Cybersecurity Fears Lead to Insulin Pump Recall

Cybersecurity Fears Lead to Insulin Pump Recall

By McKenzie E. Cato —

On June 27, Medtronic announced that it was recalling certain MiniMed insulin pumps due to “potential security vulnerabilities.”  On the same day, FDA issued a Safety Communication and the Department of Homeland Security issued a Cybersecurity Infrastructure Security Advisory about the same issue.

FDA’s Safety Communication states that “FDA has become aware that an unauthorized person (someone other than a patient, caregiver, or health care provider) could potentially wirelessly connect to a nearby MiniMed insulin pump with cybersecurity vulnerabilities.”  FDA explains that the potential risk of a hacking attempt is that the hacker “could change the pump’s settings to either over-deliver insulin to a patient, leading to low blood sugar (hypoglycemia), or stop insulin delivery, leading to high blood sugar and diabetic ketoacidosis.”  FDA notes that it is not aware of any actual hacking incidents.

FDA has been increasingly focused on cybersecurity.  In recent years, FDA has released guidance on premarket cybersecurity considerations (see our past blog posts here, here, and here) and postmarket cybersecurity considerations (see our past blog posts here and here).  The Safety Communication from FDA about MiniMed is also not the first of its kind.  FDA has issued at least six other Safety Communications since 2015 about specific medical device cybersecurity issues, including issues related to other Medtronic devices, listed on its webpage on cybersecurity.

Though Medtronic’s recent recall, as described in its Security Bulletin, was due to “work performed by external researchers” that identified the potential cybersecurity vulnerability, it is possible that FDA will identify these types of vulnerabilities more often in both the premarket and postmarket context.  As we have reported in past blog posts (here and here), we are aware of FDA requesting additional information about device cybersecurity while reviewing pending premarket submissions.

If we start to see more cybersecurity-related recalls, particularly as wireless and cloud-based medical device software becomes more common, we may see more attention from FDA to cybersecurity issues in the postmarket context, including through inspectional observations.

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Device Manufacturer’s Criminal and Civil Penalties Deserve Closer Attention

Device Manufacturer’s Criminal and Civil Penalties Deserve Closer Attention

By Anne K. Walsh & Adrienne R. Lenz, Senior Medical Device Regulation Expert

Today’s blog post illustrates how a company’s problems can escalate rapidly from an administrative warning letter to the full weight of the criminal system.  The unfortunate subject is ACell, a manufacturer of medical devices derived from porcine urinary bladder material.  ACell received a Warning Letter in 2013 related to the Quality System and Medical Device Reporting for its MatriStem® Surgical Matrix Thick device.  Little did it know, that same year, a whistleblower filed a qui tam action alleging, among other things, off-label promotion of another one of its devices, MicroMatrix Powder Wound Dressing.  A second whistleblower filed a case in 2016 making similar allegations.  The government lawyers investigating the whistleblowers’ allegations coordinated with criminal prosecutors, culminating in ACell agreeing to pay $15 million, plead guilty to a misdemeanor charge, implement extensive compliance activities, and be subject to a five year Corporate Integrity Agreement.

The criminal plea was based on the company’s failure to report to FDA its decision to remove its MicroMatrix Powder Wound Dressing from the marketplace, a reporting requirement under 21 C.F.R. Part 806.  In 2012, ACell learned that approximately 30,000 units of its MicroMatrix powder were contaminated with endotoxin levels that posed a risk to health.  ACell removed the affected devices but concealed the reason for the removal from health care providers and did not submit an 806 Report to FDA.  On June 11, 2019, the U.S. Attorney’s Office for the District of Maryland announced that it had charged ACell with a criminal misdemeanor, imposed a fine of $3 million, and required the company to enact extensive compliance reforms.

A few notable points about the criminal portion of this case.

