FDA Sued for Rescission of Menaflex’s 510(k) Clearance

A medical device manufacturer brought suit against the U.S. Food and Drug Administration (FDA) last week for rescinding the devices 510(k) clearance and reclassifying the device from a Class II device to a Class III device. The FDAs decision forced the manufacturer to undergo additional and more burdensome application processes, and significantly impacted the manufacturers ability to market the device in the United States. Class II devices are subject to 510(k) premarket notification review, whereby the FDA must determine whether a device is at least as safe and effective, that is, “substantially equivalent,” to a legally marketed device that is not subject to premarket approval, see 21 CFR 807. Class III devices, on the other hand, are subject to premarket approval (PMA), which is based on the determination that the PMA contains sufficient valid scientific evidence to assure that the device is safe and effective for its intended use(s), see 21 CFR 814. PMA approval is the most stringent type of device marketing application required by the FDA and must be obtained before a Class III device can be marketed in the United States.

In 2008, the FDA classified the Menaflex, a collagen-based surgical mesh implant intended to reinforce damaged meniscal soft tissue, as a Class II device under the Food, Drug, and Cosmetic Act (FDCA). At that time the FDA found Menaflex to be substantially equivalent to surgical mesh, a legally marketed predicate device. On March 30, 2011, the FDA rescinded this 510(k) clearance and reclassified Menaflex as a Class III device. ReGen Biologics, the manufacturer of Menaflex (or the Collagen Meniscus Implant, the name under which the device is distributed outside of the United States), filed for bankruptcy one month later.

Last month, ReGen filed a petition with the U.S. Court of Appeals for the District of Columbia Circuit seeking review of the FDAs rescission of the Menaflexs 510(k) clearance. Pursuant to the Administrative Procedure Act, ReGen also filed suit in the U.S. District Court for the District of Columbia for declaratory and injunctive relief last week. In its complaint, ReGen claims that the FDCA does not grant the FDA authority to rescind a 510(k) clearance, and seeks an order setting aside the March 30, 2011 rescission letter “as arbitrary, capricious, an abuse of discretion and not in accordance with law, and in excess of statutory jurisdiction, authority and limitations.”

According to the complaint, the review of Menaflexs 510(k) clearance was allegedly prompted by a letter from three members of Congress who urged Dr. Joshua M. Sharfstein, the Principal Deputy Commissioner and Acting Commissioner of the FDA at that time, to look into Menaflexs substantial equivalence determination. The FDAs decision to grant 510(k) clearance was allegedly influenced by outside political pressures from lobbyists and politicians.

In September 2009, the FDA released a preliminary report, which revealed that “multiple departures from processes, procedures, and practices occurred.” Furthermore, the failure of important decision-makers to sufficiently explain and document the bases for their decisions in an administrative record constituted “a clear deviation from the principles of integrity used in this review” and also “undermine[d] the ability of the agency to counter the suggestion that lobbying on behalf of ReGen affected the decision.” The report also concluded that a “focused scientific reevaluation of the decision to clear the [Menaflex] device is warranted,” but it did not specifically provide evidence that the device was unsafe or ineffective. ReGen alleges that this report created a pretense to justify re-review of the devices Class II status.

ReGen claims that the FDA lacks explicit authority under FDCA to rescind 510(k) clearances. In 2001, the FDA issued a proposed rule that would authorize the FDA to reconsider and rescind a 510(k) clearance, but it did not finalize that rule. Although the FDA does have authority to reclassify a device from Class II to Class III, see Section 513(e) of the FDCA, or to withdraw premarket approval of devices, see Section 515(e) of the FDCA, the decision to rescind Menaflexs 510(k) clearance was not expressly authorized under either of those provisions. The FDA did not provide a statutory or regulatory basis for its decision and has not yet responded to ReGens complaint. It remains unclear whether the FDA has implicit authority under FDCA to rescind 510(k) clearances.

This decision raises interesting issues involving the FDAs regulation of medical devices, the Administrative Procedure Act, and legal principles of ripeness, exhaustion, and subject-matter jurisdiction. Fuerst Ittleman will continue to monitor the progress of these issues in this case. For more information, contact us at contact@fidjlaw.com.

