FDA Announces Public Meeting on Approval Pathways for Biosimilars

The U.S. Food and Drug Administration (FDA) has announced that it will hold a two-day public hearing on November 2-3, 2010 for the purpose of gathering “input on specific issues and challenges associated with the implementation of the Biologics Price Competition and Innovation Act of 2009 (BPCI Act).”

The Patient Protection and Affordable Care Act (Pub. L. 111-148), signed into law by President Obama in March of this year, contains the BPCI Act. The BPCI Act amends the Public Health Service Act (PHS Act) to create an abbreviated approval pathway for biological products. In order to take advantage of this abbreviated pathway, these biological products must be shown to be biosimilar to, or interchangeable with, an FDA-licensed reference biological product.

Biosimilarity may be demonstrated through the use of scientific support (clinical trials, animal studies, etc.) with the appropriate number of trials and appropriate types of studies. The appropriate number and type required will be determined by the FDA. For a product to be considered biosimilar, data collected from the requisite study/studies must show that the biological product is “highly similar to the reference product, notwithstanding minor differences in clinically inactive components.” While it is unclear what level of clinical similarity is required to reach the finding of “highly similar”, The Agency intends to address this issue during the November hearing.

For more information on biologics or the BPCI Act, contact us at contact@fidjlaw.com.

More News on the Coming Wave of FDA Enforcement Actions

Yesterday we reported the comments of Eric Blumberg, FDA Deputy Chief Counsel for Litigation, who said that the FDA will increase misdemeanor criminal prosecutions for pharmaceutical executives whose companies are promoting off-label uses of their products. At this same conference, sponsored by the Food and Drug Law Institute, additional guidance was provided for the pharma industry with respect to coming trends in FDA enforcement and how companies can achieve compliance now.

In addition to prosecuting off-label marketing of pharmaceutical products, Blumberg also warned that criminal investigations will increase and be focused on the distribution of unapproved new drugs as well as the failure to report unexpected adverse events caused by these products.

Eugene Thirolf, Director of the Office of Consumer Litigation at the Department of Justice (the FDAs government prosecutor), echoed Blumbergs comments stating that he foresees more criminal prosecutions arising from safety issues related to pharmaceutical products; e.g., distribution of defective products, adverse event reporting failures and fraudulent use or reporting of testing data.

This increased emphasis on criminal investigations and prosecutions by the FDA and the Justice Department are not just confined to consumer issues, however. Blumberg, Thirolf and several other speakers also discussed holding pharma companies accountable for regulatory issues arising from manufacturing. Company executives were admonished to adhere to current Good Manufacturing Practice (cGMP) regulations and standards, and cautioned not to ignore (or cover-up) safety issues discovered in the manufacturing and testing of pharmaceutical products. Thirolf stated that criminal prosecutions could arise from false documentation of manufacturing processes and procedures.

Much of the impetus for these new investigations and prosecutions will come from the FDAs Office of Criminal Investigations, which the agency has pledged to revamp and refocus.

The message from the FDA is clear “ not only for pharmaceutical companies, but for dietary supplement companies, medical device manufacturers, food producers, cosmetic companies and other FDA regulated industries as well:

Now is the time to proactively implement FDA compliance programs, to perform audits of your existing compliance programs, and to review your manufacturing processes, distribution networks, advertising, websites, and promotional activities to ensure compliance with FDA laws and regulations. Failure to do so now will result in even greater problems “ including criminal investigations and prosecutions “ later.

FDA Message to Pharma: Misdemeanor Criminal Charges can Result from Promoting Off-Label Drug Uses

The FDA should target for misdemeanor criminal prosecution the executives of pharmaceutical companies which promote unauthorized uses of their medicines.

This is the latest message from Eric Blumberg, Deputy Chief for Litigation for the U.S. Food and Drug Administration. Speaking at the “Enforcement and Litigation Conference” for the Food and Drug Law Institute on October 13, 2010, Blumberg said, “Unless the government shows more resolve to criminally charge individuals at all levels in the company, we cannot expect to make progress in deterring off-label promotion.”

Blumberg cited a recent case involving Pfizer in which the company agreed to pay a $2.3 billion fine for the off-label marketing of several products. Some industry analysts point to the Pfizer case as evidence that big pharma increasingly sees FDA fines and settlement agreements referencing “corporate integrity” as nothing more than a cost of doing business, and not changing industry practices. “Its clear were not getting the job done with large, monetary settlements,” Blumberg added.