  • No individuals are named in the plea. The failure to include an officer of ACell seems inconsistent with DOJ’s mantra about holding individuals accountable.
  • The Statement of Facts accompanying the criminal plea, which the parties agreed the government could prove beyond a reasonable doubt at trial, extends to activities well beyond the single 806 reporting violation, and paints a picture of a much more culpable defendant than the single misdemeanor count reveals.
  • Despite the five year statute of limitations contained in the Federal Food, Drug and Cosmetic Act, the criminal plea related to conduct that occurred seven years ago, when the reporting obligation was triggered in 2012.
  • The Compliance Program contains many of the typical elements in a Corporate Integrity Agreement, but extends to include monitoring for potential violations of FDA reporting obligations.

Each of these points is worth closer examination, and perhaps even its own blog post, but for now, medical device companies simply need to recognize the potential ramifications of the government’s  enforcement of the 806 reporting obligations.

The civil settlement turned on entirely different conduct: the company’s marketing of the MicroMatrix product.  According to the settlement agreement, FDA cleared MicroMatrix only for the management of topical wounds, but ACell marketed MicroMatrix for non-topical or internal uses.  The government alleged that “ACell’s promotion was false and misleading because, at the direction of management, ACell sales representatives stated to physicians that the use of powder non-topically and internally was safe and effective, when the sales representatives knew that no such clinical data existed.”  The government also alleged the company provided incorrect coding recommendations for reimbursement of its devices and provided prescribers with “improper inducements” to encourage use of its devices.  The civil settlement requires ACell to pay $12 million over five years, which includes an initial payment of $500,000, and quarterly payments in amounts ranging from $475,000 to $675,000 (plus interest).  The qui tamrelator will receive $2,366,004 of the settlement.

We have seen the number of straight “off-label” prosecutions diminish as the government has struggled with First Amendment considerations for distributing truthful, non-misleading information.  This case, however, turned on the “false and misleading” nature of the promotion because no clinical data existed.  Thus, industry should not get too confident that off-label promotion investigations are by-gone relics, and as always, should focus on ensuring there is proper substantiation for all product claims, whether on- or off-label.

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HP&M’s James Valentine Named a 2019 RARE Champion of Hope; Moderates Global Rare Disease Town Hall with FDA and EMA

HP&M’s James Valentine Named a 2019 RARE Champion of Hope; Moderates Global Rare Disease Town Hall with FDA and EMA

By Frank J. Sasinowski

Last week, Global Genes, a global rare disease patient advocacy organization, announced the 2019 RARE Champion of Hope Awardees, which included Hyman, Phelps & McNamara, P.C.’s very own, James Valentine.  This is a great honor, bestowed upon “true champions for rare disease”, “people who inspire us all through innovation, research, compassion and a relentless spirit to affect positive change.”  It is no surprise to me, someone who works with James on a daily basis, that he would be selected for such an honor.

James has been a relentless advocate for rare disease patients from the day he started his career, as a patient liaison at FDA, over 11 years ago.  At FDA, James worked across the Agency’s three medical product centers to help incorporate the patient voice into regulatory decision-making.  He helped administer the FDA Patient Representative Program, facilitated stakeholder consultations during the reauthorization of PDUFA and MDUFA, helped launch the Patient-Focused Drug Development (PFDD) program, and developed the FDA Patient Network.

Since joining HP&M 5 years ago, James brought his advocacy skills to private practice, representing over two dozen rare disease patient advocacy groups, assisting them in engaging with drug developers and regulators.  He’s been central to the transition of the PFDD program to externally-led meetings, having helped plan and moderated the majority of these, and is also working on novel methodologies for capturing patient experience data.  He has helped ensure thousands of patients have a seat at the table with decision-makers. And his patient advocacy work is only the beginning.  James has also been critical in advising orphan drug and gene therapy sponsors in development and approval issues, having helped secure FDA approval for several new molecular entities in this relatively short period of time.

