Thoughts on Regulatory Constraints of Business Models

By Seth A. Mailhot 

I am often called upon to address the nature of how regulatory controls may apply to the organization of healthcare companies in their ability to create, deliver, and capture value (their ‘business models’). While no summation could adequately capture all of the complexity inherent in this question, it would seem appropriate to briefly comment on some of the general recent trends I have seen, and how they may be shaped by various regulatory authorities.

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Ninth Circuit Off-Label Marketing Decision Suggests More Prosecutions Will Be Coming

By David Douglass

The Ninth Circuit has reopened a door for off-label marketing prosecutions, and it is important to review your compliance and risk management programs in light of this recent decision. Last December, the pharmaceutical and medical device industries exhaled a sigh of relief in response to the influential Second Circuit’s decision in United States v. Caronia, holding that truthful off-label marketing is a form of protected First Amendment speech that cannot form the basis for a criminal prosecution under 21 U.S.C. §333 of the Food, Drug and Cosmetic Act (“FDCA”). The Caronia decision followed the Supreme Court’s decision in Sorrell v. IMS Health Inc., 131 S. Ct. 2653 (June 23, 2011), which held that a Vermont statute prohibiting pharmaceutical companies from engaging in truthful marketing activities offended the First Amendment. The question after Sorell and Caronia became, can the government still prosecute off-label marketing? On March 4, 2013 the Ninth Circuit said yes, albeit in an unpublished opinion.

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The Impact of Cloud Computing on FDA's Regulation of Medical Products

By Seth Mailhot

The following blog article is drawn from the upcoming book Cloud Computing Deskbook, which is set to be released by Thomson Reuters West next summer. Cloud Computing Deskbook covers the legal and regulatory aspects of cloud computing, including those related to regulation by U.S. Food and Drug Administration. Please contact the author with any questions related to FDA regulation of cloud computing and software in general.

Cloud computing involves the delivery of computing as a service rather than a product. In a cloud computing solution, shared resources, software, and information are provided much like a utility, over a network to computers and other devices. Cloud computing has been embraced by the medical industry, and is used as a vital technology in electronic medical record systems and telemedicine solutions, among other products.

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FDA Issues Two Proposed Rules That Will Significantly Change Regulatory Requirements For Food Safety

By Peter ReichertzSeth Mailhot, and Robert Uram

The FDA Food Safety Modernization Act (FSMA), which was signed into law by President Obama on January 4, 2011, proposes the most sweeping reform of U.S. food safety laws in more than 70 years. As part of the changes introduced by the law, Section 103 of FSMA, titled “Hazard Analysis and Risk-Based Preventive Controls,” and Section 105 of FSMA, titled “Standards for Produce Safety,” each amend the Federal Food, Drug and Cosmetic Act by adding new sections 418 (Hazard Analysis and Risk-Based Preventive Controls )and 419 (Standards for Produce Safety ). Section 418 and 419 significantly change the existing legal requirements for food manufacturing and growing. Each section also requires the U.S. Food and Drug Administration (“FDA”) to conduct rulemaking to implement these provisions.

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FDA Issues Final Guidance on Filing PMAs and 510(k)s

By Seth A. Mailhot and Peter S. Reichertz

On December 31, 2012, the U.S. Food and Drug Administration (FDA) issued two new guidance documents on the minimum threshold of acceptability for medical device premarket submissions, which are titled “Refuse to Accept Policy for 510(k)s,” and “Acceptance and Filing Reviews for Premarket Approval Applications (PMAs).” These guidance documents detail the conditions under which a Premarket Notification [510(k)], or a Premarket Approval application [PMA] will be accepted for substantive review.

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Proposition 37 Permits "Natural" Labeling for Non-GMO Processed Food

Proposition 37, the California Right to Know Genetically Engineered Food Act ("Prop 37”), if approved by the voters on November 6, 2012, will provide that food offered for retail sale in California produced with genetic engineering (“GMO food”) is misbranded unless clearly labeled to say it is genetically engineered. Prop 37 also provides that GMO “processed food” may not on its label, store signage, advertising or promotional materials state or imply that the food is “natural” or words of similar import.

Ballot materials prepared by the Legislative Analyst’s Office (LAO) state that Prop 37 could be interpreted to mean “processed food” is subject to the prohibition against “natural” labels, even if it is not produced with genetic engineering. In our view, this is not the correct interpretation of Prop. 37.

