Amgen SENSIPAR Pediatric Exclusivity Dispute is Put on Ice While FDA Dispute Resolution Process Proceeds

Amgen SENSIPAR Pediatric Exclusivity Dispute is Put on Ice While FDA Dispute Resolution Process Proceeds

By Kurt R. Karst –      
Amgen Inc.’s (“Amgen”) nearly two-week-old lawsuit filed against FDA in the U.S. District Court for the District of Columbia challenging the Agency’s denial of a period of 6-month pediatric exclusivity under the Best Pharmaceuticals for Children Act (“BPCA”) (FDC Act § 505A) applicable to SENSIPAR (cinacalcet) Tablets (NDA 021688) is on hold while Amgen seeks resolution of its claim that the company met the requirement for granting exclusivity by using FDA’s Formal Dispute Resolution process.
As we previously reported, Amgen alleges in the company’s Complaint and Motion for Temporary Restraining Order and/or Preliminary Injunction that FDA violated the Administrative Procedure Act when the Agency, among other things, “acted contrary to the plain terms of its governing statute by faulting Amgen for its failure to fulfill ‘one criterion’ of several study requests, when the statute requires merely that the studies ‘fairly respond’ to the Agency’s [Written Request for pediatric studies].”  Amgen’s lawsuit set off a flurry of activity from each party to the litigation, including a Motion to Dismiss from FDA and supplemental briefs (here and here).  A Motion Hearing was held last Friday where Judge Randolph D. Moss took the matter under advisement.
But on Monday, June 5, 2017, the case was put on hold with a Stipulation and Order signed by Judge Moss. According to the Order, “FDA will accept resubmission of Amgen’s May 25, 2017 request for dispute resolution on June 5, so long as that request is substantially similar to Amgen’s May 25, 2017 request,” and the Agency must respond with a decision by June 26, 2017. “[S]hould reconsideration uphold the May 22, 2017, decision [denying pediatric exclusivity], Amgen shall respond to the reconsideration decision by July 3, 2017; and FDA shall issue a decision on dispute resolution by August 2, 2017,” says the Order.  If FDA, after reconsideration, deems that the studies met the terms of the Written Request for pediatric studies, then “FDA will update the Orange Book to reflect pediatric exclusivity on the first business day following the acceptance.”  If FDA once again denies Amgen pediatric exclusivity, then we’ll probably see the parties back in court. 
Regardless of whether FDA decides to grant pediatric exclusivity, or if the exclusivity is ordered granted by a court, the Order states that “any future decision requiring FDA to accept Amgen’s study reports for Sensipar (cinacalcet) under 21 U.S.C. § 355a(d)(3) . . . shall be deemed to relate back, nunc pro tunc, to May 22, 2017, the date of FDA’s initial determination.”  As we previously explained, a “relate back” decision is important here, because pediatric exclusivity extends all other types of Orange Book-listed patent and non-patent marketing exclusivity an application holder may have under the FDC Act, provided that at the time pediatric exclusivity is granted there is not less than nine months of term remaining.  Here, U.S. Patent No. 6,011,068 listed in the Orange Book for SENSIPAR expires on March 8, 2018.  Nine months prior to that date is June 8, 2017. 

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First Generic Drug Price Gouging Prohibition to Become Law in Maryland

