteria invites arbitrary enforcement here just as much as in that case.

In Franck’s Lab, the court also found that the selective lifting of enforcement discretion did not comport with the rule of lenity, which requires that, when a statute carries criminal penalties, any ambiguities be interpreted in the defendant’s favor.  As the court found in Franck’s Lab, this rule applies even in civil enforcement matters, because a statute must be interpreted consistently in both criminal and civil contexts.  That concern is present here, too.

Looking at the non‑enforcement aspect of the LDT situation, the FDA’s decision to suspend enforcement of the FDCA against the vast majority of clinical laboratories is constitutionally dubious.  Under our Constitution, it is Congress’ role to pass laws of general applicability and it is the Executive’s role to enforce the laws.  Thus, Congress possesses “[a]ll legislative powers,” and the Executive “shall take Care that the Laws be faithfully executed.”  U.S. Const. Art. I, § 1; id. Art. II, § 3.  In the case of LDTs, Congress enacted the FDCA to govern the regulation of medical devices.  The FDA has interpreted this law as applicable to LDTs.  Yet, FDA has systematically declined to enforce the very law that it insists is applicable.  In doing so, FDA is effectively denying congressional supremacy by prospectively refusing to enforce a duly enacted law.  See generally Z. Price, Enforcement Discretion and Executive Duty, 67 Vand. L. Rev. 671 (2014).

It is, of course, well accepted that the faithful execution of the laws encompasses the exercise of enforcement discretion in particular cases.  This issue has arisen in the context of challenges to the exercise of enforcement discretion under the Administrative Procedure Act (APA), 5 U.S.C. §§ 701‑706.  In Heckler v. Chaney, 470 U.S. 821 (1985), the Supreme Court famously found that FDA’s decisions not to enforce the FDCA in particular cases is not subject to judicial review.

With regard to LDTs, however, FDA has prospectively announced general non‑enforcement.  This suspension of the FDCA is not an exercise of Heckler v. Chaney enforcement discretion.  It more like a recent APA case involving e‑cigarettes.  In Am. Acad. of Pediatrics v. FDA, 379 F. Supp. 3d 461 (D. Md. 2019), the court found that FDA could not lawfully rely on putative enforcement discretion to create a generally applicable five‑year grace period based enforcement discretion for continued marketing of e‑cigarettes without premarket review, contrary to the FDCA.  If a five year grace period with general non‑enforcement of a premarket provision of the FDCA for e‑cigarettes cannot be justified based upon enforcement discretion, how much more seem it would seem that the same conclusion would apply to more than 30 years (with no end in sight) of general non‑enforcement of the entire statutory scheme.  The latter, of course, is an apt description of FDA’s enforcement policy with respect to LDTs.

No doubt clinical laboratories enjoying the benefit of FDA’s so‑called enforcement discretion will not object to being left alone (even if they do not agree that FDA is correct in its assertion of authority to potentially regulate them).  But it is the suspension of the law against the many that makes it arbitrary to enforce it against the few.  A basic protection against arbitrary government is the requirement that executive agencies faithfully apply general rules as applicable.  Under the FDCA, if an article meets the definition of a medical device, a host of requirements apply.  There is no provision in the FDCA that authorizes FDA to select a specific class of medical devices for suspension of the law; and yet, that is what FDA has done with respect to LDTs.

Likewise, there is no provision in the FDCA that authorizes FDA to unsuspend the law against just a few clinical laboratories based upon “significant public health concerns.”  FDA has conjured up this idea.  This conjuring is an act of official fiat, not authorized law enforcement.  FDA is not statutorily authorized to be a roving commission to protect the public health in any way that it deems fit.  It is a powerful Executive Branch agency whose mission to protect the public health has been carefully fenced in by duly enacted law.  Yet, when it comes to LDTs, FDA has jumped the fence and is roaming free.

Another way in which the Inova warning letter is problematic relates to FDA’s 2014 draft LDT guidance and the ensuing discussion.  The draft guidance proposed to apply the FDCA much more fully to LDTs in a complex, phased‑in, risk‑based scheme.  There ensued a many‑sided dialogue that rather mimicked legislative deliberation, enlivened by threats of legal challenges under the APA.  After several years, the upshot was a failure to launch; in 2017, FDA issued a discussion paper explaining that it would not finalize the guidance.  Instead, FDA said it was stepping back from the draft guidance “to give our congressional authorizing committees the opportunity to develop a legislative solution” (p. 1).  A legislative process seems to be underway. (Normally, in a well‑functioning republic, agencies do not allow the legislature “the opportunity” to authorize the agency to enforce a law.  Rather, the legislative enacts the law and then the agency implements it.  One wonders from this turn of phrase if FDA envisions that if Congress does not enact legislation, the agency will do so in its place.  The reference to “authorizing committees” is also an odd locution.  Typically, the Congress as a body enacts legislation.)