In fact, the Global Genes announcement came just one day before James moderated the Global Rare Disease Town Hall at the DIA Annual Meeting.  As pictured, James led a discussion with FDA’s Dr. Peter Stein (Director, Office of New Drugs & Acting Associate Director for Rare Disease, OND, CDER), Dr. Janet Maynard (Director, Office of Orphan Products Development), and Dr. Ilan Irony (Deputy Director, Division of Clinical Evaluation and Pharmacology/Toxicology, OTAT, CBER), as well as EMA’s Dr. Agnès Saint-Raymond (Head of International Affairs, Head of Portfolio Board).  The panel discussed important topics in the regulation of products for rare diseases, including new targeted technologies, the utility of expedited programs, patient engagement and collaboration, new Agency organizational proposals, and more.

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FDA Issues Final Guidance on Declaration of Added Sugars for Single Ingredient Products and Certain Cranberry Products

FDA Issues Final Guidance on Declaration of Added Sugars for Single Ingredient Products and Certain Cranberry Products

By Riëtte van Laack

As we discussed previously, FDA’s 2016 final regulation updating nutrition labeling requirements included a requirement to declare added sugars.  This requirement created quite a stir among several segments of the industry.  Among others, the honey and maple syrup manufacturers pushed back on the requirement to include, on single-ingredient packages for these products, a statement (in the nutrition facts box), “includes x g sugars;” the inclusion of this statement was expected to confuse consumers into thinking the honey or maple syrup were adulterated by the addition of sugar.

In March 2018, FDA issued a draft guidance allowing a disclaimer explaining the statement.  However, FDA’s proposed solution was not well received by industry.  In June, FDA announced that FDA was working with stakeholders to devise a (more) sensible solution.  Subsequently, on Sept. 6, 2018, then-Commissioner Gottlieb announced that FDA was drafting the “final guidance, which [FDA] anticipate[s] issuing by early next year.”  Then in December 2018, the President signed the Farm Bill including a provision prohibiting FDA from requiring a statement “includes x g sugar” on single ingredient packages or containers of pure honey, maple syrup and other single ingredient sugars and syrups.  Last week, about six months after the Farm Bill was enacted, FDA issued final guidance advising industry what, according to FDA, this means for the nutrition facts box for these products.

Consistent with the Farm Bill, the single-ingredient products are not required to declare the number of grams of added sugars in a serving of the product on the Nutrition Facts box but must still include the percent Daily Value (DV) for added sugars. In other words, FDA believes that it can require declaration of %DV for an undeclared nutrient.  FDA further states that it intends to exercise enforcement discretion for the use of the “†” symbol immediately following the %DV declaration, which leads to a footnote inside the Nutrition Facts label which explains the amount of added sugars that one serving of the product contributes to the diet as well as the contribution of one serving of the product toward the percent DV for added sugars or a similar non-misleading statement.  The inclusion of the footnote is not mandatory.  The guidance as well as a fact sheet include an example.

The honey and maple industries were not the only ones objecting to FDA’s final rule.  The cranberry industry also raised objections .  Cranberry juice naturally contains little sugar but is so tart that making it palatable for the consumer demands the addition of sugar (or another sweetener).  The added sugars must be declared as added sugars.  A juice, such as grape juice, that is naturally sweet, need not be sweetened to be palatable.  As a result, consumers comparing the nutrition information of a cranberry juice and grape juice, may avoid cranberry juice; even though the total sugar content of the two juices is similar, the amount of added sugar in cranberry juice is significantly higher than the amount of added sugar in grape juice (which will be 0 g).

Consistent with the draft guidance, FDA maintains its position that cranberry beverage products and certain dried cranberry products must declare added sugars in grams as well as the %DV for added sugars.  However, FDA will exercise enforcement discretion by allowing the use of a symbol immediately following the %DV for added sugars.  This symbol will link to a statement outside the Nutrition Facts label explaining that sugars are added to improve the palatability of naturally tart cranberries.  FDA provides examples of several possible statements none of which appear to address the total sugar content of the cranberry product vs. the naturally sweeter product.

In the Federal Register notice, FDA notes that it may consider the same type of enforcement discretion discussed with respect to certain cranberry products for other naturally tart fruits for which the amount of total sugars per serving is at a level that does not exceed the amount of total sugars in a comparable product with no added sugars.  Acai berry juice products do not fall in that category.

