USDA Warns Public of Organic Certification Fraud

On August 30, 2011, the U.S. Department of Agriculture (USDA) issued a press release notifying the public that a fraudulent organic certificate had been disseminated. The press release, found here, discusses how the certificate was brought to the Agencys attention when an accredited organic certifier, whose name falsely appeared on the certificate, notified the USDAs National Organic Program (NOP). According to the USDA, no products bearing the fraudulent certification were sold in the United States.

As we previously reported, the USDAs NOP sets forth several requirements that foods and other products must meet before being designated “organic.” This includes periodic inspections and the implementation of an organic production and handling plan to ensure the goods are fit for organic designation. Without this designation, products may not bear the widely-recognized organic seal. USDA regulations provide for hefty fines for the fraudulent use of the organic certificate or label, which may be up to $11,000 per violation.

For more information about food labeling or USDAs National Organic Program, please contact us at contact@fidjlaw.com.

University of Miami Research Complex Paves Way for Biotech Companies in Miami

This September the University of Miamis Tissue Bank will be relocating to a new $11.5 million facility. Moving from its current building to what is envisioned as a multi-enterprise commercial complex, the tissue bank is expected to prompt research and other medical companies to consider Miami as the new hotspot for biotechnology ventures. With the first building in the complex already nearly two-thirds leased, it appears that the University of Miamis efforts are having some success in bringing companies (and jobs) to the area.

The new complex will serve as an incubator for biotechnology companies seeking to test the market in South Florida. This idea is not new for the State, as the Sid Martin Biotechnology Incubator, housed in Alachua County, has been attracting biotech companies to Florida since 1995. Considering the success of the Sid Martin Biotechnology Incubator, those involved in the University of Miamis new project are confident that Miami will soon serve as a focal point for start-up companies, as well as established biotechnology operations in the coming years.

While many biotechnology companies are currently concentrated in the Northeast region of the U.S., Florida has been experiencing rapid growth in this industry over the last decade. Partially due to efforts of the Florida legislature and BioFlorida, the states bioscience industry association, biotech companies are moving from the northeast and west coast of the U.S., in order to become part of this emerging market. For example, Scripps Research Institute, a biomedical research institute headquartered in California, opened its sprawling research facility, Scripps Florida in 2009. Located in Palm Beach County, the research facility moved to Florida in part due to efforts by the Florida legislature. Seeking to stimulate growth of the biotech industry within the State, legislators offered support for the project by way of a $310 million appropriation. Additionally, Palm Beach County provided various incentives aimed at bringing Scripps to the area, including funding for land and related start-up costs.
By seeking to establish Florida as a hub for the biotechnology industry, Scripps Florida is but one example of how the States incentives have lured companies to the state. For instance, one of the biggest advantages of “setting up shop” in Florida is its extremely favorable tax structure. There is no state income tax imposed on partnerships, limited partnerships, limited liability companies, limited liability partnerships, or subchapter S-corporations. Additionally, the state income tax imposed on C-corporations is only 5.5%. Also, as guaranteed by the Florida Constitution, employees of all of Florida based entities enjoy the absence of a state personal income tax.  
In addition to favorable income tax treatment, there is no sales tax on purchases of raw materials incorporated into a final product for resale, including non-reusable containers or packaging. Furthermore, Florida offers sales and use tax exemptions for numerous business processes such as:

  • Machinery and equipment used by a new or expanding Florida business to manufacture, produce or process tangible personal property for sale;
  • Labor, parts and materials used in repair of and incorporated into machinery and equipment;
  • Electricity used in the manufacturing process;
  • Certain boiler fuels (including natural gas) used in the manufacturing process;
  • Semiconductor, defense and space technology-based industry transactions involving manufacturing equipment;
  • Machinery and equipment used predominantly in research and development; and
  • research and development labor expenditures.