Recent DOJ Letters May Signal Increased Federal Efforts To Prosecute Medicinal Marijuana Under the CSA

Recent Department of Justice actions may signal an impending crackdown on the medical marijuana industry by federal authorities. The issue of medical marijuana is a textbook example of the interplay between State and Federal governments and highlights issues of federalism, preemption, and the Supremacy Clause of the U.S. Constitution.

Though 15 states currently allow for the use of medical marijuana, marijuana remains prohibited under federal law. Under federal law, marijuana is classified as a Schedule 1 drug under the CSA. Drugs classified as Schedule 1 have been found by Congress to: 1) have a high potential for abuse; 2) have no currently accepted medical use in treatment in the US; and 3) lack accepted safety for use under medical supervision. Additionally, no prescriptions may be written for CSA Schedule 1 drugs. Therefore, though it may be legal under state law to possess, cultivate, and/or distribute marijuana for medicinal purposes, such actions violate federal law.

The conflict between the rights of citizens under state medical marijuana laws and the federal CSA has played out in several landmark decisions in the U.S. Supreme Court over the past decade. In United States v. Oakland Cannabis Buyers Cooperative, 582 U.S. 483 (2001), the Court was faced with a battle between the rights of citizens under California law and the CSA. Under the California Compassionate Use Act, a patient or his primary caregiver could cultivate or possess marijuana on the advice of a physician. Oakland Cannabis Buyers Cooperative was organized to distribute marijuana to qualified patients for medical purposes. The United States sued to enjoin the Cooperative under the CSA arguing that the Cooperatives activities violated the CSAs prohibitions on distributing, manufacturing, and possessing with the intent to distribute or manufacture a controlled substance. In response, the Cooperative argued that a common law medical necessity defense should be written into the CSA and that because California law allowed for medicinal use, the medical necessity defense should apply.

In siding with the government, the Supreme Court held that there is no medical necessity exception to the CSAs prohibitions on manufacturing and distributing marijuana. The Court went on to explain that Congress made a value judgment in placing marijuana in Schedule 1 under the CSA. As such, because the CSA defines Schedule 1 drugs as having no currently accepted medical use, medical necessity could not be used to avoid prosecution.

In Gonzales v. Raich, 545 U.S. 1 (2005), the Supreme Court directly addressed the issue of whether Congress, pursuant to its Commerce Clause authority, could regulate and prohibit the local cultivation of marijuana which complied with California state law. In Raich, the Respondents were California residents who qualified for medicinal marijuana under the states Compassionate Use Act. After federal agents seized and destroyed all six of Monsons cannabis plants, the respondents filed suit seeking injunctive and declaratory relief prohibiting the enforcement of the federal CSA to the extent it prevented them from possessing, obtaining, or manufacturing cannabis for their personal medical use. The respondents claimed that enforcing the CSA would violate the Commerce Clause and other constitutional provisions. In response, the government argued that the Commerce Clause permitted regulation of even entirely intrastate activities so long as those activities are part of an economic “class of activities” that have a substantial effect on interstate commerce.

In holding that the CSAs prohibition of locally grown and used marijuana was permissible, the Court found that Congress had a rational basis for concluding that local marijuana substantially affects interstate commerce. The Court found that Congress can regulate purely intrastate activity that is not itself “commercial,” i.e., not produced for sale, if it concludes that failure to regulate that class of activity would undercut the regulation of the interstate market in that commodity. The Court went on to find that due to the inability to distinguish or prevent locally cultivated marijuana from entering the interstate market, the failure to regulate it would undermine the purposes of the CSA as a whole.

Post-Raich, the position of the DOJ throughout the remainder of the Bush administration was that any use of medicinal marijuana, though legal under state law, could and would be prosecuted under the CSA. However, this position appeared to change under the Obama administration with the publication of the Ogden Memorandum in 2009. On October 19, 2009, the DOJ announced that, while it was committed to the enforcement of the CSA, it was also committed to efficient and rational use of its limited resources. Therefore, the DOJ advised that prosecutors “should not focus federal resources in [their] States on individuals whose actions are in clear and unambiguous compliance with existing state laws providing for the medical use of marijuana.” A copy of the Ogden Memorandum can be read here.