First Generic Drug Price Gouging Prohibition to Become Law in Maryland

By David C. Gibbons & Alan M. Kirschenbaum –
Maryland will become the first state in the United States to enact a law prohibiting “price gouging” by generic pharmaceutical manufacturers. H.B. 631, 437th Gen. Assemb., Reg. Sess. (Md. 2017) (hereinafter, “the Bill”). The Bill was passed by the Maryland General Assembly on April 20, 2017 and, on May 26, Maryland Governor Larry Hogan sent a letter to the Speaker of the House stating that he would allow the bill to become law without his signature.
There are two essential provisions of the Bill. First, it prohibits a generic drug manufacturer or wholesale distributor from engaging in price gouging in the sale of an “essential off-patent or generic drug.” An essential off-patent or generic drug, for purposes of the Bill, is a prescription drug (1) with no unexpired marketing exclusivity under the Federal Food, Drug, and Cosmetic Act; (2) that either appears on the World Health Organization’s model list of essential medicines or is designated as essential for treating a life-threatening or certain chronic health conditions by the Maryland Secretary of Health and Mental Hygiene; (3) is actively marketed in the United States by three or fewer manufacturers; and (4) is available for sale in Maryland. Prohibited price gouging, according to the Bill, is an “unconscionable increase” in the price of such prescriptions drugs. This term is defined as a price increase that is “excessive and not justified” by the manufacturing cost or costs associated with expanding access to the drug for the purpose of promoting public health, and which results in patients having “no meaningful choice” whether or not to purchase the drug because of its importance to their individual health and insufficient market competition. The Bill exempts wholesale distributors from the price gouging prohibition when the price increase is “directly attributable” to additional costs imposed on the distributor by the manufacturer.
Second, the Bill authorizes the Maryland Medical Assistance Program (“MMAP”) to notify the Maryland Attorney General (“AG”) of a price increase when the Wholesale Acquisition Cost (“WAC”) of a prescription drug increases by at least 50% from the WAC within the preceding one-year period or when the price paid by MMAP would increase by at least 50% from the WAC within the preceding one-year period and the WAC for either a 30-day supply or a full course of treatment exceeds $80.
At the request of the AG, the manufacturer of a drug so identified must provide a statement justifying the price increase within 45 days of such request. The AG may also require a manufacturer or distributor to provide records or documents relevant to a determination of whether the price increase violates the Bill’s prohibition on price gouging. The AG may seek a court order compelling a justification statement or document disclosure.
In addition, the Bill allows the AG to seek other remedies, including:

Restraining or enjoining violations of the Bill;
Obtaining monetary relief to consumers, based on violative price increases;
Requiring the manufacturer or distributor to sell the drug to Maryland State health plans or programs at the price at which it was available in the year prior to the violative price increase; and
Imposing a civil penalty of up to $10,000 per violation.

The Bill has not been without controversy. Governor Hogan indicated, in his letter to the Speaker of the House, that “legal and constitutional concerns” with the Bill have been raised by his Chief Counsel. This places the Governor at odds with the AG, who championed the Bill, but largely echoes concerns raised by generic drug manufacturers through the Association for Accessible Medicines, the generic manufacturers’ trade association. The Governor stated that one issue concerns the fact that the Bill only addresses generic products, and not patented drugs and medical device drug delivery systems, which, according to the Governor, comprise a significant share of the market and “are often times the most expensive and essential pharmaceuticals.” He also stated that the Bill may suffer from defects under the U.S. Constitution. First, the Governor stated that the Bill potentially implicates the Constitution’s dormant commerce clause by regulating interstate commerce—that is, drug prices negotiated “outside of Maryland.” Second, the Bill may violate the Fourteenth Amendment due process clause due to the vagueness of the terms “unconscionable increase” and “excessive.”
The Bill will become effective on October 1, 2017. We will continue to monitor enforcement of this law and similar developments in other states.
 

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Letter Signed by 65 Members of Congress Urges FDA to Reconsider “Office Stock” Restrictions for Section 503A Compounders

Letter Signed by 65 Members of Congress Urges FDA to Reconsider “Office Stock” Restrictions for Section 503A Compounders