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Congress Contemplates Action on Rolling Machines

By Seth A. Mailhot

As part of Sheppard Mullin’s monthly blog on tobacco retailer issues, we are taking a look at the possible future of retailer-operated rolling machines. On March 8, 2012, the U.S. Senate adopted an amendment to the federal highway bill “Moving Ahead for Progress in the 21st Century Act” (MAP–21) that included a provision impacting retail establishments that offer rolling machines for use to customers. The provision would have changed the definition of “manufacturer of tobacco products” in section 5702(d) of the Internal Revenue Code of 1986 to “include any person who for commercial purposes makes available for consumer use . . . a machine capable of making cigarettes, cigars, or other tobacco products.”[1]

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Comment Period to Close On Petition to FDA for Mandatory Labeling of All Foods Produced Using Genetic Engineering

By Robert Uram

On March 27, 2012, the comment period will close on a petition filed by the Center for Food Safety that calls for the FDA to issue new regulations requiring labeling of all foods produced using genetic engineering (GE). Docket No. FDA-2011-P-0723 (Filed October 12, 2011). Unlike many other developed countries – such as 15 nations in the European Union, Japan, Australia, Brazil, Russia and even China – the U.S. has no laws requiring labeling of genetically engineered foods.

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FDA Announces Proposals for Biosimilars User Fees and Performance Review Goals

By Peter Reichertz

FDA has at last began formal implementation of the Biologics Price Competition and Innovation Act of 2009 ("BPCI Act"), by announcing the proposal it will send to Congress to implement user fees for "generic" copies of biologics, called biosimilars in the BPCI Act. A biosimilar is a product approved under Section 351(k) of the Public Health Service Act ("PHSA"); approvals are not Federal Food, Drug and Cosmetic Act ("FFDCA") approvals. Under the proposal, the user fees for biosimilars - including the product application fee, the annual product fee and the annual establishment fee - would be identical to the fees established for human drug products approved under Section 505(b) of the FFDCA with one significant difference.[1]

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Rights to Compensation for use of Biospecimens: OHRP and FDA Clarify that Waivers of Rights in Informed Consents are not "Exculpatory"

By Peter S. Reichertz

In a Federal Register notice of September 7, 2011,[1] the Office of Human Research Protection (“OHRP”) and the Food and Drug Administration have clarified that a waiver by an individual in an informed consent to compensation for use of his/her biospecimens is not “exculpatory”, and permissible, if worded properly. This Guidance – entitled “Guidance on Exculpatory Language in Informed Consent" – applies to research conducted for purposes of FDA approval, as well as research sponsored by the Department of Health and Human Services (“DHHS”).
 

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Generic Drug Manufacturers And Failure To Warn: What duty is there after Pliva v. Mensing?

By Peter S. Reichertz

The Supreme Court ruled on June 23, 2011, that generic drug manufacturers cannot be sued for a failure to warn under state tort law, as long as their labeling complies with the FDA mandated labeling for the innovator drug product. While the Court had previously declined to find that federal regulation and approval of drug labeling of an innovator drug preempted state tort law in Wyeth v. Levine, 555 US 555 (2009), the Court ruled 5-4 in Pliva that the comprehensive scheme for approval of generic drugs under the 1984 Hatch-Waxman amendments required generic manufacturers to use the same labeling as the innovator brand name product. Since the law and FDA regulations, as conceded by the Food and Drug Administration (FDA), preclude a generic company from obtaining approval of labeling different from the innovator brand name product, the Court held it was not possible for a generic manufacturer to comply with both federal and state law. As such, under the doctrine of impossibility, they ruled federal law was supreme and state tort laws on failure to warn were preempted. In so finding, they held that the issue of “impossibility” turns on whether the private party could independently do under federal law what state law requires of it. In this case, they held that generic manufacturers could only ask FDA to change labeling and could not do so without FDA approval, and thus could not act independently.
 

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Sunscreen in the Spotlight: FDA Illuminates New Sunscreen Regulations

By Seth A. Mailhot and Allie Frumin

On June 14, 2011 the U.S. Food and Drug Administration (FDA) announced new requirements for sunscreens and sunscreen-containing products currently sold over-the-counter. These changes are covered in a Federal Register notice to be published on June 17, 2011. The Final Rule will have a significant impact on producers of sunscreens and cosmetics and will result in changes to labeling, advertising and formulation of a vast array of products containing sunscreen and making sunscreen claims. In addition to the Final Rule, which will take effect for most producers on June 18, 2012, the FDA has also developed a Proposed Rule, an Advance Notice of Proposed Rulemaking and a Draft Guidance for Industry regarding these products.
 