This is not the first time Blumberg “ and the FDA “ has talked about getting tough with criminal prosecutions for drug law violations.

Not long after his appointment as the FDAs top litigator in 2005, Blumberg stated that senior executives should be held accountable for company actions under Federal Food, Drug and Cosmetic Act (FD&C Act). He warned that ignorance is not bliss, and also is not a defense in court. “The FD&C Act is a strict liability statute,” Blumberg said to a conference of pharmaceutical companies. “That means you may be found criminally responsible for a violation of the FD&C Act, even though you did not participate in the violation, you were not aware of the violation, or you did not act with criminal intent, or even negligence.”

Blumbergs words echo the so-called Park Doctrine, named after the Supreme Court decision in United States v. Park, 421 U.S. 658 (1975). This doctrine allows the government to seek criminal convictions against company officials for alleged violations of the FD&C Act.

In that case, the conviction of John Park, President of a national retail food chain, was upheld by the Supreme Court. The Court ruled that senior executives of companies manufacturing or selling FDA-regulated products have an affirmative duty to ensure the safety of those products. The Court further held that the U.S. Government can criminally prosecute corporate officers who are in a “responsible relationship” to an illegal activity by a company even if the person did not take part in, or even know of, the companys activities. The FD&C Act, according to the Court, imposes a positive duty on senior company officers to seek out and remedy violations when they occur as well as implement processes to prevent violations in the first place.

The Doctrine was used extensively by the FDA in the 1970s in strict liability cases usually involving “dirty warehouses” “ unsanitary facilities maintained by a company. But by the early 1980s, use of the Park Doctrine in criminal prosecutions had fallen off, due in part perhaps, to the meager penalties for misdemeanor convictions, which often were as low as $50.

Then in 2008, the U.S. Sentencing Commission adopted new guidelines that increased the likelihood that misdemeanor convictions under the Doctrine will result in prison time. These changes, along with higher penalties and the passage of new laws increasing the FDAs enforcement authorities and postures seem to have resurrected use of the Park Doctrine.

While Blumberg stated yesterday that his comments did not reflect FDA policy, they do reflect the thinking of the agencys senior management. In a March 2010 letter from FDA Administrator Margaret Hamburg to the Senate Finance Committee, Hamburg also stated that the FDA plans to increase misdemeanor prosecutions of pharma industry executives as it refocuses its Office of Criminal Investigations on stricter enforcement measures.

Blumberg added yesterday that pharmaceutical company officials shouldnt wait until they are criminally charged to begin bringing their marketing campaigns into compliance with FDA regulations. “If youre a corporate executive or are advising a corporate executive, now is the time to comply,” he said. “That conduct may already be under the criminal microscope.”

And quite a microscope it is. Under current law, misdemeanor cases carry sentences for company execs of up to a year in prison and/or a maximum fine of $100,000 per count. If the crime results in death, however, the maximum fine for an individual is $250,000. The FDA also can bar individuals from working in the industry.

Medicare To Implement New Billing Procedures, Proposes New Regulations To Combat Fraud

On September 27, 2010, President Obama signed into law the Small Business Lending Act which contains a new anti-fraud provision that will significantly change how the Center for Medicare and Medicaid Services (“CMS”) bills for services. Under the new provision, CMS will be required to end its 45 year policy of approving claims quickly without first verifying that the services were actually provided and that the claims submitted are not the product of fraud.

The new law requires CMS, which pays out $500 billion annually in Medicare and Medicaid claims, to adopt new billing software with “predictive modeling” by next year in hopes of reducing fraud. Predictive modeling software is currently used by the credit card industry to detect questionable bills and stop payments if fraud is suspected. Under CMSs current system, nicknamed “pay and chase” by government officials, over $60 billion dollars per year are lost to fraud. By implementing predictive modeling software, CMS will be alerted to suspicious claims, providers, and facilities before payment is rendered, thereby allowing CMS to stop payment on these claims and investigate whether fraudulent activity has taken place.

CMS will start the competitive bidding process by software manufacturers in January of 2011 and will begin phasing in the technology in the 10 states with the highest rates of Medicare fraud by July 2011. Additionally, CMS will require its Medicare contractors to use the new technology for claims processing for hospitalization and outpatient services, the bulk of Medicares costs. The new law provides that the Department of Health and Human Services track the actual savings to the Medicare program after implementation of the software for one year. At that time, should Congress find that the savings are significant, funding will be expanded to allow the program to be used in 10 additional states.