In the discussion paper, FDA suggests that a possible approach would be to grandfather all existing LDTs and then begin applying the FDCA in a phased approach.  This suggestion testifies to the basic safety and effectiveness of LDT technology, as developed over the years under CMS regulation with minimal FDA oversight.

More to the point here, the discussion paper focuses heavily on the need for a new framework due to advances in LDT technology.  FDA says that the draft guidance was the agency’s attempt to provide one.  In the discussion paper, FDA says it is stepping back to allow Congress to provide a legislative solution.  Nothing in the discussion paper suggests that FDA will continue to enforce the current FDCA against select LDT technology during the pendency of the legislation.  The implication of the discussion paper is the opposite.

Yet, as shown by the Inova warning letter, FDA is now enforcing the unamended FDCA against pharmacogenetic tests, a prime example of novel LDT technology, without waiting for the legislation FDA has suggested is needed.  In this regard, FDA appears to have lulled the industry.  Compare Franck’s Lab, 816 F. Supp. 2d at 1252 (“the FDA promised that it would publish new guidance, then it didn’t”).  Absent a true public health emergency, which FDA has not shown, there is no reason for FDA to act in advance of Congress with regard to pharmacogenetic tests, or other LDTs, particularly those marketed on a prescription basis to medical professionals.

To date FDA’s oversight of LDTs has been the worst of all worlds.  FDA claims the authority to regulate them under the FDCA, but has suspended the statute against almost all LDTs (in violation of the Take Care clause of the constitution).  And yet, FDA has applied the law haphazardly against a few select categories of LDTs, including new technology that it concedes must be addressed in legislation that would amend the FDCA.  The selective enforcement is inherently arbitrary and capricious and may violate the APA.

How to make this right?  Two years ago, FDA publicly said it would stand down so that Congress can set the authorized terms of FDA’s role in LDT oversight.  FDA should follow through on that commitment.  All enforcement of the FDCA against LDTs should end until Congress enacts an amendment to the FDCA explicitly authorizing FDA to regulate LDTs and defining how it is to be done.

By Sarah Wicks* & Larry J. Bauer, Senior Regulatory Drug Expert —

FDA recently finalized a Guidance for Industry to help guide the development of new products for patients with amyotrophic lateral sclerosis (ALS). The original draft guidance was published early in 2018 (see our previous post here).

ALS, colloquially known as Lou Gehrig’s Disease (ALS forced the baseball player to retire in 1939), is a progressive neurodegenerative disease that deteriorates nerve cells in the brain and spinal cord. About 5,000 people in the U.S. are diagnosed with ALS each year. Early symptoms can include stiff or weak muscles, twitching or spasms, fatigue and trouble walking. Eventually it leads to difficulty in speaking, breathing and swallowing, as well as loss of voluntary movement with premature death often within 2-5 years after diagnosis. This disease is sporadic, typically with no known pattern of inheritance or familial patterns, although gene mutations have been identified in some sporadic ALS patients. This disease can affect multiple body systems including cognitive and behavioral changes.

This guidance focuses on specific clinical drug development and trial design issues that are unique to ALS. One of the changes that is immediately noticeable is the emphasis on drug developers communicating with people affected by ALS. This is part of the ongoing emphasis of the FDA on greater patient engagement at every phase of drug development. The guidance states that, “Sponsors should understand how affected patients view treatment goals and risk tolerance.”

Additionally, the FDA encourages broader inclusion in clinical trials of patients at every age and at every stage of the disease. They suggest enrolling the broad population of affected individuals with ALS and possibly conducting a primary analysis on a specified subset of those enrolled and using the totality of the data collected as secondary and supportive. This advice is in sync with the FDA guidance published in June of this year on the topic of broadening inclusion criteria in clinical trials.

Another significant change from the draft guidance is the emphasis on greater flexibility in the review of drugs for this devastating rare disease.  This emphasis reflects the Agency’s continued evolution in flexible approaches to approving drugs for patients with serious and unmet needs. The FDA is committed to providing flexibility which is supported by statute.  21 CFR 314.105 states:

While the statutory standards apply to all drugs… the many kinds of drugs… and the wide range of uses for those drugs demand flexibility in applying the standards. Thus FDA is required to exercise its scientific judgment to determine the kind and quantity of data and information an applicant is required to provide for a particular drug to meet the statutory standards.

As the prospect of gene therapies continues to grow, FDA advises sponsors to meet with the staff at the Center for Biologics Evaluation and Research (CBER) when planning phase 1 clinical trials. Gene therapy trials must start slowly to ensure there are no immediate safety concerns or off-target effects from the intervention which is usually irreversible once administered. This advice reflects similar advice given in the 2015 guidance “Considerations for the Design of Early-Phase Clinical Trials of Cellular and Gene Therapy Products.”