By Karla L. Palmer –
A recent letter from 65 members of Congress to FDA’s Commissioner Gottlieb has caused a bit of a buzz in the pharmacy compounding world. The letter, dated May 23, 2017, expresses the Congressional signers’ “strong disappointment” with FDA’s recently issued Final Guidance for Industry titled, “Prescription Requirement under 503A of the Food Drug and Cosmetic Act.” The Final Guidance, published on December 30, 2016 (see our previous post here), addresses the so-called “prescription requirement” in FDCA Section 503A, including FDA’s policies requiring compounding only after the receipt of a prescription for an identified individual patient, limited compounding before the receipt of such a prescription (referred to as “anticipatory compounding”), and the prohibition on compounding for office use (referred to as “office stock”).  FDA has consistently asserted since the passage of the 2013 Drug Quality and Security Act that, in order for compounders to obtain Section  503A’s exemptions from new drug, adequate directions for use and cGMP requirements, each compounded formulation must be prepared for an individually identified patient pursuant to a prescription or order, and the compounder may not engage in compounding for office stock.  Proponents of those that believe state-licensed pharmacies should be permitted to engage in compounding for office stock if it is permissible under state law assert that Congress’ plain use the term “distribution” in Section 503A and various Congressional statements prior to and at the time of the Act’s enactment demonstrate Congress’ clear intention to permit state-licensed pharmacies to engage in compounding for office stock.  
The bi-partisan letter (led by Rep. Chris Stewart (R-Utah) and Rep. Buddy Carter (R-Ga.), urges FDA to rethink its decision restricting pharmacies from engaging in compounding for office stock. The Letter  states that FDA’s policies are contrary to the plain language of Section 503A as amended by the DQSA.  In addition,  it asserts that FDA ignored congressional intent, stakeholder input, and clear directives in FY 2016 funding legislation about office use compounding, and added to the Final Guidance language that attempts to redefine the terms “dispense” and “distribute,” ignoring their commonly accepted “definitions both in existing law and in pharmacy practice.”  The Letter accuses FDA of “doubling down” on FDA’s “misinterpretation of the statute and will further exacerbate the patient access problems as more state licensed and compliant pharmacies are forced to cease compounding office-use medications to the providers in their communities who rely on them.” 
Calling the Final Guidance “regulatory overreach,” the Letter lastly seeks the rescission of the Final Guidance, and requests FDA to issue a proposed rule that adheres to “congressional intent” and “plain language of the underlying statute.”

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Amgen Sues FDA After Agency Denies Pediatric Exclusivity for SENSIPAR