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A MATRIXX Revolution, Part II: Supreme Court affirms Ninth Circuit's holding that life science companies cannot rely on a statistical significance standard when deciding whether adverse event reports are material for the purpose of securities disclosures

By Peter S. Reichertz and Allie Frumin

On March 22, the U.S. Supreme Court affirmed the Ninth Circuit’s ruling in Matrixx Initiatives, Inc. v. Siracusano, 09-1156. See our prior blog article from November 18, 2010.
 

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FDA Announces Its Plan For Changes to the 510(k) "Approval" Pathway

By Peter S. Reichertz and Allie Frumin

January 19, FDA announced its plan to modify the 510(k) “approval” pathway, the most common review path for medical devices. Specifically, FDA released a report containing twenty-five actions it intends to take in 2011 to “improve” the review process. Importantly, however, no changes have yet been made to the process; FDA has just announced its plan of action of how it intends to address potential changes to the process.
 

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President Obama Signs New Expansive Food Safety Law

By Deborah M. Shelton

In the flurry of legislation passed by the 111th Congress in its final days, the Food Safety and Modernization Act (FSMA) cleared the Senate by unanimous voice vote on December 20, passed the House 215-144 the following day, and was signed into law by President Obama on January 4, 2011 ("date of enactment"), immediately upon returning from his holiday vacation in Hawaii.
 

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E-CIGARETTES GET A "SMOKING" BREAK: D.C. Circuit Clarifies Scope of FDA's Authority Over E-Cigarettes

By Deborah M. Shelton and Allie Frumin

On Tuesday December 7th, the D.C. Circuit Court of Appeals affirmed a lower court’s ruling in Sottera, Inc. v. FDA, No. 10-5032, (D.C. Cir. Dec. 7, 2010) holding that that the Food and Drug Administration (FDA) could not regulate as a medical device the electronic cigarettes (often referred to as “e-cigarettes”) at issue in that case. Instead, the court affirmed the district court’s finding that FDA’s authority over these e-cigarettes, as labeled, was limited to that over traditional tobacco products.
 

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IRS Guidance On New Excise Tax On Branded Pharmaceutical Companies: Filing Due January 21, 2011

By Peter S. Reichertz

In a prior article dated May 25, 2010, we advised of a new excise tax on branded pharmaceutical manufacturers. We indicated that the Patient Protection and Affordable Care Act ("PPACA") required the Internal Revenue Service ("IRS") to publish guidance "necessary to carry out the purpose" of the section in which the tax is included. The IRS has now issued that guidance ("the Guidance"). 

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A MATRIXX Revolution? Is there a need to describe all adverse event reports in SEC filings of life sciences companies?

By Peter S. Reichertz

The U.S. Supreme Court has scheduled oral argument for January 10, 2011, in the case of Matrixx Initiatives et al v. Siracusano, Case Number 09-1156, on appeal from the decision of the Ninth Circuit in Siracusano v. Matrixx Initiatives, Inc., 585 F3d 1167 (9th Cir. 2008).  The court granted certiorari on July 14, 2010.
 

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FTC Changes Guidance on Environmental Marketing Claims

By Robert L. Magielnicki

Many marketers of OTC drugs and devices, cosmetics, foods and dietary supplements make claims with regard to the content of their products and/or the packaging for their products. and their fate in or effect on the environment. These claims are regulated by the Federal Trade Commission (“FTC”) and its “false and misleading” authority found in Section 5 of the Federal Trade Commission Act. The FTC first issued its guidance on these rules in 1992, and revised them in 1996 and 1998.
 

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FDA Announces Much Anticipated Public Hearing on Biosimilars

By Deborah M. Shelton

Having had the opportunity to analyze the biosimilars provisions of the new health care law enacted this past March, stakeholders have at long last the chance on November 2-3 to weigh in on FDA's implementation of the biosimilar approval pathway. FDA will hold a two-day public hearing on November 2-3, 2010, from 8:30 am to 4:30 pm, at the FDA Conference Center on FDA's campus in White Oak, Maryland.  FDA published its official announcement of the public hearing in the October 5th issue of the Federal Register. 75 Fed. Reg. 61497 (Oct. 5, 2010). Here is the link to the Federal Register Notice: http://edocket.access.gpo.gov/2010/pdf/2010-24853.pdf.

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Has the Time Come for "Total Recall" of Medical Products?