The draft ALS guidance was somewhat rigid and  recommended that sponsors conduct randomized, placebo-controlled, double-blind studies for ALS. In the spirit of flexibility and concern for patient well-being, the final guidance has modified that directive. The final guidance states that no patient should be denied effective therapies by being randomized to a placebo-only arm of the study. The Agency also suggests that everyone in a study be given a treatment that has previously been shown to be effective so that no one in the study is on placebo alone.  They also state that placebo-controlled studies can be designed as time-to-event trials so that if a participant in the placebo arm worsens, they can be transitioned to open-label study drug. The final guidance maintains that using historical controls as a control group can be very challenging in ALS since there is tremendous variability in disease course.

Regarding efficacy endpoints, FDA has added emphasis on engaging with patients in developing any new measures being considered. It is refreshing to see how consistently the Agency is asking industry to inquire about the patient perspective at all points in drug development. One of the specific suggestions they make for endpoints is related to the measurement of the key symptom of ALS – loss of strength.  This can include effects on the ability to perform activities of daily living (ADLs) where any improvement might be significant to patients. The guidance also suggests considering measuring respiratory function as a potential treatment benefit. Consistent with the draft guidance, mortality will be an important outcome to be measured in all patients.

ALS strikes people between the ages of 40 and 70 and there are approximately 16,000 Americans who are sick at any given time. ALS takes away a person’s ability to walk, to write, to dress, to swallow and eventually to breathe. This disease is devastating to individuals and families with affected loved ones. This final guidance will help guide and expedite the development of new treatments for people with ALS.

*  Not admitted to the Bar. Work supervised by the firm pending Bar admission.

By Deborah L. Livornese —

On September 20, 2019, the governor of California approved AB 647 which expands the obligations of manufacturers and importers of cosmetics (and disinfectants) containing hazardous substances.  Beginning on July 1, 2020, these manufacturers and importers are required to not only provide safety data sheets (“SDSs”) to purchasers, but to also post a copy of each SDS on its public website by the brand name or other commonly known name.  The bill created new Section 6390.2 of the California Labor Code.  Under the new law, manufacturers and importers are also required provide translations of the SDSs into Spanish, Vietnamese, Chinese, and Korean on their public websites.   The list of required translations may be expanded in the future to include other languages found by the State to be common for the beauty care industry.

AB 647 was adopted in part in response to efforts by the California Healthy Nail Salon Collaborative.  The cosmetics and disinfectants to which it applies are not, however, limited to those used in nail salons.

By James E. Valentine —

On October 1, 2019, FDA issued its second Patient-Focused Drug Development (PFDD) draft guidance – the next in a series of four methodological guidance documents, which discuss the collection of patient experience data to support decision-making related to drug development and approval (see some of our previous coverage of the evolving role of the patient voice over the years here, here, here, here, & here).

The first PFDD guidance more broadly discussed various methods for collecting patient experiences to help ensure they are accurate and representative of the intended patient population. This second guidance provides approaches to identifying what is most important to patients with respect to their experience as it relates to burden of disease and burden of treatment. Eliciting what is important to patients is valuable to drug development, as it is informative to the selection and, if necessary, development of clinical outcome assessments (COAs) for use in clinical trials, as well as determining what represents a clinically meaningful effect.  However, it will be in the next two PFDD guidance documents that FDA discusses how to translate this information about what is important to patients to then identify, collect, and analyze data from COAs.

Where to Start?

The draft guidance explains that in order to understand what is most important to patients, you should begin with a good foundation in the disease and in currently available treatments.  As such, literature reviews and consultation with subject matter experts can help establish this baseline characterization.  Presumably, this includes patient advocates in addition to clinical researchers/KOLs.  This informs the selection of the research question(s) and method(s).  FDA acknowledges that there is no single preferred method, whether that be a qualitative, quantitative, or mixed-method approach. The draft guidance provides an array of data collection methods within each category, noting those that are most commonly used and providing recommendations for selecting and implementing them.

Recommendations for Qualitative Research

An Array of Qualitative Methods to Choose From

FDA highlights two qualitative methods as being most common: one-on-one interviews and focus groups.

1. One-on-one interviews involve a discussion on the topic of interest between a patient or caregiver and a trained interviewer. The benefit is that interviews offer opportunities to explore topics in depth at an individual level using probing questions.  They are also useful for exploring subject areas that might be too sensitive for a focus group.  Interviews can vary in their degree of structure (i.e., use of predetermined questions and interview guide).
2. Focus groups involve a discussion with a group of participants led by a moderator, allowing the exploration of issues both at an individual level and through a discussion among participants. This method allows for an understanding of a range of experiences.  Sample sizes of focus groups typically range between 5-10 participants, which reduces the likelihood of multiple, simultaneous conversations occurring that decrease the effectiveness of the session.