Despite all of the benefits built into the taxing scheme of Florida, there are additional incentives available to certain industries and businesses that achieve certain goals. For instance, the Qualified Target Industry Tax Refund Incentive (QTI) provides refunds on corporate income, sales, ad valorem, intangible personal property, insurance premium, and certain other taxes for businesses that create high wage jobs in targeted high value-added industries. Also, the Capital Investment Tax Credit is an annual credit that is provided for up to 20 years against the corporate income tax. It is specifically available for designated high-impact portions of the certain sectors, including clean energy, biomedical technology, financial services, information technology, silicon technology, transportation equipment manufacturing, or be a corporate headquarters facility. 
Florida also provides a negotiated grant under the High Impact Performance Incentive to pre-approved applicants in certain high-impact sectors designated by the Governor’s Office of Tourism, Trade and Economic Development (OTTED). In order to participate in the program, the project must:

  • operate within designated high-impact portions of the following sectors– clean energy, corporate headquarters, financial services, life sciences, semiconductors, and transportation equipment manufacturing;
  • create at least 50 new full-time equivalent jobs (if a R&D facility, create at least 25 new full-time equivalent jobs) in Florida in a three-year period; and
  • make a cumulative investment in the state of at least $50 million (if a R&D facility, make a cumulative investment of at least $25 million) in a three-year period.

The biotech market fits perfectly within the purview of Floridas numerous incentives aimed at bringing industry to the state. Coupled with the states advantageous tax structure, this provides a favorable environment for these industries to make the shift to Florida.  

For more information regarding biotechnology issues or any information regarding starting a business in Florida, please contact us at contact@fidjlaw.com.

FDA Publishes Draft Guidance for Evaluation and Labeling of Scored Tablets

On September 1, 2011, the U.S. Food and Drug Administration (FDA) released draft guidance for tablet scoring, see FDA Guidance for Industry Tablet Scoring: Nomenclature, Labeling, and Data for Evaluation. This draft guidance provides recommendations regarding “guidelines to follow, data to provide, and criteria to meet and detail in an application to approve a scored tablet,” as well as nomenclature and labeling for approved scored tablets. This draft guidance applies only to sponsors of new drug applications (NDAs) and abbreviated new drug applications (ANDAs). These guidelines are optional for currently marketed drug products.

The FDA published this draft guidance in recognition of the need for consistent scoring between a generic drug product and its reference listed drug (RLD). Insurance companies and physician sometimes recommend that patients score drug tablets to allow patients to adjust a drug dose or as a cost-saving measure. This practice, however, carries possible safety issues. The FDAs concerns with splitting a tablet include “variations in the tablet content, weight, disintegration, or dissolution,” which may affect the concentration of a drug in a split tablet and its rate of absorption. The new draft guidance aims to achieve consistency and ensure the quality of NDA and ANDA scored tablet products.

            In furtherance of those goals, the FDAs draft guidance recommends criteria by which scored tablets can be evaluated and labeled by:

  • Providing a harmonized approach to chemistry, manufacturing, and controls reviews of scored tables;
  • Ensuring consistency in nomenclature  and labeling; and
  • Providing information through product labeling or other means to healthcare professionals.

The FDA has outlined eight main guidelines and criteria by which a scored tablets characteristics will be evaluated during the review process:

  • The dosage amount meant to be achieved after splitting the tablet should not be below 84 the minimum therapeutic dose indicated on the approved labeling.
  • The scored dosage form should be safe to handle and not pose risk of unintended drug 87 exposure (e.g., teratogenic, chemotherapeutic, hormones).
  • Modified release products for which the control of drug release can be compromised 90 by tablet splitting (e.g., tablets controlled by an osmotic pump system or an exterior 91 film coat) should not have a scoring feature.
  • The split tablet, when stored in standard high-density polyethylene pharmacy bottles 94 and caps (no seal), should meet established stability requirements for a period of 90 95 days at 25º C, plus or minus 2º C/60 percent Relative Humidity (RH), plus or minus 5 96 percent RH.
  • The split tablet portions should meet the same finished-product testing requirements 99 as for a whole-tablet product with equivalent strength. A risk assessment should be 100 provided to justify the tests and criteria for product with the proposed functional 101 score. The resulting data should be provided to the Agency for evaluation. The 102 assessment should be undertaken on both tablets that are split nonmechanically (by 103 hand) and tablets that are split mechanically (with a tablet splitter). Any 104 recommended dissolution test data must be generated on a minimum of 12 individual 105 split tablet portions.
  • The scored tablet should be tested using the indicated patient population to ensure patients can split the tablet correctly, as labeled.
  • Scoring configuration of generic drug products should be the same as the RLD
  • New study data on tablet splitability should be provided during the postapproval period for an product changes at level 2 and Level 3 as defined in the Agencys Scale-up and Post-Approval changes (SUPAC) guidances.