Amgen Sues FDA After Agency Denies Pediatric Exclusivity for SENSIPAR

By Kurt R. Karst –
The drought is over! It’s been several months since we’ve seen a new dispute over non-patent exclusivity filed against FDA in a court.  But with a May 25, 2017 Complaint and a Motion for Temporary Restraining Order and/or Preliminary Injunction filed in the U.S. District Court for the District of Columbia, Amgen Inc. (“Amgen”) has ended the drought.  And the dispute concerns a rarely litigated statutory provision: 6-month pediatric exclusivity granted (or denied, as the case is here) under the Best Pharmaceuticals for Children Act (“BPCA”) (FDC Act § 505A).  In fact, we’re only aware of one similar case in the 20 years since FDC Act § 505A has been around: Merck & Co. v. FDA, 148 F. Supp. 2d 27 (D.D.C. 2001) (here) . . . and that case didn’t turn out too well for FDA.  (Of course, there was the initial case of National Pharmaceutical Alliance v. Henney, 47 F. Supp. 2d 37 (D.D.C. 1999) (here), but that case concerned the applicability and scope of, and not the eligibility for, pediatric exclusivity under FDC Act § 505A.) 
By way of background, FDC Act § 505A provides an additional six months of patent and non-patent exclusivity to pharmaceutical manufacturers that conduct acceptable pediatric studies of new and currently-marketed drug products identified by FDA in a Written Request (“WR”) for which pediatric information would be beneficial. Pediatric exclusivity extends all other types of Orange Book-listed patent and non-patent marketing exclusivity (e.g., 5-year, 3-year, and 7-year orphan drug exclusivity) an application holder may have under the FDC Act, provided that at the time pediatric exclusivity is granted there is not less than nine months of term remaining.  An important aspect of pediatric exclusivity is that it provides additional marketing exclusivity not just for the pediatric indications or formulations, but for all protected indications and formulations of that sponsor’s drug.  Thus, pediatric exclusivity attaches to the patent and non-patent marketing exclusivity for any of the sponsor’s approved drug products (including certain combination products) that contain the active moiety for which pediatric exclusivity was granted, and not to a specific drug product. 
Amgen’s lawsuit centers around FDA’s March 22, 2017 Letter Decision denying the company pediatric exclusivity for SENSIPAR (cinacalcet) Tablets (NDA 021688).  FDA approved SENSIPAR on March 8, 2004 for the treatment of secondary hyperparathyroidism in patients with Chronic Kidney Disease on dialysis, and for the  treatment of hypercalcemia in patients with parathyroid carcinoma. 
In May 2010, FDA issued Amgen a WR – a condition precedent to obtaining pediatric exclusivity – “to obtain the information needed to understand (and describe in labeling) the safety and effectiveness of the long term use of cinacalcet in children 28 days to < 18 years of age,” says FDA in the Agency’s Letter Decision. “The main objective of WR was to establish the benefits of  cinacalcet use for the chronic treatment of hyperparathyroidism (HPT) secondary to end-stage  renal disease in pediatric patients receiving either hemodialysis or peritoneal dialysis, and to adequately characterize the risks associated with this intended use in pediatric patients,” according to the Agency.  The WR was amended several times over the years, and, as finally amended, requested that Amgen conduct four pediatric studies.  Amgen conducted the studies – and an additional five studies – and submitted them to FDA last November.  But the company also had some difficulty with one of the studies.  “FDA’s [WR] asked that Study 3 involve a minimum of 15 patients who would be treated for either 26 weeks or, if a patient received a kidney transplant during the study, 12 weeks prior to transplant,” but Amgen was able to enroll only 11 patients for at least 12 weeks, and only four patients met all study completion criteria.  Amgen’s two-count Complaint alleges that FDA violated the Administrative Procedure Act (“APA”) in multiple ways, and that FDA’s interpretation of FDC Act § 505A (and the Agency’s failure to provide fair notice about its interpretation) violates the procedural due process guarantees of the Fifth Amendment to the United States Constitution. . . as well as the APA: FDA’s decision violated the [APA] in as many ways as that Act can be violated. First, the agency acted contrary to the plain terms of its governing statute by faulting Amgen for its failure to fulfill “one criterion” of several study requests, when the statute requires merely that the studies “fairly respond” to the Agency’s [WR]. Second, the agency also violated the statute by conflating the standard for accepting study reports with the different, separate, and more rigorous statutory standard for assessing a drug’s safety. Third, by denying pediatric exclusivity, FDA deviated from its treatment of similarly situated sponsors and broke with the agency’s longstanding practice, without explanation. Fourth, FDA’s denial of pediatric exclusivity lacks any logical basis, because it is premised on Amgen’s failure to achieve an impossible goal set by the agency – one that the agency itself cemented by refusing to accommodate amendments to the relevant study.  And fifth, FDA violated Amgen’s due process rights by changing the agency’s interpretation of the statute without providing Amgen advance notice of its newfound interpretation.  To support its case, Amgen points to the Merck decision linked to above.  “In addition to text, context, and purpose, Amgen has precedent on its side,” says the company.  In that case, which concerned MEVACOR (lovastatin), FDA denied pediatric exclusivity because Merck met only 14% of the study enrollment requirement.  But the DC District Court concluded that Merck’s studies “fairly responded” to the WR, and that FDA impermissibly denied pediatric exclusivity for “failure to meet a single term of the [WR].”  Amgen is seeking emergency relief, and a Temporary Restraining Order or Preliminary Injunction by June 6, 2017. Why that date?  Because June 8, 2017 is the date that is nine months before the March 8, 2018 expiration of U.S. Patent No. 6,011,068 listed in the Orange Book for SENSIPAR.  As noted above, the BPCA provides that pediatric exclusivity extends all other types of Orange Book-listed patent and non-patent marketing exclusivity, provided that at the time pediatric exclusivity is granted there is not less than nine months of term remaining.  