Overall, FDA is giving manufacturers of single ingredient packages/containers of pure honey, maple syrup, other pure sugars and syrups, and certain cranberry products enforcement discretion until July 1, 2021 to comply with the new nutrition labeling requirements, i.e., approximately two years after publication of the final guidance.  This will give these manufacturers additional time to make label changes consistent with the final regulations, the Farm Bill and FDA’s guidance.

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Not Dead Yet – Far from It: OTC Monograph Reform Back on Congress’ Radar

Not Dead Yet – Far from It: OTC Monograph Reform Back on Congress’ Radar

By Deborah L. Livornese

We knew it would be back.

It was never dead, though perhaps forgotten by some (never us), but OTC Monograph Reform is back in the public eye again.  Lawmakers appear to be taking to heart CDER Director Janet Woodcock’s remarks last week in which she urged the adoption of reforms to the monograph system.  On June 24, 2019, a bipartisan group of lawmakers introduced H.R. 3443 to enact the Over-the-Counter Monograph Safety, Innovation, and Reform Act of 2019, and it was referred to the House Committee on Energy and Commerce.  The text of the bill can be found here.

As readers of this blog may recall, FDA has been exploring OTC Monograph Reform and its associated user fees for several years, formally beginning with a public meeting on the subject in June of 2016, which we blogged about here.  Remarkable in its bipartisan appeal and support, legislation emerged that seemed destined for passage.  However, it stalled over differences in the House and Senate bills on the proposed length of time for marketing exclusivity afforded for certain innovations.  That issue was resolved, but it wasn’t the right time for this legislation.  Due, at least in part, to complications caused by the federal government shut down, it was still not (yet) to be at the end of 2018.  Earlier this year, monograph reform was included in H.R. 269 (the Pandemic and All-Hazards Preparedness and Advancing Innovation Act of 2019) which was passed by the House.  Senate leadership concluded a separate bill was not necessary because the provisions had been agreed to by both chambers and it placed the bill on the Senate Legislative Calendar under General Orders where it remains.

The newly introduced H.R. 3443 contains the same language as the monograph section of the Pandemic and All-Hazards Preparedness and Advancing Innovation Act of 2019 introduced as H.R. 269.  Among other things, it:

  • changes the rulemaking process currently used to establish and modify monographs to what is hoped to be a more efficient order process
  • addresses the status of products currently marketed under tentative final monographs
  • allows for innovation beyond the constraints of the current system
  • provides for marketing exclusivity for certain innovations
  • provides FDA with more tools in the event of an emerging safety issue
  • provides for user fees which will come with timeline goals for FDA actions.

There’s much more to the OTC Monograph Reform, and we will cover the details as it gets closer to becoming law.  The new bill may be added to drug pricing legislation under consideration. We will continue to follow and report on its progress.

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SCOTUS Makes it Easier for Government to Withhold Commercial or Financial Information

SCOTUS Makes it Easier for Government to Withhold Commercial or Financial Information

By Anne K. Walsh & Ricardo Carvajal

In a 6-3 decision, the U.S. Supreme Court reversed and remanded the lower courts’ decision to publicly disclose commercial information that previously had been submitted to the government.  Given that FDA-regulated entities often submit to FDA commercial or financial information that those entities regard as privileged or confidential, this decision is notable because it upends FDA’s interpretation and application of Exemption 4 of the Freedom of Information Act (FOIA).  Exemption 4 permits the government to withhold from disclosure “trade secrets and commercial or financial information obtained from a person and privileged or confidential.”  5 U.S.C. 552(b)(4).

In this case, a South Dakota newspaper (Argus Leader) filed a FOIA request with the U.S. Department of Agriculture (USDA) for data related to the national food-stamp program (called SNAP).  The newspaper asked for annual redemption data from each of the stores, and USDA invoked FOIA Exemption 4 in declining to disclose the data.  The lower court applied the generally accepted “substantial competitive harm” test to determine whether the commercial information is “confidential.”  That test, first adopted by the D.C. Circuit in 1974 in National Parks & Conservation Association v. Morton, provides that Exemption 4 prevents disclosure of information required to be submitted to the government only if disclosure is likely “(1) to impair the Government’s ability to obtain necessary information in the future; or (2) to cause substantial harm to the competitive position of the person from whom the information was obtained.”   Although the court agreed that “revealing store-level SNAP data could work some competitive harm, the court could not say that disclosure would rise to the level of causing ‘substantial competitive harm,’ and thus ordered disclosure.”