In addition, the FDA will require new products that meet the above criteria to be labeled as having a functional score. The use of functional score is intended to indicate to healthcare professionals that the product has been evaluated against the FDAs newly established criteria. These product labels should reflect the following:

  • “Dosage Forms and Strength” section of the Highlights
  • “Dosage Forms and Strength” section of the Full Prescribing Information
  • “How Supplied” section of the full prescribing information

The FDA will require newly approved products to include this information in the patient package insert or medication guide. Those products that do not meet the criteria set forth in the FDAs new draft guidance, should not make reference to scoring or indicate a scoring feature in its product labeling.

Fuerst Ittleman will continue to monitor developments in the FDAs regulation of medical drugs. For more information, please contact us at contact@fidjlaw.com.

Del Monte Prepares for Suit Against Oregon

On August 29, 2011, Del Monte began taking steps to sue the State of Oregons Public Health Authority (PHA) and one of its senior officials. After suing the FDA last week, the company filed a notice to sue letter, alerting the State that it will be pursuing legal action in relation to allegations of tainted cantaloupes. According to Del Monte, Oregons PHA and its officials had insufficient evidence to link Del Monte cantaloupes to an outbreak of Salmonella Panama.

We previously reported on Del Montes suit challenging an import alert issued by U.S. Food and Drug Administration (FDA). According to Del Monte, the FDA placed an Import Alert on all cantaloupes being imported from Guatemala because of the possible link to a salmonella outbreak earlier this year. As alleged by Del Monte, the Import Alert was unlawful because the Agency had insufficient evidence that the cantaloupes imported from Guatamala were contaminated. While Del Montes arguments against the State of Oregon are expected to be similar to those made against the FDA, the notice to sue letter is just the first step in what could become a long legal battle concerning the allegedly tainted fruit.

For more information on FDA enforcement measures or import compliance, please contact us at contact@fidjlaw.com.

FDA Issues Import Alert for Papayas from Mexico

On August 25, 2011, the U.S. Food and Drug Administration (FDA) issued an Import Alert aimed at stopping the introduction of contaminated papaya from entering the country. As announced here, the FDA and its Mexican counterparts have been closely monitoring the salmonella contamination that has been linked to papaya grown in Mexico.

Found here, the Import Alert details the actions that importers must take in order to bring papayas into the country. Specifically, in order to successfully import papayas, importers must provide documentation from an accredited laboratory, showing that each shipment of fruits is not contaminated. As we previously reported on a similar import alert last week, these requirements are frequently imposed by the FDA to prevent shipments from entering the country without proof of their safety. By requiring heightened scrutiny when goods are offered for import, Import Alerts prevent goods from entering the country unless all required documentation is supplied by the importer. Thus, it is important to be aware of relevant FDA import alerts before offering goods for importation, as well as any necessary steps that must be taken to verify compliance with federal law.

For more information on FDA enforcement measures or import compliance, please contact us at contact@fidjlaw.com.

Violation of FDA Regulations Prompts Seizure by U.S. Marshals

On August 25, 2011, U.S. Marshals seized various seafood products from a manufacturing facility in California. Prompting the seizure, the U.S. Food and Drug Administration (FDA) requested the marshals take action against Meiko Food Co. after finding the companys operations were not compliant with the federal Food, Drug, and Cosmetic Act (FDCA) and accompanying FDA regulations.

As discussed here, the FDA sought action against the seafood manufacturer because of continued non-compliance, despite repeated FDA warnings. In particular, the FDA found that Meikos seafood products were adulterated because the company failed to have a Hazard Analysis Critical Control Point (HACCP) plan in place. A HACCP plan is one of many preventative controls that the FDA requires manufacturers to have in place in order to ensure health risks are being monitored and reduce food borne illness outbreaks.

As found in an FDA Warning Letter to Meiko late last year, the FDA had previously cited the company for its failure to have a HACCP plan. Thus, the seafood manufacturers continued failure to address FDAs warnings led the Agency to step up its enforcement actions against the company. Had the seafood manufacturer taken the necessary steps called for by the warning letter, it may have avoided further FDA action.

Because the FDA typically issues warning letters before taking any serious action against non-compliant parties, it is important to take warning letters seriously and take any necessary corrective measures in order to avoid further enforcement action.

For more information on FDA enforcement measures or other compliance issues, please contact us at contact@fidjlaw.com.