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If Everyone’s Unhappy, Maybe You’re Doing Something Right… Comment Period on FDA’s Biosimilar Interchangeability Guidance Closes

If Everyone’s Unhappy, Maybe You’re Doing Something Right… Comment Period on FDA’s Biosimilar Interchangeability Guidance Closes

By Sara W. Koblitz –
The comment period on FDA’s Draft Guidance Considerations in Demonstrating Interchangeability With a Reference Product recently closed (Docket No. FDA-2017-D-0154), and it seems like everyone has something to say about the guidance. With over 50 comments submitted, some very technical in nature, FDA has some deep reading to do before finalizing anything. Commenters ranged from biologics and biosimilar manufacturers to third-party payers and trade associations.
Most commenters addressed the same points: the distinction between interchangeability and biosimilar, switching studies, use of foreign reference products, and the necessity of demonstrating interchangeability in all indications or uses and in all presentations. Questions are raised throughout the comments about what interchangeability actually means: is it a higher standard or just an additional data requirement? Is it therapeutic equivalence? And everyone is nervous about whether FDA will use labeling or nonproprietary naming or something totally new to indicate that a biosimilar is interchangeable. The commenters were also torn on the use of foreign reference products – mostly breaking down into a cost compared to safety argument.
Interestingly, almost all of the comments complimented FDA on its “flexible approach” to interchangeability, but proceeded to ask FDA for more precise testing requirements. Some want more human factor requirements while others want more in-depth switching study requirements. And comments really want FDA to lay out its plan for post-marketing changes to innovators after findings of interchangeability.
A lot of these questions are familiar to commenters, as they echo the questions that have arisen during the rocky implementation of the Hatch-Waxman Act and the abbreviated new drug pathway. Questions about whether interchangeability needs to apply to all conditions of use seem like they are a direct response to the common practice of skinny-labeled generics. And questions about exclusivity when multiple applications for interchangeability are submitted and ready for approval on the same day smacks of post-MMA questions that have taken FDA years to address. There is a lot of overlap in the biologic and drug industry, so a lot of these players have been burned before. Hence, the push for clarity, I presume.    
It’s clear that FDA is not going to be able to please everyone with its interchangeable procedures. With so many commenters asking for diametrically opposed standards, there will be some tough decisions to make. And as we have seen in the Hatch-Waxman context, the trade-off between innovation and access is complicated. The one thing that all of the commenters have made pretty clear though is that they want FDA to take action and give some clear direction to manufacturers here. With the plain language of the BPCIA already subject to multiple interpretations, industry is really relying on FDA for some semblance of clarity here. As the Rolling Stones so eloquently said “you can’t always get what you want, but if you try sometimes, well you just might find, you get what need.” Maybe these comments will push FDA to give industry the clarity it needs, but one can only hope.

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Coalition of Consumer Advocates Challenges FDA’s GRAS Notification Final Rule

Coalition of Consumer Advocates Challenges FDA’s GRAS Notification Final Rule

By Ricardo Carvajal –
A coalition of consumer advocates filed a lawsuit challenging FDA’s final rule that formally established the GRAS notification system.  The complaint alleges that the rule “unlawfully subdelegates statutory authority to private parties,” that the “secret GRAS system is contrary to the FDCA,” and that the “criteria for GRAS determinations are contrary to the FDCA.”  Plaintiffs ask the court to vacate the rule and direct the agency to “correct the legal deficiencies found by the court.”
The lawsuit was foreshadowed in critical press releases issued by two of Plaintiffs shortly after issuance of the final rule, and is the latest parry in Plaintiffs’ years-long battle to call attention to alleged deficiencies in FDA’s oversight of the GRAS exception.  The central allegations and arguments in the complaint have been previously raised and addressed in one or another context, so we won’t belabor them here (see, for example, FDA’s memorandum submitted to the court in prior litigation, and our prior postings here and here).  Essentially, Plaintiffs fault FDA for not imposing certain requirements on industry that FDA lacks any apparent statutory authority to impose.  For those seeking an antidote in the form of a more constructive take on the GRAS system, we suggest this supplemental issue of Regulatory Toxicology and Pharmacology. 
The merits of Plaintiffs’ case may be entirely beside the point.  Industry should expect that the litigation will be used as a cudgel in the court of public opinion as it unfolds.  In the interim, FDA will be forced to expend its scarce resources to defend Plaintiffs’ dubious claims – a result that seems unlikely to advance the cause of food safety.

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DEA Administrative Decisions Update: Has DEA Established New Grounds for Summary Disposition?