However, news organizations such as NPR have reported that over the course of the past several months, the U.S. Attorneys Office has issued letters to 8 of the 15 state governments which authorize the use of medicinal marijuana emphasizing DOJs commitment to enforcing the Controlled Substances Act (“CSA”) vigorously against individuals and organizations that participate in unlawful manufacturing and distribution activity involving marijuana under federal law, even if such activities are permitted under state law. A copy of NPRs report can be read here.

In the wake of these letters, DOJ spokespersons have emphasized that the Ogden Memorandum neither legalized marijuana possession nor provided a defense to prosecution under federal law and that distribution continues to be a federal offense. As a result, dispensaries, which are legal under some State medical marijuana laws, may face a renewed risk of prosecution.

The attorneys at Fuerst Ittleman, PL have extensive experience dealing with administrative law, regulatory compliance, and white collar criminal defense. You can reach an attorney by emailing us at contact@fidjlaw.com.

Proposed rulemaking by DEA will bring its regulations governing forfeitures in line with the Civil Asset Forfeiture Reform Act

The Drug Enforcement Administration (DEA) recently published a notice of proposed rulemaking regarding the consolidation of seizure and forfeiture regulations in the Department of Justice which will harmonize the regulations of the DEA, Bureau of Alcohol, Tobacco & Firearms (ATF) and Federal Bureau of Investigation (FBI) pertaining to the seizure and forfeiture of assets and bring those procedures for seizure and forfeiture under one regulation. That notice of proposed rulemaking can be found here. Generally, assets may be seized and forfeited to the government if they were used in violation of a law providing for forfeiture, are contraband, violate a regulatory statute, or are connected in some way to the laundering of monetary proceeds of a specified unlawful activity.

In 2000, Congress passed the Civil Asset Forfeiture Reform Act (CAFRA) which amended the forfeiture laws regarding seizures and forfeitures involving federal agencies, except for violations of the Customs laws, certain laws involving embargos, IRS laws or seizures for violations of the Food, Drug & Cosmetic Act. CAFRA was passed in response to stories of abuse regarding the seizures and forfeitures of assets without adequate due process protections for individuals who could not afford counsel or the bond often required to challenge government forfeitures.

For example, prior to CAFRA, there were no fixed time limits regarding when notice letters had to be sent by the agency informing an owner that his or her goods had been seized for forfeiture and no remedies to the owner for goods being held an inordinate amount of time. Likewise, there was no fixed deadline governing when a forfeiture proceeding had to be commenced after notice had been sent to the owner. Additionally, persons claiming seized goods had to post a bond, sometimes in the thousands of dollars, just for the right to contest the forfeiture. In cases where the owner of seized property could not afford a lawyer, he or she had to represent his or her self. In all cases, the agency only had to show probable cause that the goods were forfeitable, the owner had the burden of proof to show why the goods should not go to the agency. Innocence or lack of knowledge of a violation of the law was not necessarily a defense.

Now, under CAFRA, forfeiture notices must generally be sent within 60 days of seizure;, and if the notice is not sent the agency must return the property. If an owner files a claim for the property, a complaint for forfeiture in court must be filed within 90 days, the owner no longer needs to post a bond, and if the forfeiture is of a primary residence, and the owner does not have the funds for a lawyer, the court must appoint a lawyer. Furthermore, the government now has the burden to prove by the greater weight of the evidence that the goods are forfeitable under the law, and an owner now can assert innocence or lack of knowledge of the violation claimed by the agency as a defense to forfeiture, and an owner can obtain an attorneys fees award against the agency if he or she prevails in a forfeiture action in court.

The proposed rulemaking by the DEA seeks to harmonize its regulations with these CAFRA requirements and consolidate its rules and procedures with those of other Department of Justice agencies. These proposed, consolidated regulations will apply to all seizures and forfeitures commenced by any agency of the Department of Justice except those specifically excluded by CAFRA. The proposed regulations will make express in the rules of the Department of Justice the enhanced due process protections provided by CAFRA to owners and others with interests in property.