By Peter Reichertz

On July 14, 2010, Congressman Edolphus Towns introduced legislation to provide for the mandatory recall of adulterated or misbranded drugs. The legislation, H.R. 5740, has been referred to the Committee on Energy Commerce. Congressman Towns was the chair of the subcommittee that held hearings about Johnson & Johnson/McNeil and its handling of adulterated children’s drug products (including Tylenol® and Motrin®) this past Spring. Johnson & Johnson was scrutinized for delaying the recall of the products and allegedly covering up the recall of some of the products. As a result, there has been increased publicity over the authority of the U.S. Food and Drug Administration (“FDA”) to require the recall of drug products.
 

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FDA's Regulation of Laboratory Developed Tests (LDTs) - Changes on Horizon?

By Deborah M. Shelton

For years, the Food and Drug Administration has maintained that it has jurisdiction over laboratory-developed tests (“LDTs”) – those in vitro tests developed, validated and used for in-house pathology and diagnostic purposes – as medical devices. Yet the Agency has, with some few exceptions (e.g., IVDMIAs), exercised enforcement discretion, reasoning that most LDTs were simple, well-characterized, and reliant upon various FDA-regulated individual components. As LDTs have become increasingly complex and the laboratory setting increasingly large-scale, FDA has begun rethinking its regulatory approach.

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FDA's Regulation of Laboratory Developed Tests (LDTs) - Changes on Horizon?

By Deborah M. Shelton

For years, the Food and Drug Administration has maintained that it has jurisdiction over laboratory-developed tests (“LDTs”) – those in vitro tests developed, validated and used for in-house pathology and diagnostic purposes – as medical devices. Yet the Agency has, with some few exceptions (e.g., IVDMIAs), exercised enforcement discretion, reasoning that most LDTs were simple, well-characterized, and reliant upon various FDA-regulated individual components. As LDTs have become increasingly complex and the laboratory setting increasingly large-scale, FDA has begun rethinking its regulatory approach.
 

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Banning "Pay-For Delay" Settlements and Resale Price Maintenance are Senate Antitrust Subcommittee's Top Legislative Priorities

In a recent interview, Senator Herb Kohl (D-Wis.), Chairman of the Senate Judiciary Committee's subcommittee on antitrust, competition policy and consumer rights, discussed the subcommittee's legislative priorities for 2010. At the top of the list is passage of the Preserve Affordable Access to Generics Act, which would prevent anticompetitive "pay-for-delay" patent settlements in which a brand-name pharmaceutical company pays a generic drug maker millions of dollars in exchange for an agreement to stop selling a generic version of the drug.
 

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New Taxes for Pharmaceutical and Medical Device Manufacturers/Importers/Distributors

Manufacturers

As part of the recently enacted Patient Protection and Affordable Care Act (“PPACA”) – known to most as Healthcare Reform Legislation, new taxes will be imposed on manufacturers of “branded prescription drugs” and most medical devices. These taxes are in addition to the fees already charged by the Food and Drug Administration (“FDA”) for review of full new drug applications for drugs and 510(k)’s and Premarket Approval Applications for medical devices. And unlike user fees, the taxes will not be paid to FDA but assessed by the Department of Treasury and paid to support health insurance coverage.
 

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FDA Publishes Proposed Rule on Broadcast Direct-to-Consumer Prescription Drug Advertisement; the 4 New Standards

On March 29, 2010, FDA published a proposed rule setting forth how it would interpret the Congressionally mandated requirement that “major statements” in broadcast Director-to-Consumer (“DTC”) advertisements for prescription drugs be presented in a “clear, conspicuous and neutral manner." See proposed 21 C.F.R. § 202.1(e), 75 Fed. Reg. 15376 (March 20, 2010).  
 

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FDA Looks to Boost Criminal Prosecutions

In the wake of a scathing March 4th GAO Report, FDA has informed Congress that it will boost criminal prosecutions of pharmaceutical and food industry executives.[1] Although the Agency’s Office of Criminal Investigation (OCI) can prosecute ‘responsible corporate officials,’ according to the GAO Report OCI has failed to exercise this enforcement tool to achieve FDA priorities and has underperformed comparable agencies in bringing misdemeanor prosecutions.
 

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Congress Passes Legislation Giving FDA Authority Over Tobacco Products

On June 12, 2009, Congress passed a legislation empowering the Food and Drug Administration to regulate cigarettes and tobacco products. Just one day after the Senate approved the bill, the House decided to forgo its own version of the bill and passed the Senate bill with a final vote of 307-97. President Obama stated he will promptly sign the bill into law. Enactment of such legislation will end a long battle over the years to give FDA the authority to regulate the manufacturing, marketing and sale of cigarettes and other tobacco products. The bill, authorizes sweeping regulation of the tobacco industry.
 

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