The new law comes at the same time as CMS unveiled new proposed regulations to crack down on fraud. The proposed regulations would make it easier for CMS to suspend payments to providers. Under the proposed rules, payments to providers can be suspended upon a showing of “credible allegations” of fraud that merit further investigation, including tips from consumers. Additionally, the proposed rules would require state Medicaid programs to stop using medical providers that have been kicked out of Medicare or another states Medicaid program.

The proposed rules also include a ranking system of all types of medical providers within the Medicare system by their risk for engaging in fraud. The providers with the highest risk would be required to undergo fingerprinting and criminal background checks before engaging in business. The rules also provide that all new home health agencies and home-health equipment suppliers that are not publicly traded will be subject to this increased screening.

For more information regarding Health Care Reform and its effect on Medicare and Medicaid regulations please contact us at contact@fidjlaw.com.

US Department Of The Treasury Continues Its Implementation Of Tougher Sanctions Against Iran

On September 28, 2010, the Office of Foreign Assets Control (“OFAC”) of the United States Department of the Treasury issued new regulations amending the Iranian Transactions Regulations, (“ITR”), of the Code of Federal Regulations. The new regulations come as OFAC continues its efforts at implementing the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (“CISADA”). Passed on July, 1, 2010, CISADA supplements the Iran Sanctions Act of 1996 by expanding sanctionable activities and providing for additional types of sanctions.

The new regulations revoke 31 C.F.R. §§ 560.534 and 560.535 from the ITR. As a result, OFAC will no longer authorize, by either general or specific license, the commercial importation or dealing in of certain foodstuffs and carpets of Iranian origin into the United States. Additionally, the new regulations implement the import and export prohibitions in section 103 of the CISADA. Section 103 economic sanctions include prohibitions on the importation of goods or services of Iranian origin directly or indirectly into the US and on US origin goods, services, or technology from the US or a US person to Iran. A copy of the OFAC Federal Register announcement can be at Iranian Transactions Regulations amendment.

While the new regulations prohibit the import and export of goods and services to and from Iran, numerous exceptions, such as the exportation of goods for humanitarian assistance and the exportation of technology necessary for personal internet communication, exist under both the CISADA and the ITR. Additionally, importers must be aware of the definition of “goods of Iranian origin” under the ITR. Under the ITR, goods “of Iranian origin” not only include goods grown, produced, manufactured, extracted, or processed in Iran but also goods which have entered into the stream of commerce in Iran. Therefore, foodstuffs and carpets of third-country origin which are transshipped through Iran become goods of Iranian origin under the ITR and thus prohibited from importation into the US.

For more information regarding OFAC and strategies on maintaining compliance with federal regulations, please contact Fuerst Ittleman at 305-350-5690 or contact@fidjlaw.com.

FinCEN Proposes Reporting Regulations For Cross-Border Electronic Transmittals Of Funds By Financial Institutions

On September 27, 2010, the Financial Crimes Enforcement Network (“FinCEN), of the U.S. Department of the Treasury, issued a notice of proposed rulemaking for publication in the Federal Register. The proposed rule would require money services businesses (“MSB”) and certain depository institutions to affirmatively report records of certain cross-border electronic transmittals of funds (“CBETF”) to FinCEN. Under the proposed rules, MSBs would be required to report all CBETF transactions of $1,000 or more.

Under the current regulatory scheme, the financial institutions that would be subject to the proposed rule must maintain and make available upon request to FinCEN records of CBETF information. However, the proposed rule goes further and affirmatively requires these institutions to report such transactions.

The proposed rules were issued pursuant to the requirements of the Intelligence Reform and Terrorist Prevention Act of 2004. This act gave the Secretary of the Treasury the power to require financial institutions to report CBETF if the Secretary determined that reporting is reasonably necessary to prevent money laundering and terrorist financing. If the proposed rule takes effect, U.S. depository institutions that are either the first to receive funds transferred electronically from outside the US or the last to transmit funds internationally would be required to report all such transmittals of funds of $1,000 or more.

FinCEN has also proposed a rule to require an annual filing by all depository institutions of a list of taxpayer identification numbers of accountholders who transmitted or received a CBETF. FinCEN believes that this proposed rule would allow for greater utilization of the CBETF data that would be gathered, and enhance law enforcement efforts to combat tax evasion by those seeking to hide assets offshore. A copy of the proposed rules can be read at FinCEN Proposes Rule On Reporting Requirements For Cross-Border Transactions.