When faced with the deprivation of property by a federal agency, it is important to obtain counsel in order to ensure that the government complies with the enhanced due process protections of CAFRA. At Fuerst Ittleman, we will monitor the proposed rulemaking and will blog when the final rules are promulgated.

Department of Justice Prosecutes US Taxpayer For Failing to Report HSBC Bank Account in Bermuda

On May 19, 2011, a criminal information was filed in the U.S. District Court for the District of Massachusetts charging Michael F. Schiavo with one count of willfully violating the Foreign Bank Account Reporting Requirements of 31 U.S.C. sections 5314 and 5322(a).

Of particular interest is the following paragraphs of the information:

11. A “silent disclosure” occurs when a U.S. taxpayer with an undeclared account files FBARs and amended returns and pays any related tax and interest for previously unreported offshore income without notifying the IRS of the undeclared account through the Voluntary Disclosure Program. A silent disclosure does not constitute a voluntary disclosure. On its website, the IRS strongly encourages taxpayers to come forward under the Voluntary Disclosure Program and warns them that taxpayers who instead make silent disclosures risk being criminally prosecuted for all applicable years.

18. On or about October 6, 2009, following widespread media coverage of UBS’s disclosure to the IRS of account records for undeclared accounts held by U.S. taxpayers and the IRS’s Voluntary Disclosure Program, Schiavo made a “silent disclosure” by preparing and filing FBARs and amended Forms 1040 for tax years 2003 to 2008, in which he reported the existence of his previously undeclared account at HSBC Bank Bermuda. He made such filings notwithstanding the availability of the Voluntary Disclosure Program. Schaivo reported on the amended individual income tax returns the interest income that he earned from the previously undeclared account he held at HSBC Bank Bermuda but did not report on the 2006 return the income earned that he earned from Headway Partners.

19. On or about October 27, 2009, a Special Agent from the IRS attempted to interview Schiavo at his home.

20. On or about October 29,2009, Schiavo prepared and executed a second amended individual income tax return for tax year 2006 on which he reported the income earned that he earned from Headway Partners and that had been deposited into his previously undeclared account at HSBC Bank Bermuda.

A full copy of the information is available here.

What is interesting is that the criminal charges do not contain any violations of the Internal Revenue Code (Title 26), but instead only contain violations of the Bank Secrecy Act. The Bank Secrecy Act requires individuals to file Form TD 90.22-1. A copy of the form is available here.

Further, the U.S. Department of Justice has issued a press release on the matter available here.

The attorneys at Fuerst Ittleman, PL have extensive experience in addressing undeclared foreign bank accounts, undeclared income and voluntary disclosures. You can contact an attorney by emailing us at contact@fidjlaw.com.

Drug Company Immunity A Possibility In North Carolina

The North Carolina legislature is currently considering a bill that would provide immunity from lawsuits for drug companies in cases where the drug product in question had received FDA approval. If passed, North Carolina would be only the second state to provide such immunity for drug manufacturers. Michigan, which passed a similar law in 2005, was the first state to do so.

Prior to bringing a drug to market, drug manufacturers must receive FDA approval. During this approval process, the burden of establishing the safety and effectiveness of a drug is on the drug manufacturer. Traditionally, even after a drug has been approved for use, the law, both state tort law as well as federal regulatory law through the FDCA, has placed a continuing duty upon drug companies to warn its consumers of any potentially harmful effects of its products. Recent Supreme Court precedent has echoed this principle.

In Wyeth v. Levine, 129 S Ct 1187 (2009), the issue of whether FDA approval of a drug product was intended to preempt and prohibit contemporaneous state tort lawsuits was addressed by the United States Supreme Court. In Wyeth, the plaintiff filed tort action for negligence and strict product liability against a drug manufacturer in Vermont State Court alleging that the drug company had failed to include an adequate warning label describing the possible injuries which could occur from the injection of its drug product. In response, the drug manufacturer argued that the Plaintiffs failure-to-warn claims were preempted by federal law because: 1) it had received FDA approval for its products drug label; and 2) any state-law duty to provide stronger warnings would obstruct the purposes of the FDCA and federal drug labeling regulations because it would substitute a lay jurys decision about drug labeling for the expert judgment of the FDA.