A number of additional qualitative methods are described in Appendix 1 of the draft guidance, including:

1. Facilitated discussions at patient meetings, similar to focus groups, provide a forum for a moderated discussion with patients and caregivers. The draft guidance specifically calls out the PFDD meeting format as the exemplar of this.  While originally run by FDA, the Agency now invites patient organizations to host these meetings (called externally-led PFDD meetings).  HP&M’s James Valentine and Larry Bauer have helped plan and moderated over two-thirds (20) of the 28 EL-PFDD meetings to date (see an FDA Law Blog post on learnings from these meetings here).
2. Survey instruments with open-ended questions are viewed as a qualitative alternative to quantitative survey instruments that can help obtain answers that were unplanned or more realistic answers (quantitative survey methods discussed below).

Because the data from these qualitative methods can be so voluminous, the draft guidance raises the importance of having a standardized way to analyze and interpret this data in a practical and consistent way.  Appendix 4 of the draft guidance discusses the steps for data analysis, including how to use a coding approach for categorizing and aggregating study results.  This appendix also recommends that data collection continue until no new or important concepts have appeared, which is known as “saturation.”  Once saturation is met, no further elicitation is needed.

What is the right question to ask?

FDA emphasizes the importance of collecting unbiased patient input, which means that it is critical to frame questions in a way that avoids biased or false/misleading responses.  In general, the draft guidance recommends spontaneous responses over prompting participants (i.e., stimulating or providing a participant’s memories).  However, prompts are viewed as valuable for gaining more information, particularly if the participant does not provide detailed responses.  The draft guidance, however, states that prompts should avoiding leading questions, which include or imply the desired answer in the phrasing of the question.

Recommendations for Quantitative Research

FDA focuses on survey research methods as the primary approach to collecting quantitative data from patients and caregivers.  Surveys can be interview-administered or self-administered, including by paper, telephone interactive voice response, or by computer.  Of note, if a survey instrument is intended to be used to derive a study endpoint for use in a clinical trial, the draft guidance recommends that the two future PFDD guidance documents be referenced.

How to Develop Items for a Survey Instrument?

The draft guidance recommends that steps be taken to ensure survey items are well-understood.  This includes assessing appropriateness for literacy of the population, using familiar language used by patients rather than clinical terminology, assessing translatability in multinational and multicultural studies, and testing through interviews of respondents on whether interpretation is as intended.  Other recommendations include:

• Simple formatting for ease of use;
• Usability testing if electronic or web-based;
• Scripting to ensure standardization, if interviewer-administered;
• Assessing for potential social desirability bias (i.e., tendency to respond in manner they perceive may be viewed favorably by others);
• Assessing for applicability of the content; and
• Understanding impact of question ordering to avoiding priming by earlier questions.

Tables 3 and 4 of the draft guidance provide considerations for selecting various question types.

Mixed Methods

The draft guidance sets out a series of reasons that warrant using a mixed methods design:

• Harmonizing and confirming results from different methods;
• Supplementing and clarifying results from one method with those of another;
• Using results from one method to inform the design of another;
• Discovering inconsistencies, contradictions, and new perspectives; and
• Expanding scope of research question in different methods.

Depending on the specific utility of mixed methods, implementation may be either sequential or concurrent.

Eliciting Patient Input During Clinical Trials

While most of the draft guidance is devoted to methods of eliciting what is important to patients generally, FDA calls out one method that can add greater depth to understanding the patient experience during a clinical trial: patient exit interview studies.  This innovative approach to using interview (or survey) methods was the subject of a commentary co-authored by HP&M’s James Valentine, published in Advances in Therapy (see an FDA Law Blog post covering this article here).  FDA echoes the strengths of patient feedback that can be obtained using this approach, including:

• In rare diseases, contributing to the cumulative understanding of aspects of the patient experience;
• Informing initial development and refinement of COAs if done in early development;
• Adding greater depth to data in rare diseases where stand-alone qualitative studies are less feasible; and
• Obtaining input on meaningful outcomes or meaningful change as defined by the patient.

FDA calls attention to the burden this type of interviewing can be on site staff and patients/caregivers, as well as to the challenges with scheduling this could cause.  To overcome these limitations, the commentary recommends utilizing a mobile app-based approach to remote self-interviewing using an embedded interview guide.

Additional Considerations for Specific Populations

One of the more thought-provoking sections of the draft guidance explores special considerations that should be examined when obtaining input from specific populations of patients and caregivers.  This includes, but is not limited to, a patient population’s:

• Health status and the impact it may have on participation;
• Limited attention span (e.g., young children) and/or cognitive slowness (e.g., elderly)
• Geographic disbursement and whether to use remote assessment;
• Emotional burden (i.e., potential for heightened emotions, like anxiety);
• Need for stimulation to participate (e.g., asking young children to draw to help elicit concepts); and
• Stage in their disease course, because understanding and acceptance of prognosis change over time.