For more information regarding FinCEN regulations please contact us at contact@fidjlaw.com.

CBP Withdraws Proposed “Last Sale” Rule

Preservation of First Sale Doctrine Seen as Victory for Importers

U.S. Customs and Border Protection (CBP) published a notice in the Federal Register today formally withdrawing its proposed rule to determine the value of imported merchandise for customs valuation purposes based on the last sale prior to importation of the merchandise. In a victory for importers who spent years fighting the rule, CBP will preserve the “first sale” doctrine for import valuation.

Merchandise is often bought and sold in a series of transactions between the foreign manufacturer and various foreign middlemen prior to the merchandises entry into the United States. Embraced by Customs over twenty years ago, the first sale rule allows U.S. importers to set the customs value of the merchandise upon the first sale between the manufacturer and a middleman. This allows U.S. importers to capture the manufacturers price for the goods, and avoid paying customs duties upon the additional mark-ups charged by foreign middlemen. The result for importers was big savings in duties and fees paid to the United States.

In January 2008, however, CBP proposed new rules which would base the customs value of imported merchandise on the price paid in the last sale prior to the merchandises entry into the United States. While CBP believed that this “last sale” rule would more correctly estimate the entered value of the goods, industry groups and leading American importers argued that the real result of the proposed rule would be higher prices for American consumers and the complete jettisoning of court and Customs rulings on valuation upon which importers had been able to rely.

Members of the Senate and House soon climbed aboard the bandwagon calling for the withdrawal of the proposed last sale rule. A “Sense of the Congress” provision was passed in May 2008 instructing CBP not to implement the proposed rule before January 1, 2011, and not without first consulting with Congress and trade advisory groups, and only then with the approval of the Secretary of the Treasury.

The outcry over the proposed rule was even greater when then-CBP Commissioner Ralph Basham acknowledged that the rule had been proposed without substantive consultations with Congress and the trade community.

While the proposed last sale rule has languished, and CBP has been publicly stating since August 2008 that it would not implement the proposed rule, current CBP Commissioner Alan Bersin only recently committed to formally withdrawing the rule. In a letter to the National Association of Manufacturers (NAM), Bersin also committed to clearing up the backlog of ruling requests, and to developing an internal process to highlight to management any substantive regulatory initiatives, major proposed rulings and modifications of existing rulings prior to their publication.

Todays withdrawal of the proposed last sale rule and the Bersin letter to the NAM are seen as signs that CBP is starting to address some trade regulatory issues that have been nagging importers for years. As Bersin describes, the Agency is widely expected to soon announce final rules on country of origin markings, and proposed rules increasing the values for de minimis and informal entry shipments; these values have not been updated in over 15 years.

FDA and CMS Consider Parallel Review of Medical Products

The U.S. Food and Drug Administration (FDA) and Centers for Medicare and Medicaid Services (CMS) recently announced in a Federal Register Notice that they are considering establishing a parallel review process for medical products, including pharmaceuticals, biologics, and medical devices. The goal of the parallel review process is to reduce the time between FDA marketing approval or clearance decisions and CMS national coverage decisions (“NCDs”). Currently, FDA will first conduct a premarket review that assesses the safety and effectiveness of the medical products. CMS conducts a second review to determine whether the medical product will be covered by Medicare.

The agencies envision that the manufacturer of a specific medical product will request that the agencies undertake the parallel review process and the agencies will then both provide their agreement to participate in the parallel review process. The FDA would make its approval or clearance determination first because CMS would not normally provide coverage to a medical product that was not approved or cleared by the FDA. Each agency will continue to use its own regulatory and evidentiary standards for decision-making. The medical product sponsor would be expected to meet the legal requirements for both the FDA and CMS.

The agencies are seeking comments from the public on what products would be appropriate for parallel review, what procedures should be developed, how a parallel review process should be implemented, and any other issues related to operation of the process. In addition, the agencies are announcing the intent to begin a pilot program for parallel review of medical devices. All electronic or written comments must be submitted by December 16, 2010.

For more information on how FDA and CMS review medical products and how the parallel review process may be beneficial to your product, please contact us at contact@fidjlaw.com.