DEA Administrative Decisions Update: Has DEA Established New Grounds for Summary Disposition?

By John A. Gilbert, Jr. & Andrew J. Hull –
Numerous prior DEA final orders have been based on a summary disposition. Summary disposition is a procedure used by government counsel to seek a recommended decision by the Administrative Law Judge (“ALJ”) to revoke a DEA registration without proceeding to a hearing on the facts. It is similar to summary judgment in federal court, and is used when there are undisputed facts that are dispositive of a matter. The aforementioned DEA cases have all used summary disposition in cases where it is undisputed that a practitioner has lost state authority to handle controlled substances (see our previous post here).
However, a recent administrative decision by the DEA Acting Administrator appears to expand the basis whereby DEA will grant summary disposition to allegations of material falsification of an application for DEA registration. To our knowledge, DEA has never used summary disposition to adjudicate a matter other than loss of state authority. Yet the Administrator’s decision in Richard J. Blackburn, D.O., 82 Fed. Reg. 18669 (Apr. 20, 2017), holds that an allegation of material falsification of an application—at least in that case—can be properly decided on summary disposition.
Material falsification of an application for DEA registration is an independent and discretionary ground for granting an application or revoking a registration. 21 U.S.C. § 824(a)(1). The Administrator’s decision in this case is noteworthy because, unlike loss of state authority where the agency believes state licensing is a prerequisite to maintaining a DEA registration, proof of material falsification can be overcome by acceptance of responsibility by the registrant and remedial actions. See The Lawsons, Inc., 72 Fed. Reg. 74334, 74338-39 (Dec. 31, 2007).
In the present matter, DEA issued an Order to Show Cause to the physician in September 2016, proposing the denial of the physician’s application for DEA registration on two separate grounds: loss of state authority and material falsification of his application. The physician requested a hearing, and explained in his request that “any irregularities in his application were done by mistake.” 82 Fed. Reg. at 18670. DEA moved for summary disposition on both grounds, though it had originally indicated that it believed a hearing was necessary for the material falsification allegation. The physician failed to respond to DEA’s motion, and the ALJ deemed the summary disposition motion as unopposed.
The ALJ granted the summary disposition motion as to the loss of state authority, but declined to grant the motion on the material falsification allegation because the physician had earlier specifically denied this allegation. The government contended in its exceptions to the ALJ’s recommended decision that there was no dispute that multiple answers to the physician’s application were false (the physician had surrendered a state license, but indicated that he had never surrendered a professional license for cause, and had provided a state license number when, in fact, he did not hold a state license).
On review, the Administrator agreed with the ALJ regarding the summary disposition related to loss of state authority. However, finding that the practitioner had falsified his application, he ruled that the ALJ erred in not granting summary disposition on the material falsification allegation, and stated that the “Government was entitled to summary disposition on the allegation that Respondent materially falsified his . . . application.” Id. at 18673. He also held that the physician had waived his right to present evidence refuting the government’s prima facie showing on material falsification and on the issue of remediation by failing to respond to the government’s motion. Id. at 18671-72.
There are a few important takeaways. First, the issue of whether the material falsification allegation should be decided on summary disposition had little immediate practical effect as the Administrator was still going to deny the application on loss of state authority. The government likely sought a ruling on this ground so that the final order could have preclusive effect in a future hearing if the physician ever reobtained his state license and applied again for a DEA registration. So, the intent may not have necessarily been to establish a new standard.
Second, the physician likely would have saved himself from summary disposition on the material falsification ground if he had responded to the government’s summary disposition motion as directed by the ALJ.
Third, and finally, regardless of whether the facts of this case may have been unique in providing a basis for summary disposition on the material falsification issues, all registrants, including manufacturers, distributors, and practitioners, should be on notice of DEA’s potential use of summary disposition on material falsification grounds in future cases. In our opinion, the bright line where a practitioner either does or does not have a current state license is not the same case as responses to DEA liability questions on an application related to whether the applicant has been subject to prior disciplinary actions, suspensions, surrenders, or even convictions. Often, it is not as evident whether the answer to these questions is “Yes” or “No.” Thus, a broad application of summary disposition in cases where DEA believes that an applicant has provided the wrong answer to such questions and where the registrant is not permitted the opportunity to put on evidence of acceptance of responsibility and remedial actions, would shortcut current agency precedent and due process protections.