Del Monte Brings Suit Challenging FDA Import Alert

On August 22, 2011, Del Monte Fresh Produce N.A., Inc. (Del Monte) brought suit against the U.S. Food and Drug Administration (FDA), seeking to invalidate an import alert the agency placed on cantaloupes imported from Guatemala. The challenged Import Alert, found here, was issued after the FDA concluded that cantaloupes being imported from Guatemala were the source of a Salmonella Panama outbreak that left several people ill. In its complaint, Del Monte alleges the FDA had insufficient evidence that Del Montes cantaloupes were the source of this outbreak.

Under the Food, Drug and Cosmetic Act (FDCA), the FDA has the authority to inspect various types of goods being offered for import into the United States. While routine inspections may provide a basis for imported goods to be detained and even refused entry into the country, an import alert, like the one challenged by Del Monte, can cause goods to be detained without having to undergo any inspection at all.

Because import alerts can prevent shipments from entering the country without an allegation that the specific goods are unsafe, it is not uncommon for companies to challenge the bases for these alerts. For example, we previously reported on a case brought by Seagate, in which we successfully challenged the legality of an import alert. As in the case of Del Monte, FDA detained a series of Seagates shipments without alleging that the specific products were contaminated. In that case the FDA released the detained products soon after we filed suit. In this case, however, it is unclear how the FDA will proceed.

For more information on FDA enforcement measures or import compliance, please contact us at contact@fidjlaw.com.

Five Tobacco Companies File Suit Challenging FDA’s New Warnings Rule

On August 16, 2011, five tobacco companies filed a complaint against the U.S. Food and Drug Administration (FDA) in the U.S. District Court for the District of Columbia challenging the Agency’s rule requiring new textual and graphic warning labels on cigarette packaging and advertisements. As we reported here earlier this year, the FDA issued a final rule pursuant to the Family Smoking Prevention and Tobacco Control Act (the “Act”) that requires each cigarette package and advertisement to bear one of nine new textual warning statements and an accompanying graphic image (see FDA’s approved images here).  The final rule explained that the requirements for the new textual and graphic warning labels would go into effect 15 months after the FDA’s issuance of a final rule.

The five tobacco companies (R.J. Reynolds Tobacco Company, Lorillard Tobacco Company, Commonwealth Brands, Inc., Liggett Group LLC, and Santa Fe Natural Tobacco Company, Inc.) seek a declaratory judgment that the FDA’s final rule violates the First Amendment and Administrative Procedure Act (APA), and declarative and injunctive relief that the new textual and graphic warnings will not become effective until 15 months after FDA issues regulations “that are permissible under the United States Constitution and federal laws.”

The Plaintiffs allege that the FDA’s final rule regarding textual and graphic warnings requires them “to become a mouthpiece for the Government’s emotionally-charged anti-smoking message.” The Petitioners argue that the requirement to essentially advocate against the purchase of their own lawful products “is precisely the type of compelled speech that the First Amendment prohibits” because the Government cannot compel corporations to “use their private property as a ‘mobile billboard’ for the State’s ideological message.” The Plaintiffs also contend that the FDA’s warnings are unjustified and unduly burdensome, as they do not further any compelling governmental purpose and are “unlikely to have any material impact on consumer understanding of smoking risks, consumer intentions regarding smoking, or actual consumer smoking decisions.” The FDA’s final rule, according to the Plaintiffs, “violates the First Amendment under any standard of review.”

In addition, the Plaintiffs argue that the FDA acted arbitrarily and capriciously “by attempting to justify the Ruleon grounds that were illogical, contradictory, and without support in the regulatory record, and by employing different standards of analysis to comments supporting the Rule than to comments opposing the rule.”  As a result, the Plaintiffs allege that the FDA’s final rule “contravenes core requirements” of the APA.

Lastly, the Plaintiffs assert that the FDA has not issued a legally valid rule and, therefore, the 15-month effective date for the new textual and graphic warnings cannot come into effect until the FDA complies accordingly. The Plaintiffs contend that Congress’s single implementation date for the new warnings and related requirements “demonstrates an intent that manufacturers not be subjected to multiple, costly overhauls of their packaging and advertising.” Further, the Plaintiffs state that to avoid an invalidation of the Rule, the Act must be read to “tie the effective dates of all cigarette packaging and advertising changes to the ‘issuance’ of regulations by FDA.” In furtherance of that goal, the Plaintiffs request the court to grant declaratory and injunctive relief that the Act not become effective until 15 months after the FDA issues a rule that is permissible under the U.S. Constitution and federal law.
Fuerst Ittleman will continue to monitor the progress of this lawsuit and the FDA’s regulation of tobacco products and advertising. For more information, please contact us at contact@fidjlaw.com. 