In addition, where patients can provide reliable self-reporting, the draft guidance states that it is generally preferable for the caregiver to not be present during an interview or, if needed in the room, to sit behind the patient to minimize influencing.

For caregiver reporting, the draft guidance recommends against proxy reporting (i.e., reporting as if they were the patient), but instead eliciting what caregivers observe in patients, including things patients tell them.

Can This Research Be Done on Social Media?

The final section of the draft guidance states that this patient experience data, regardless of method, can be collected using social media.  FDA gives greater weight to such research that is conducted with communities that provide personal information (e.g., verified patient communities) to allow verification of personal characteristics (e.g., diagnosis).  Other forms of social media lacking verification are open to data integrity and interpretation concerns.

By Riëtte van Laack —

On September 30, 2019, FDA announced the availability of a draft guidance for Industry, titled “Eligibility Criteria for Expanded Conditional Approval of New Animal Drugs.”  This guidance addresses a special pathway for approval of animal drugs that address serious or life-threatening diseases or conditions, or an unmet animal or human health need, and for which demonstrating effectiveness would require complex or particularly difficult study or studies.  This new pathway is the result of an amendment in 2018.

Following the enactment of the 2004 Minor Use and Minor Species (MUMS) Animal Health Act, FDA established a “conditional approval” pathway to allow the development of animal drugs in commercially limited markets.  The conditional approval pathway allowed the marketing of animal drugs for minor species or for minor uses for major species after demonstrating that the animal drug is safe and that there is a reasonable expectation of effectiveness; upon receiving conditional approval, manufacturers may market the drug for up to five years while collecting data to demonstrate effectiveness.

In August 2018, the Animal Drug User Fee Act (ADUFA IV) amended the FDC Act to expand the conditional approval pathway beyond MUMS to include new animal drugs for a serious or life-threatening disease or condition or drugs intended to address an unmet animal or human health need, and for which proof of effectiveness would require a particularly difficult study or studies.  ADUFA directed FDA to issue guidance to identify the relevant terms by September 30, 2019.

A serious or life-threatening disease or condition

FDA identifies three categories of serious or life-threatening diseases or conditions: 1) those associated with morbidity that has a substantial impact on the day‐to‐day functioning or is associated with mortality in the target animal; 2) zoonotic diseases that present a risk of serious or life-threatening disease or condition to humans; and 3) diseases or conditions in food-producing animals with a risk of disrupting regional or national food supply.

“Unmet animal or human health need”

FDA defines an unmet need as a disease or condition for which the treatment, control, or prevention is not adequately addressed by available therapy or, if a therapy exists, the new drug is expected to provide a meaningful advantage.  “Available therapy” means a product that is FDA approved, licensed by the USDA as a veterinary biologic, or registered EPA, and is currently being marketed in the U.S. for the same intended use in the same species proposed for the new animal drug product for which expanded conditional approval is sought.

A product can provide a “meaningful advantage” over a currently existing therapy in several ways, e.g., by providing clinically relevant improved effectiveness or beneficial effect; providing effectiveness in animals that cannot tolerate the currently available therapy; and providing similar effectiveness but improved safety.

Complex or difficult study or studies

FDA will determine whether a study is complex or particularly difficult on a case-by-case basis.  The guidance provides factors the Agency will consider when making its determination.

In addition to discussing the meaning of the terms, FDA reminds interested parties that the law specifies that the pathway of expanded conditional approval is not available for antimicrobial drugs.  Also, of interest is FDA’s clarification regarding the exclusion of transgenic animals.  As FDA notes, the law specifies that conditional approval pathway is not available for transgenic animal defined as “an animal whose genome contains a nucleotide sequence that has been intentionally modified in vitro.” FDA notes that intentional genomic alterations such as gene deletions do not meet the definition of transgenic and such products might be eligible for conditional approval (provided they meet the other conditions).

To be considered, comments must be submitted to docket FDA-2019-D-3361 on www.regulations.gov beginning no later than January 28, 2020.

By Alan M. Kirschenbaum —

Buried in a recently enacted continuing appropriations act for FY 2020 is a provision amending the Medicaid Drug Rebate statute as it relates to authorized generics. See Continuing Appropriations Act, 2020, and Health Extenders Act of 2019, § 1603.  Under CMS regulations, NDA holders (“primary manufacturers,” in CMS parlance) who permit other manufacturers (“secondary manufacturers”) to market authorized generics under the same NDA are to include in the average manufacturer price (AMP) of the brand version the transfer price of the authorized generic from the primary to the secondary manufacturer, if the secondary manufacturer is “acting as a wholesaler for drugs distributed to retail community pharmacies.”  42 C.F.R. § 447.506(b).  These prices, which tend to be steeply discounted, tend to reduce the AMP of the brand version, which, in turn, reduces the brand’s Medicaid rebate liability.