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For the Love of Money: The Trump Administration’s Fiscal Year 2018 FDA Budget Plan

For the Love of Money: The Trump Administration’s Fiscal Year 2018 FDA Budget Plan

By Kurt R. Karst –      
Cue up “For The Love of Money” by The O’Jays (and theme song of The Apprentice) . . . The Trump Administration’s Fiscal Year 2018 Budget Proposal is out!
On May 23, 2017, The White House Office of Management and Budget released President Trump’s Fiscal Year 2018 Budget.  We pored over the volumes of analytical perspectives, supplemental materials, and what not to get a better sense of how FDA is proposed to be funded in the coming fiscal year.  Of course, we had some sense of where the Trump Administration would land on FDA funding.  After all, in the “America First Budget Blueprint” released in March, here’s what the Administration said about FDA:

Recalibrates [FDA] medical product user fees to over $2 billion in 2018, approximately $1 billion over the 2017 annualized CR level, and replaces the need for new budget authority to cover pre-market review costs. To complement the increase in medical product user fees, the Budget includes a package of administrative actions designed to achieve regulatory efficiency and speed the development of safe and effective medical products. In a constrained budget environment, industries that benefit from FDA’s approval can and should pay for their share.

True to the budget blueprint, the proposed FY 2018 Budget would slash discretionary FDA funding by $854 million, but would make up that ground (and more) by doubling user fee funding – a proposal that FDA supported in the Agency’s own budget justification document.  In a volume titled “Major Savings and Reforms,” FDA is tagged for a “reduction” (though it’s really a shift in funding source):

The Budget recalibrates the level of [FDA] medical product user fees to over $2.4 billion in 2018, approximately $1.2 billion over 2017 annualized [Continuing Resolution] level, replacing the need for new appropriated funding to cover pre-market review costs. . . .
Currently, medical product user fees cover an average of 60 percent of FDA premarket review costs, ranging from 30 percent for animal drug review to 70 percent for prescription drugs. Ensuring that FDA has the capacity to carry out its mission is a priority for the Administration.  Industries that directly benefit from FDA’s medical product premarket approval and administrative actions can and should pay more to support FDA’s continued capacity.

The Fiscal Year 2018 Budget includes $5.1 billion in total resources for FDA, which, with the doubling of user fees, would mean an increase of $456 million (or 10%) above the Fiscal Year Continuing Resolution level (see here).  But, as the Alliance for a Stronger FDA points out, FDA would see an $871 million (or 31%) cut in the taxpayer-funded budget authority compared to the final FY2017 Omnibus Appropriations bill.
The Budget also includes a package of “administrative actions” that are “designed to achieve regulatory efficiency and speed the development of safe and effective medical products.” Although details on the “administrative actions” aren’t provided, the proposed actions include:

Encouraging the use of 21st Century Cures Act tools for drug evaluation, review, and approval;
Simplifying administrative requirements to reduce drug and device manufacturers’ reporting burden;
Clarifying treatment of value-based purchasing arrangements; and
Improving predictability for payers and enhancing dissemination of evidence by fostering the exchange of scientifically sound information between manufacturers and payers’ pre-approval to reduce uncertainty and improve payer ability to more accurately set premiums.

Earlier this month, HHS Secretary Tom Price penned a letter to Senate Health, Education, Labor and Pensions (“HELP”) Committee members as they considered legislation to reauthorize several user fee programs. “[A]s Congress reauthorizes FDA’s medical product user fee programs, we strongly urge you to include the medical product user fee policy set forth in the President’s Budget Blueprint so that the industries which benefit from these review processes pay the full cost of FDA’s evaluation activities of their products,” wrote Secretary Price.  But Secretary Price’s request was met with resistance.  HELP Committee Chairman Senator Lamar Alexander (R-TX) reportedly commented that while the doubling of user fees is an “interesting proposal,” this is not the time to consider such a proposal.  The request “can be considered the next time the FDA negotiates the user fee agreements with the manufacturers of drugs and devices, but it is way too late to have an impact on this year’s agreements,” said Sen. Alexander.