In rejecting the drug manufacturers argument, the Court found that the FDCAs purpose was to bolster consumer protection and that Congress did not provide for federal remedies for consumers harmed by unsafe/ineffective drugs because state common law rights of action were already available. Further, unlike medical devices, Congress did not specifically provide for preemption of claims for drugs. Therefore, the Court found that “Congress did not intend FDA oversight to be the exclusive means of ensuring drug safety and effectiveness.”

However, if passed, HB 542 would provide immunity to drug manufacturers and sellers from product liability suits related to any drug sold or manufactured which first received FDA approval prior to production and sale. The only exceptions under the proposed bill are for cases where FDA approval was obtained through fraud or bribery. Such a law will have dramatic effects not only on the ability of consumers to hold drug companies accountable for selling dangerous or defective drugs but also on the State government itself bringing related claims.

An example of the likely effects of such legislation can be seen in a recent decision of the Michigan Court of Appeals interpreting a similar immunity statute under Michigan law. In Michigan v. Merck & Co. Inc., the Michigan Court of Appeals held that where the drug in question was approved by the FDA, the states suit to recover Medicaid money premised on fraud by the drug company in its representations regarding the safety and efficacy of the drug was barred under Michigan law. In that case, the court found that, though the suit was based on the Michigan Medicaid False Claims Act, the underlying allegations of the Complaint qualified the suit as a “product liability action” under Michigan law. As such, because 1) the States suit constituted a “product liability action” under Michigan law, 2) Mercks drug received FDA approval, and 3) that approval was not obtained through fraud or bribery, Merck qualified for immunity and the Court of Appeals remanded the case with orders to dismiss.

For more information regarding the drug approval process or for any questions regarding how your company can maintain FDA regulatory compliance, please contact us at contact@fidjlaw.com.

DOJ Will No Longer Seek Chevron Deference for Revenue Rulings and Revenue Procedures

On May 7, 2011, the Department of Justice announced it will no longer argue for Chevron deference to apply to revenue rulings and revenue procedures. The announcement comes in the wake of the Supreme Courts recent decision in Mayo Found. for Med. Educ. & Research v. U.S., 131 S. Ct. 704 (2011) in which the Court held all regulations should be analyzed using Chevron deference regardless of the agency which promulgated them.

A basic principle of administrative law is that, generally, courts will tend to defer to an agencys interpretation of the statute that it administers. The Supreme Court expanded upon this idea in Chevron U.S.A. Inc. v. Natural Resource Defense Counsel, 467 U.S. 837 (1984). In Chevron, the Court established a two part test to determine whether to grant deference to an administrative agencys interpretation of a statute. First, the Court will look to see if Congress has directly spoken to the matter at issue. If so, the Courts analysis is complete and the administrative agencys interpretation is not entitled to deference. However, if the Court determines that issue is ambiguous, the Court will proceed to step two of the Chevron analysis. Under step two, the question for the court is whether the agency’s interpretation is based on a permissible construction of the statute. So long as the agencys interpretation is a permissible construction, the Court will not substitute its own judgment for that of the administrative agency and will uphold the agencys interpretation.

Not all agency actions are entitled to the highly deferential standard of Chevron deference. While Chevron deference applies to agency interpretations contained within properly promulgated regulations, interpretations such as those in opinion letters and interpretations contained in policy statements, agency manuals, and enforcement guidelines — all of which lack the force of law — do not warrant Chevron deference. Instead, they are “entitled to respect,” but only to the extent that they are persuasive. See Skidmore v. Swift & Co., 323 U.S. 134 (1944). Revenue rulings, which are official pronouncements of the IRS addressing the application of the Internal Revenue Code (“I.R.C.”) and regulations to particular factual situations, and revenue procedures, which are official statements of a procedure that affect the rights or duties of taxpayers under the law, would fall into this latter category.