Prompted by an April 2019 report of the Office of the Inspector General of the Department of Health and Human Services, which concluded that this practice was depriving Medicaid of hundreds of millions of dollars in rebates, Congress has now amended the statute to specifically exclude from the brand AMP all authorized generic transfer sales from an NDA holder to a “wholesaler”.  The statutory definition of “wholesaler” has been changed to complete the exclusion.  Heretofore, the definition included, among other things, a manufacturer engaged in wholesale distribution to retail community pharmacies, which permitted authorized generic sales to certain secondary manufacturers to be included in the brand’s AMP.  The reference to “manufacturer” has now been deleted, so that a secondary manufacturer may no longer be considered a “wholesaler” even if it sells to retail community pharmacies.  The latter change – i.e., the deletion of the term “manufacturer” from the definition of a “wholesaler”, could have an impact on transactions affecting not only authorized generics, but also drugs sold by a manufacturer to a repackager or relabeler.

This law was signed by Donald Trump on September 27 and became effective on October 1, 2019.  CMS has yet to issue any guidance regarding its implementation.  Holders of NDAs for authorized generics will have to evaluate their monthly and quarterly AMP methodologies to ensure consistency with the new amendment.

By Rachael E. Hunt & Serra J. Schlanger & Anne K. Walsh —

In a decision that could dramatically change the course of how defendants conduct discussions with the government, a district court judge in the District of Minnesota required a defendant in a False Claims Act (FCA) case to turn over to a qui tam relator the presentations the company had made to the government prior to the government’s decision to decline the matter.  U.S. ex rel. Higgins v. Boston Scientific Corp., 11-cv-02453, Dkt. No. 279 (D. Minn. Aug. 28, 2019).  As set forth in the Justice Manual, a defendant is eligible for cooperation credit if it discloses the relevant facts related to any alleged misconduct.  Justice Manual § 9-28.720.  Thus it is not uncommon for a corporate defendant to conduct an internal investigation of the alleged misconduct, and to share its findings with the government in the form of PowerPoint presentations or White Papers with an expectation that the government will consider those findings in determining whether prosecution of the company is warranted.  Companies seek to ensure confidential treatment of these documents, invoking Federal Rules of Evidence (FRE) 408 and 410, requesting Freedom of Information Act confidentiality, and not providing “leave behind” copies for the government attorneys.  If the logic in the Higgins decision is adopted by other courts, a defendant may need to refine how it presents its findings to convince the government to decline the case, but also to protect its position if the relator continues to pursue those declined claims.

The underlying case involved allegations from Relator Steven Higgins that Boston Scientific Corporation (BSC) caused physicians to submit false claims for reimbursement for medically unnecessary and unreasonable devices and surgeries.  In discussions with the government, BSC made several presentations to respond to the allegations.  The government ultimately declined to intervene, and as permitted under the FCA, the Relator proceeded with the lawsuit on the declined claims.  As part of Relator’s discovery requests, he asked BSC to produce the presentations that BSC had earlier made to the government.  BSC objected and the Relator filed a motion to compel.

The magistrate judge granted Relator’s motion from the bench, holding that neither the FCA nor the FRE restricted discovery of these materials.  The judge also held that BSC waived any claims to work-product or attorney-client privilege by intentionally disclosing the materials to an adversary, that the work-product doctrine does not protect materials used in litigation, and that the materials were relevant.  BSC objected to this ruling, triggering a review by the district court, which can only reverse a magistrate judge’s order on non-dispositive pretrial matters if it is clearly erroneous or contrary to law.  Fed. R. Civ. P. 72(a).  It is an “extremely deferential” standard.  See Reko v. Creative Promotions, Inc., 70 F. Supp. 2d 1005, 1007 (D. Minn. 1999).

BSC put forth four arguments to protect the materials from disclosure, each of which District Court Judge Joan N. Ericksen rejected.  First, BSC argued that settlement negotiations are subject to a heightened relevance standard in discovery under FRE 408.  In rejecting this argument, Judge Ericksen noted that Rule 408 prohibits evidence contained in settlement negotiations from being admitted to prove a claim or impeach another party during trial.  Judge Ericksen stated however, that the FRE do not apply to discovery.

Second, BSC argued that public policy requires the court to protect communications between defendants and the government in qui tam cases and that allowing disclosure of these communications would hinder the government’s ability to settle FCA cases.  Judge Ericksen side-stepped BSC’s policy argument, turning instead to the language in the FCA governing Civil Investigative Demands (CIDs) (31 U.S.C. § 3733).  Judge Ericksen determined that the FCA CID provisions prohibit the government from disclosing materials while in the possession of the government but do not prohibit the defendant from disclosing those materials in discovery.  In making this determination, Judge Ericksen focused on 31 U.S.C. § 3733(i).