IRS Issues Guidance on Annual Fee Imposed on Branded Prescription Drugs

On August 15, 2011, the U.S. Department of Treasury and Internal Revenue Service (IRS) issued temporary regulations (T.D. 9544) and proposed regulations (REG-112805-10) regarding the annual fee imposed on certain branded prescription drugs. The prescription drug fee was enacted by section 9008(a) of Patient Protection and Affordable Care Act (PPACA). The $2.5 billion excise tax is an aggregate annual fee imposed on branded prescription drug manufacturers and importers with gross receipts over $5 million from sales to specified government programs. Please see our previous report here for more information regarding the prescription drug fee and the PPACA.

The temporary and proposed regulations describe the rules and actions of the prescription drug fee to be taken before the annual September 30th due date. The regulations are generally consistent with previous IRS guidance documents regarding the prescription drug fee. The regulations provide guidance regarding:

  • A general overview of the fee rules
  • An explanation of terms used in implementing the fee
  • A description of the information requested from covered entities and provided by specified government programs
  • A description of how the fee and subsequent adjustments are calculated
  • Rules relating to the notice of preliminary fee calculation, dispute resolution process, and notification of final fee calculation
  • An explanation of how to pay the fee, how the fee is treated for tax purposes, and how to make refund claims

See the official release of the documents in the August 18th Federal Register here and here. The Department of Treasury and the IRS are seeking public comment until November 16, 2011. The attorneys at Fuerst Ittleman, PL are knowledgeable in both tax and food and drug law. If you have questions regarding the prescription drug excise tax, please contact us at contact@fidjlaw.com.

Arizona Naturopathic Doctor Pleads Guilty to Selling Stem Cells

On August 18, 2011, Fredda Branyon, a naturopathic physician in Arizona, entered into a plea agreement with the U.S. Attorneys Office in Houston, Texas regarding charges of illegally selling stem cells. In late July, prosecutors filed charges against Ms. Branyon for allegedly selling stem cells in violation various federal law. In the charging document, the government alleged that Branyon, the operator of a clinic in Scottsdale, engaged in a conspiracy whereby she caused the stem cells to be introduced into interstate commerce in violation of the federal Food, Drug, and Cosmetic Act (FDCA). Additionally, Branyon was charged with ten counts of mail fraud, one for each shipment of stem cells from her clinic in Arizona into the State of Texas. Violations of the FDCA are punishable by up to 3 years imprisonment while violations of the mail fraud statute are punishable by up to 20 years imprisonment. According to the plea agreement, Branyon pled guilty to just one charge of violating the FDCA. The rest of the charges will be dismissed at her sentencing hearing. The plea agreement can be reviewed by clicking here.

As discussed in the plea agreement, Branyon had been purchasing umbilical cord tissue (from which the cells were derived) from a birthing facility, where new mothers donated their cord blood for research purposes. After purchasing the donated tissue, Branyon recruited the services of a medical school professor, who then obtained the cells from the cord blood. Having in her possession viable stem cells, Branyon then entered into an arrangement with a Texas medical clinic to supply it with stem cells. While the arrangement on its face stated that the cells were “for research purposes only,” the plea agreement states that Branyon knew the cells were to be used to treat patients. In addition to the sale of the cells, the plea agreement emphasizes that Branyon had been operating various websites whereby she had advertised these stem cells for the treatment of certain diseases, including amyotrophic lateral sclerosis (ALS) and multiple sclerosis (MS).

Branyon, according to the plea agreement, also agreed to cooperate with the government against others involved with violations of the law.

Under the FDCA and U.S. Food and Drug Administration (FDA) regulations, it is against federal law to cause an unapproved new drug to be shipped into interstate commerce. The FDA has recently asserted that stem cells that are removed from the body for medical treatment of a patient are a new “drug”.  Fuerst Ittleman has attorneys with great experience in representing medical professionals and others involved in the use of human stem cells for the medical treatment of a variety of physical ailments. The regulation of stem cells and their usage is an evolving area of the law in which Fuerst Ittleman is deeply involved and constantly monitoring.