Although USDA declined to appeal, the Food Marketing Institute (FMI) (a grocery retailers’ trade association) appealed the decision to the Eighth Circuit, which rejected FMI’s argument to discard the National Parks “substantial competitive harm” test and affirmed.  FMI then appealed to the Supreme Court.

Justice Gorsuch, in the Supreme Court opinion, noted that the statute does not define the term “confidential,” and thus focused on the term’s “ordinary, contemporary, common meaning” when Congress enacted FOIA.  The Court noted that contemporary dictionary definitions of “confidential” established that at least one condition has to be met for information to qualify as “confidential” – namely, the information “must be at customarily kept private, or at least closely held, by the person imparting it.”  An additional condition might also have to be met – namely, the party receiving the information must provide “some assurance that it will remain secret.”  The Court declined to resolve that question because both conditions were met in the instant case.  The grocery stores clearly treated the SNAP data as private, and USDA had provided the stores with an assurance that the agency would treat the information as such.  The Court firmly rejected the application of the “substantial competitive harm” requirement set forth in National Parks, characterizing the approach taken in that decision as “a relic from a ‘bygone era of statutory construction,’” and other courts’ subsequent application of this standard as a “casual disregard of the rules of statutory interpretation.”

Thus, the Court greatly expanded the ability of the government to withhold information from the public:

At least where commercial or financial information is both customarily and actually treated as private by its owner and provided to the government under an assurance of privacy, the information is “confidential” within the meaning of Exemption 4.

(Emphasis ours.)  In an accompanying opinion concurring in part and dissenting in part, Justice Breyer maintained that the Court’s reading of Exemption 4 is at odds with the “whole point” of FOIA: “to give the public access to information it cannot otherwise obtain.” Otherwise FOIA would be unnecessary, because Google searches could suffice to obtain information that is already publicly available.  He warned that the Court’s reading will “deprive the public of information for reasons no better than convenience, skittishness, or bureaucratic inertia.”

The importance of this decision to FDA-regulated entities cannot be overstated.  Now, an FDA-regulated company that is required to submit commercial or financial information to FDA only needs to show its efforts to keep the information private, and the assurances from FDA that it would treat the information as such (and, as noted above, even the latter criterion might not apply).  There is no requirement for showing any harm from the disclosure of that information, whether substantial or negligible.  Although FDA regulation largely tracks the broad definition of confidential commercial or financial information (“valuable data or information which is used in one’s business and is of a type customarily held in strict confidence or regarded as privileged and not disclosed to any member of the public by the person to whom it belongs”), 21 C.F.R. § 20.61, FDA may need to scrub the reference to “competitive harm” in discussing its assessment of whether to provide notice to the submitter of commercial or financial information about a request for that information.

Further, the Court’s decision points toward adoption of a single standard for determining whether information qualifies as confidential, thereby eradicating the esoteric distinction between information that is required to be submitted (which was governed by the “substantial competitive harm” standard elucidated in National Parks) and information that is voluntarily submitted (which was governed by the less demanding standard elucidated in Critical Mass Energy Project v. NRC, i.e., “information qualifies as confidential ‘if it is of a kind that would customarily not be released to the public by the person from whom it was obtained’”).  While declining to articulate that single standard, the Court noted that it could not “discern a persuasive reason to afford the same statutory term to two such radically different constructions.”