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The Supreme Court Refuses to Hear Park Doctrine Case

The Supreme Court Refuses to Hear Park Doctrine Case

By Jennifer M. Thomas –
After a lengthy struggle that began with a major Salmonella outbreak in 2010, Jack and Peter DeCosters’ criminal case came to an end on May 22, 2017 when the U.S. Supreme Court denied their petition for writ of certiorari. We have followed this case with great interest, as it tested the limits (and the very existence) of the Park doctrine, also known as the “responsible corporate officer” doctrine.
In refusing to hear the case, the Supreme Court leaves in place a fractured Eighth Circuit Court decision upholding the DeCosters’ three-month prison sentences – one that we previously called the most significant Park doctrine ruling in over four decades. We described the Eighth Circuit’s ruling in some detail here.
Beyond the obvious critical importance of food safety, and the gravity of an outbreak of food-borne illness, the DeCosters’ saga provides useful reminders for all industry executives about potential criminal liability.
Importantly, a supervisory liability conviction may justify a penalty of imprisonment without violating due process only where “blameworthiness” exists, either inherent in the offense, or based on case-specific findings of fact. However, according to at least one judge of the Eighth Circuit, a misdemeanor Park doctrine conviction, implicates sufficient “blameworthiness” to justify a penalty of imprisonment, because the corporate officer in question is being held responsible “for his own failure to prevent or remedy ‘the conditions which gave rise to the charges against him.’” United States v. DeCoster, 828 F.3d 626, 633 (8th Cir. 2016). Even if the Park doctrine itself does not implicate “blameworthiness,” however, the facts of the DeCosters’ case demonstrate that pleading guilty to a Park offense without admitting knowledge or negligence does not preclude the sentencing judge from going on to find facts that support scienter.
Based on its position in this case and subsequent official statements, the DOJ under Jeff Sessions continues to favor aggressive prosecution and sentencing of strict-liability offenses. The government’s brief urged the Supreme Court to refuse to review the DeCosters’ case, and argued that strict Park doctrine liability, without further finding of fact, would justify the prisons sentences imposed on the DeCosters. More generally, Attorney General Sessions has stated that DOJ “will continue to emphasize the importance of holding individuals accountable for corporate misconduct” and that “those who choose to disregard the law will be caught and punished.” See Attorney General Jeff Sessions, Remarks at Ethics and Compliance Initiative Annual Conference (Apr. 24, 2017).
Given the stated importance of individual responsibility to the DOJ, and the unsettled nature of the Eighth Circuit’s seminal ruling, we would not be surprised to see another case testing the limits of Park. When it does, you will read about here.

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Implementation of 340B Final Rule Postponed Until October 1, 2017

Implementation of 340B Final Rule Postponed Until October 1, 2017

By David C. Gibbons –
Today the Health Resources and Services Administration (“HRSA”), the federal agency responsible for overseeing the 340B Drug Discount Program, published in the Federal Register a rule delaying until October 1, 2017 the implementation of a final regulation establishing the methodology for calculating the 340B ceiling price (including so-called penny pricing) and civil monetary penalties (CMPs) for knowing and intentional overcharges of 340B covered entities.
The history of these regulations is a tortured one. The final regulation in question was published on January 5, 2017 (see our post here) with an effective date of March 6, 2017. On March 6, 2017, HRSA issued a rule delaying implementation to start of the following quarter.  Later, to comply with the new administration’s regulatory freeze memorandum (see our previous post here), HRSA further postponed the effective date until May 22, 2017, and invited comment on whether the effective date should be even further delayed until October 1, 2017 (see also our post here).  HRSA has opted for the latter effective date to implement the ceiling price methodology and CMP regulation, explaining that the delay was “necessary to provide adequate time for compliance and to mitigate implementation concerns.” 82 Fed. Reg. 22893, 22894 (May 19, 2017).

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