Third, BSC argued that the Eighth Circuit created an expectation of confidentiality for material provided to the government during an investigation.  Specifically, BSC cited Diversified Industries, Inc., v. Meredith, 572 F.2d 596 (8th Cir. 1977) (en banc), which held that the voluntary surrender of material protected by the attorney client privilege to a government agency was a limited waiver and did not waive the privilege in future disputes.  Judge Ericksen concluded that Diversified Industries did not apply because BSC asserted that the presentations were protected by the work-product doctrine, not the attorney client privilege.

Lastly, BSC argued that the presentations are protected by the work-product doctrine.  Judge Ericksen agreed that the work product doctrine protects materials prepared in anticipation of litigation, but that the privilege could be waived by disclosure to an adversary such as the government.  Judge Ericksen reasoned that by voluntarily disclosing the presentations to the government, BSC waived this privilege.

Although this decision is not binding on any other court, it will no doubt be used by relators in future proceedings to obtain defendants’ presentations.  Judge Ericksen’s seemingly sweeping dismissal of the public policy considerations shows that companies facing an FCA investigation need to carefully draft the contents of submissions to the government understanding the risk of possible disclosure of the submission to an adversary.  Should this approach gain favor in other courts, it could change the nature of FCA negotiations with the government.  Certainly defendants may be less likely to provide any written materials, such as presentations, during discussions with the government.  But there also may be less candor about admissions or attorney work product, for fear that these statements could be used in subsequent litigation by a relator.

We note that 31 U.S.C. § 3733(a)(1) permits the government to share certain information with a qui tam relator if the government determines it is necessary as part of an FCA investigation: “Any information obtained by the Attorney General or a designee of the Attorney General under this [CID] section may be shared with any qui tam relator if the Attorney General or designee determine it is necessary as part of any false claims act investigation.”  Arguably, under this provision, the government can share with the relator any and all materials a defendant presents to the government during its investigation.  We understand this is a practice that already exists among some Assistant U.S. Attorneys, particularly in those cases in which a relator is providing substantive assistance on technical issues.  But a defendant could argue that the presentations made during settlement discussions are not made in response to a CID, and thus that the government cannot share this information with the relator.  Or a defendant could argue that the presentations do fall within its CID response, and that while the government can share that information with the relator as part of its investigation, it is otherwise protected from disclosure.  While the court addressed CIDs in the context of public policy supporting its decision, it did not address this specific provision in the CID statute.

By Véronique Li, Senior Medical Device Regulation Expert —

Nearly three years after Section 3060(a) of the 21st Century Cures Act amended section 520 of the Federal Food, Drug, and Cosmetic Act (FD&C Act) by removing certain software functions from the device definition in section 201(h) of the FD&C Act, FDA has released Changes to Existing Medical Software Policies Resulting from Section 3060 of the 21st Century Cures Act (“guidance’”). The scope of this September 27, 2019 guidance document covers the 2016 amended medical device definition and its effects on four related medical device software guidance documents, which were also updated and released on September 27, 2019: 1.) General Wellness: Policy for Low Risk Devices, 2.) Mobile Medical Applications, 3.) Off-The-Shelf Software Use in Medical Devices, and 4.) Medical Device Data Systems, Medical Image Storage Devices, and Medical Image Communications Devices.

Software functions that were removed from the definition of a device include those intended 1.) for administrative support of a health care facility, 2.) for maintaining or encouraging a healthy lifestyle, 3.) to serve as electronic patient records, and 4.) for transferring, storing, converting formats, displaying data and results.

Administrative Support of a Health Care Facility

FDA has not historically considered software functions such as processing and maintenance of financial records, appointment schedules, and analysis to predict utilization to be software functions of devices.

Additionally, Laboratory Information Systems (LIS) and Laboratory Information Management Systems (LIMS) functions intended for administrative support are not considered device functions. Transferring, storing, or displaying clinical laboratory test data and results are also not considered to be within the definition of a device. As a result, section 3.2.2. of the Off-The-Shelf Software Use in Medical Devices titled “Exemption of Laboratory Information Management Systems” has been removed.

On the other hand, software functions that also analyze or interpret medical data remain medical devices under FDA’s oversight. FDA does not intend to enforce regulatory requirements for software functions that generate alarms or alerts if they do not prompt immediate clinical action because the function would be considered low-risk. An example would be a notification that a parameter is out of range but is not intended to alert a caregiver to intervene. However, software functions that analyze medical device data in order to provide a notification or flag will continue to be regulated as a device.