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FDA Updates MDR Program in an Effort to Increase Transparency

FDA Updates MDR Program in an Effort to Increase Transparency

By Adrienne R. Lenz, Senior Medical Device Regulation Expert

FDA recently announced new changes it is making to the Medical Device Reporting (MDR) program as part of its ongoing efforts to increase transparency on device performance, and detection of device-related safety concerns. FDA is formally discontinuing the Alternative Summary Reporting (ASR) Program, which permitted certain device manufacturers to file quarterly reports rather than individual reports.  All data submitted under the program are available on the MDR Data Files web page.

The ASR data is available only in compressed files containing data for one year.  Starting in 2017, the ASR Program also required manufacturers to submit a “companion” medical device report for visibility through the Manufacturer and User Facility Device Experience (MAUDE) database so the most recent files are searchable.  For the years 1999 to 2016, the data are available, but not easy to navigate.

Files from CDRH’s Device Experience Network (DEN) also are available on the MDR Data Files page.  These include files from the database that pre-dates the MAUDE database.  Like the ASR data, DEN data are available in compressed, downloadable files containing data by year, but the DEN files also can be searched by product description, product code, manufacturer and report type.

FDA also provided an update on its plans to make the MAUDE database more user friendly and for active surveillance using the National Evaluation System for health Technology (NEST).  While improving the user interface for MAUDE will be helpful, the MDR system is a passive system and has limitations in its use for identifying emerging signals to improve patient safety.  Therefore, FDA claims it is moving to an active surveillance system, leveraging Unique Device Identifiers (UDI) and NEST.  Both the MAUDE updates and NEST received funding for development in FY2019 so we look forward to seeing progress in the near future.

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Hyman, Phelps & McNamara, P.C. is Hiring!

Hyman, Phelps & McNamara, P.C. is Hiring!

The authors of this blog are busy, and we are actively seeking attorneys interested in working at the nation’s largest boutique food and drug regulatory law firm (and ideally writing for the FDA Law Blog).  We have at least two openings:

  • The first position is for a junior to mid-level associate. A demonstrated interest in food and drug law and regulation is preferred; strong research and writing skills are required.
  • The second position is specific to our drug development team. The attorney will assist our clients secure FDA approval for new drugs by leveraging our legal expertise of the approval standards in the FDC Act and implementing regulations to overcome potential regulatory or scientific impediments. The position affords the opportunity to participate in product development strategy at the initiation stage and to navigate the drug through the FDA regulatory process. Strong verbal and writing skills are required, as well as a detailed understanding of FDA and the regulatory process.

Compensation is competitive and commensurate with experience. HPM is an equal opportunity employer.  Please send your curriculum vitae, transcript, and a writing sample to Anne K. Walsh (awalsh@hpm.com). Candidates must be members of the DC Bar or eligible to waive in.

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Consumers Encouraged to “Make Smart Choices” About CBD Products

Consumers Encouraged to “Make Smart Choices” About CBD Products

By Ricardo Carvajal

FDA published a Consumer Update acknowledging the ubiquitous presence of CBD products in the marketplace, and providing the agency’s current perspective on questions regarding the regulatory status, safety, and quality of such products.  The Consumer Update follows closely on the heels of a recent statement issued jointly by FDA’s Principal Deputy Commissioner and Principal Associate Commissioner for Policy.  That statement emphasizes the agency’s commitment to “sound, science-based policy on CBD,” and thereby suggests that FDA should not be expected to make significant policy decisions until it has the data and other information needed to answer to its satisfaction the scientific issues identified by the agency thus far (e.g., “How much CBD is safe to consume in a day? How does it vary depending on what form it’s taken? Are there drug interactions that need to be monitored? What are the impacts to special populations, like children, the elderly, and pregnant or lactating women? What are the risks of long-term exposure?”)

Consistent with FDA’s past statements on cannabis and CBD, these more recent statements reiterate FDA’s intent to act against CBD products marketed with medical claims, be they labeled as dietary supplements, pet treats, or cosmetics.  The agency regards such products as unapproved drugs that present a risk to consumers’ health and safety.  The agency can also be expected to take action against products found to be contaminated with microbiological or chemical substances that pose a hazard to health.