Prior to the Mayo decision, debate raged as to whether Treasury regulations were to be analyzed under the highly deferential Chevron standard or whether the older, less deferential. multi-factored analysis of National Muffler Dealers. Assn., Inc. v. United States, 440 U.S. 472 (1979), used by the Court previously to analyze tax regulations, still governed. Under National Muffler, when evaluating a regulations validity, the Court looked to numerous factors to determine whether the Commissioners interpretation of the statute in question should receive deference including: 1) whether the regulation was promulgated contemporaneously with the statute in question; 2) the length of time the regulation had been in effect; 3) the reliance placed on the regulation by the Commissioner; 4) the consistency of the Commissioners interpretation over time; and 5) the degree of scrutiny Congress has devoted to the regulation during subsequent reenactments of the statute. National Muffler Dealers Assn., Inc., 440 U.S. at 477. As a result, while a regulation could pass muster as being a permissible construction under the Chevron test, “[u]nder National Muffler, . . ., a court might view an agencys interpretation of a statute with heightened skepticism when it has not been consistent over time, when it was promulgated years after the relevant statute was enacted, or because of the way the regulation evolved.” Mayo Found. for Med. Educ. & Research, 131 S. Ct. 104.

Moreover, prior to Chevron, the Court emphasized that rules passed pursuant to the Treasury Departments “general authority” under 26 U.S.C. § 7805(a), such as the rule in Mayo, were entitled to less deference than those rules under a specific grant of authority to define a statutory term or prescribe a method of executing a statutory provision. See Rowan Cos. v. United States, 452 U.S. 247 (1981); United States v. Vogel Fertilizer Co., 455 U.S. 16 (1982). As a result of these Pre-Chevron decisions, the deference afforded to the Commissioners interpretation of ambiguous IRC provisions varied depending on not only the multiple National Muffler considerations but also the authority under which the regulation was promulgated.

In Mayo, the Court found that as a result of Chevron and its progeny, the administrative law landscape had changed substantially since National Muffler, Rowan, and Vogel. The Court found that the underlying principles of Chevron applied to the tax context and that the Court in previous decisions had recognized the importance of maintaining a uniform approach to the judicial review of administrative agency actions. Therefore, the National Muffler analysis was no longer appropriate and the more deferential Chevron deference applied. Additionally, as a result of Mayo, all regulations promulgated by the Commissioner, regardless of whether promulgated under a specific grant of authority, will be analyzed under Chevron and entitled to the same deference.

The attorneys at Fuerst Ittleman, PL have extensive experience dealing with tax matters, administrative law, and regulatory compliance. You can reach at attorney by emailing us at contact@fidjlaw.com.

Senate passes Food Safety Crime Bill with greatly enhanced penalties

The United States Senate recently passed a food safety crime bill sponsored by Senator Patrick Leahy that will significantly strengthen criminal penalties for companies and persons that knowingly violate food safety standards and place tainted products on the market. The legislation, known as the Food Safety Accountability Act, will create a new criminal offense in Title 18 of the United States Code, and will have significant criminal penalties of up to 10 years imprisonment for committing certain food offenses “knowingly and intentionally to defraud or misleadand with conscious or reckless disregard or a risk of death or serious bodily injury.” The Senates version will now go to the House of Representatives for consideration. This bill evidences the Governments increased focus on food safety and adds teeth into the new Food Safety Modernization Act, passed last year to increase the regulatory powers and oversight of the Food & Drug Administration.

The FDA is ramping up criminal enforcement of the nations food and drug laws. We have previously blogged about the unsuccessful prosecution of the general counsel of GlaxoSmithKline, a large pharmaceutical company for obstruction of justice, here. We have also recently blogged here on the new emphasis by the FDA on bringing Park doctrine prosecutions, where corporate executives can be convicted of crimes even if they have no knowledge of or intent to commit a crime. Our lawyers are monitoring the progress of this bill and are ready to advise clients on how to navigate the FDAs regulatory minefield.

Former in-house counsel for GlaxoSmithKline acquitted

In another stunning and surprising ruling to come out of the prosecution of Lauren Stevens, a former in-house counsel for GlaxoSmithKline, for obstructing an FDA investigation into off-label marketing, the Court granted Ms. Stevens motion for a judgment of acquittal after the end of the presentation of the governments case at trial. Essentially, the Court found the evidence legally insufficient to have a jury consider it. The transcript of that decision can be found here. We previously blogged about the Stevens prosecution here and here.