Maintaining or Encouraging a Healthy Lifestyle

The General Wellness: Policy for Low Risk Devices guidance document has been updated from the July 29, 2016 version (which we have previously blogged on here) to ensure consistent policy in the regulation of digital health products. One such update is the replacement of “mobile application” with “software function” in the examples listed in Section V of the guidance document. FDA also changed this section’s title to “Examples of General Wellness Products that Are Not Medical Devices and Examples of General Wellness Products that Are Medical Devices for which FDA Does Not Intend to Enforce Requirements” to show that some examples (such as a software function that plays music to “soothe and relax”) are not medical devices under 201(h) of the FD&C Act. Beyond these updates, the guidance remains largely unchanged.

Similar changes were made to the Mobile Medical Applications guidance document, which we last blogged on here. Where appropriate, “mobile application” has been changed to “software function” and the full title of the guidance, “Policy for Device Software Functions and Mobile Medical Applications,” has been modified to reflect the delineation. Some examples of mobile apps for which FDA intends to exercise enforcement discretion have been moved to examples of mobile apps that are NOT medical devices. For example, apps that track and trend exercise activity or track the quantity or quality of healthy people’s sleep patterns do not meet the amended medical device definition.

Serve as Electronic Patient Records

Software functions that are intended to transfer, store, convert formats, or display electronic patient records that are the equivalent of a paper medical chart are not devices if all the following criteria are met:

1. Such records were created, stored, transferred, or reviewed by health care professionals (HCPs), or by individuals working under supervision of such professionals, (section 520(o)(1)(C)(i) of the FD&C Act);
2. Such records are part of information technology certified under a program of voluntary certification kept or recognized by the Office of the National Coordinator for Health Information Technology (ONC) under section 3001(c)(5) of the Public Health Service Act (“ONC Health IT Certification Program”)12 (section 520(o)(1)(C)(ii) of the FD&C Act); and
3. Such software functions are not intended for interpretation or analysis of patient records, including medical image data, for the purpose of the diagnosis, cure, mitigation, prevention, or treatment of a disease or condition (section 520(o)(1)(C)(iii) of the FD&C Act).

Some examples of mobile apps that were considered to be under FDA enforcement discretion have been moved to examples of mobile apps that are NOT medical devices in the Mobile Medical Applications guidance document. For example, EHR software functions certified under the ONC Health IT Certification Program are not considered to be devices. While this seems straightforward on the surface, this does not represent a least burdensome approach. To not be considered a device, EHR vendors would need to understand the requirements of and obtain ONC certification. At least for the time being, FDA does not intend to enforce compliance to the FD&C Act requirements for software functions that are not certified under the ONC Health IT Certification Program if they meet other criteria in section 520(o)(1)(C)(i) and (iii) of the FD&C Act.

On the other hand, functions that extend beyond those intended to transfer, store, convert formats, or display the equivalent of a paper medical chart, such as using a mobile device’s built-in camera to document or transfer images to supplement what would otherwise be an in person consultation between a patient and his/her healthcare provider, would be instances when FDA intends to exercise enforcement discretion.

As part of its update to the Mobile Medical Applications guidance document, FDA increases the number of examples it does not consider medical devices from five to twenty-one. It also changes an example from “assessing the need for immunization” to “documenting the need” so that the example is that of an electronic patient record and not clinical decision support software.

Transferring, Storing, Converting Formats, Displaying Data and Results

Over time, FDA’s thinking on MDDS products has evolved and we have shared our thoughts on Medical Device Data Systems (MDDS) here, here, and here during the evolution. From exercising enforcement discretion to full out declaring that software functions that meet the definitions of MDDS are no longer devices, we are hopeful FDA will better utilize its resources and focus on higher risk products.

However, what is unclear is how FDA intends to focus on a MDDS multiple function product. That is a product that may have a software function that is not considered a device and another function that is a device. For the time being, FDA stated it would not regulate the MDDS software functions in a MDDS multiple function product and has stated it intends to enforce the requirements under the FD&C Act based on its understanding of risks in these devices.

Therefore, the Medical Device Data Systems, Medical Image Storage Devices, and Medical Image Communications Devices guidance document has been modified to clarify that software functions that are solely intended to transfer, sore, convert formats, and display medical device data and results, are not devices and therefore not subject to FDA regulatory requirements, whether or not the use is for immediate clinical action. These are considered Non-Device-MDDS and is different from Device DDS, which encompasses hardware that transfers, stores, converts formats, and displays medical device data.

Overall, we appreciate FDA’s efforts to harmonize four related medical device software guidance documents. However, we look forward to seeing more clarifications such as FDA’s amended regulations to clearly identify the hardware functions that remain device functions and a list of product codes that are no longer devices subject to enforcement discretion. We also expect to see greater clarity around any risk-based criteria FDA will employ in their assessment of exercising enforcement discretion.