With respect to CBD products that do not make medical claims and that are manufactured to a high standard of quality, the agency’s intentions are less clear.  FDA is aware of “products on the market that add CBD to a food or label CBD as a dietary supplement.”  The agency maintains that “it is currently illegal [under federal law] to market CBD this way.”  Nonetheless, at present, FDA does not appear to be directly challenging the marketing of such products.  In the interim, consumer education is a tool FDA can deploy at will to help consumers help themselves.  As stated in the closing paragraph of the Consumer Update:  “As we learn more, our goal is to update you with the information you need to make smart choices about CBD products.”  Stay tuned.

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Pharmaceutical Manufacturers Argue Price Disclosure Rule Will Mislead Consumers

Pharmaceutical Manufacturers Argue Price Disclosure Rule Will Mislead Consumers

By Alan M. Kirschenbaum & Rachael E. Hunt

The pharmaceutical industry has filed a lawsuit challenging a recently finalized rule from the Centers for Medicare & Medicaid Services (CMS) which requires drug pricing disclosures in television advertisements for certain prescription drugs and biological products (the Final Rule).  In an effort to block the rule from going into effect on July 9, 2019, Merck, Eli Lilly, Amgen, and the Association of National Advertisers, Inc., filed a lawsuit on June 14, 2019 in the D.C. District Court seeking a declaratory judgment that the Final Rule is invalid under the First Amendment and the Administrative Procedure Act.

The Final Rule

By way of background, the Final Rule requires that any advertisement on TV for most prescription drugs or biological products for which reimbursement is available under Medicare or Medicaid must include the following statement:

The list price for a [30-day supply of] [typical course of treatment with] [name of prescription drug or biological product] is [insert price]. If you have health insurance that covers drugs, your cost may be different.

The “list price” to be inserted is the Wholesale Acquisition Cost, or WAC, which is defined as the manufacturer’s published list price for the most recent month available, not including discounts or rebates.  For a more detailed overview of the Final Rule, see our previous post here.

The Lawsuit

The Complaint argues that the required disclosure, rather than achieving increased drug pricing transparency, will instead lead to consumer confusion and may discourage patients from seeking valuable information regarding treatment options.  This is because the WAC price differs significantly from the actual out-of-pocket expense incurred by patients, which can vary based on insurance coverage, deductibles, and copay requirements.  According to the Complaint, HHS is willing to “discourage patients from using beneficial medications,” as a means to reduce Medicare and Medicaid expenditures on pharmaceutical products.

The promulgation of this Final Rule, plaintiffs argue, exceeds HHS’s statutory authority and violates their First Amendment rights.  Specifically, plaintiffs note that HHS originally looked to the Food and Drug Administration to adopt a price disclosure requirement under the Federal Food, Drug, and Cosmetic Act (FDCA).  When it became clear the FDCA does not authorize price disclosure mandates, HHS invoked its rule-making powers under the Social Security Act.  Plaintiffs argue that Congress never intended for HHS to have the authority to regulate drug pricing disclosures and, in doing so, HHS is attempting to “sidestep the limitations of the statute that actually governs this specific area.”  Complaint at 26.

With respect to the First Amendment, plaintiffs point to the “heavy burden” the government must bear in justifying compelled speech in the commercial arena by showing that the regulation “directly and materially advances a substantial government interest that could not be served just as well by means that do not regulate speech to the same degree.”  Id.at 28.  HHS cannot meet this burden, plaintiffs argue, because the Final Rule, in fact, frustrates a substantial government interest by essentially misleading consumers about their out-of-pocket costs.  Id.at 28-29.

Also on June 14, 2019, plaintiffs filed a Motion for Stay Pending Judicial Review, seeking to stay the effective date of the rule pending the resolution of the lawsuit challenging its validity, as well as a Motion to Expedite judicial review.  The Court approved an expedited briefing schedule and set the matter for hearing on July 2, 2019 at 2:00pm.  In the briefing schedule, the Court indicated its intent to issue a decision by July 8, 2019, one day prior to the effective date of the Final Rule.

We will continue to report on the updates and outcomes of this lawsuit.

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