Oprah And Rachel Ray Assist The Federal Trade Commission In Taking Down Allegedly Deceptive Acai Marketers

The Federal Trade Commission (FTC) has obtained a court order against the Arizona­based marketers of Acai dietary supplements, Central Coast Nutraceuticals, Inc, also known as CCN. The order prohibits sales of CCNs products including the weight-loss product AcaiPure and a “colon cleanser” touted to prevent cancer, but which the FTC has said is essentially a “run-of-the-mill” laxative. Also named in the FTCs complaint were CCNs affiliated companies and personnel: iLife Health and Wellness, Simply Naturals, Fit for Life, , Health and Beauty Solutions, Graham D. Gibson, and Michael A. McKenzy.

The FTC alleged that a big part of the deception centered on bogus “free trial” offers and corrupt billing practices in which “numerous unauthorized charges” were made to customers credit-cards and debit cards. Consumers were offered free products to “try” but did not receive adequate disclosure form CCN that they would be automatically enrolled in a membership program, charged for additional products. and that CCN would continue to charge them under their memberships until such time as the consumer opted out. Such practices are in violation of the FTC Act and the Electronic Fund Transfer Act.

Other deceptive practices noted in the complaint included a plethora of unsupported health claims by CCN. AcaiPures weight-loss claims supposedly were backed by “double-blind, placebo-controlled weight loss studies” which turned out to be non­existent. Consumers were also told that “most consumers taking AcaiPure report weight loss anywhere from 10-25 pounds in the first month,” a claim that similarly had no support. Another CCN unsubstantiated claim was that Colopure could help prevent colon cancer.

Lastly, the Commission alleged that the companies engaged in false celebrity endorsements by using the names and likeness of Oprah Winfrey and Rachael Ray to promote the products. Both Winfrey and Ray provided statements to the FTC that they have no involvement with the products, did not use the products and do not endorse the product.

The FTC reported that it had received over 2,800 complaints about this business and believes that consumers were duped out of at least $100 million dollars since 2009. 

The temporary restraining order is just the first step in the FTCs law suit against CCN. It is still unknown if criminal charges will be levied as in addition to the civil penalties being sought. In addition, the FTC continues to seek a permanent injunction against CCN and its affiliated companies. 

For more information on FDA and FTC regulations and marketing guidelines, please contact us at contact@fidjlaw.com.

Allergan Pleads Guilty To Misbranding Charge Agrees To Pay $600 Million In Fines And Penalties

Allergan, Inc., the manufacturer of Botox ® Cosmetic, has agreed to plead guilty to one count of misbranding, a violation under the Food, Drug, and Cosmetic Act (“FDCA”). The company pled guilty to misbranding for its off-label promotion of Botox for unapproved uses.

Botox is an injectable neurotoxin commonly used in cosmetic procedures to smooth wrinkles. The FDA has also approved the use of Botox to treat certain muscle spasms and excessive underarm sweating. However, authorities allege that from 2000 to 2005 Allergan marketed Botox for use in treating headaches, pain, muscle stiffness, and cerebral palsy in juveniles, none of which were ever approved by the Food and Drug Administration (“FDA”). Under Federal law, although doctors can prescribe drugs for unapproved uses, pharmaceutical companies are prohibited from advertising or promoting unapproved uses for drugs currently on the market. Authorities also allege Allergan paid kickbacks to doctors who used Botox for off-label purposes and taught doctors how to miscode Botox claims when submitting these claims for Medicare and Medicaid billing.

Under the terms of the plea agreement, Allergan agreed to plead guilty to one count of misbranding and will pay $375 million in criminal penalties. The company also agreed to a five year compliance plan that will require it to disclose payments to doctors on its website and have senior executives and board members annually certify that the company is complying with federal regulation. The plea agreement also required the company to drop its lawsuit against the FDA which it filed in October 2009 that challenged an FDA rule that prohibits pharmaceutical companies from marketing drugs for off-label uses. Allergan also agreed to pay $225 million to resolve the civil claims against the company filed by five whistle-blowers in Georgia under the False Claims Act. The $600 million settlement is the fifth largest amount paid by a single defendant in a misbranding case.

In the wake of the companys guilty plea and $600 million penalty, a shareholder of Allergan has filed suit against the members of Allergans board of directors. The suit, filed in Delaware state court, alleges breaches of fiduciary duties and is seeking to shift settlement costs to the members of the Allergan board of directors in an effort to hold board members responsible for the $600 million in penalties the company now faces.

For more information on FDA regulations, labeling guidelines, and acceptable pharmaceutical marketing practices please contact us at contact@fidjlaw.com.