What is notable about the Courts decision to acquit Ms. Stevens is not only the rarity of such acquittals before a jury gets to deliberate, but what the Court stated about the importance of the attorney-client privilege. Ms. Stevens was prosecuted for conduct during the course of her work responding to an FDA investigation as an in-house lawyer for a major pharmaceutical company. The Court found that many of the documents used as evidence by the government should never have been provided to it under the attorney-client privilege. Those documents were provided by GlaxoSmithKline under an exception to the attorney-client privilege involving cases where a lawyer is retained specifically to assist a client to commit a crime or a fraud. The Court found that Ms. Stevens was never retained or appointed for that purpose, but to provide representation to the corporation and to gather information. Therefore, the exception to the attorney-client privilege was inapplicable, and the government should never have had access to otherwise privileged documentation.

The Court also expressed a concern regarding possible abuses in permitting the prosecution of a lawyer for providing legal guidance. The Court stated that it had sentenced a number of lawyers who actually committed crimes or assisted others in committing crimes. This was not one of those cases. The Court stated that lawyers, “should never fear prosecution because of the advice that he or she has given to a client”, and that “a client should never fear that its confidences will be divulged unless its purpose in consulting the lawyer was for the purpose of committing a crime or a fraud”. This decision is important to businesses and individuals alike, in that it reaffirms that the government cannot invade the space between a lawyer and his or her client except under very narrow circumstances, none of which were applicable in the case of Ms. Stevens.

The Court also clearly rejected the governments theory of prosecution”that Ms. Stevens acted to obstruct justice. Instead, the Court reviewed Ms. Stevens conduct in zealously representing her client and placed it in the most favorable light in the investigation. Also, the Court found that the allegedly false statements to the FDA attributed to Ms. Stevens were taken out of context and were made under the advice of numerous lawyers for the company. The Court stated that “only with a jaundiced eye and with an inference of guilt thats inconsistent with the presumption of innocence could a reasonable jury ever convict this defendant”.

The government, including the FDA, has made it a priority to prosecute not just corporations, but also individuals in regard to the commission of strict liability criminal violations of regulatory laws. These so-called “Park” prosecutions have been discussed in our blogs here and here. The Stevens prosecution was not a “Park” prosecution because it alleged intentional, willful conduct, but it highlights the governments goal of prosecuting and convicting more individuals, not just companies, of criminal violations of regulatory laws. Our White Collar Criminal Practice group continues to monitor these cases in our effort to keep our clients informed and out of harms way.

Court Dismisses Mylan Pharmaceuticals Lawsuit Over Lipitor Generic ANDAs On Standing and Ripeness Grounds

On May, 2, 2011, the United States District Court for the District of Columbia granted the FDAs Motion to Dismiss a lawsuit brought by Mylan Pharmaceuticals (“Mylan”) seeking injunctive and declaratory relief for alleged violations of the Administrative Procedure Act (“APA”) by the FDA in the approval process of several Abbreviated New Drug Applications (“ANDA”) for the brand-name drug Lipitor. A copy of the Courts decision can be read here.

The decision contains a helpful and educational summary of the FDA approval process for generic drugs. As explained within the opinion, once a brand-name or “pioneer drug” has received approval, manufacturers of generic versions of these drugs may seek approval of the FDA to market their generic versions by filing an ANDA.

Within the ANDA, a generic drug manufacturer must demonstrate that the generic is the “bioequivalent” of the pioneer drug, i.e. the new generic drug can be expected to have the same therapeutic effect as the pioneer drug when administered to patients. Additionally, for each “Orange Book” patent of the pioneer drug that is implicated by the generic drug, the generic manufacturer must certify as to whether the proposed generic would infringe on that patent. If an ANDA applicant seeks to market its generic drug prior to the expiration of the patents for the brand name drug, it must make a “paragraph IV” certification stating “such patent is invalid or will not be infringed by the manufacture, use, or sale, of the new drug. . . .” 21 U.S.C. § 355(j)(2(A)(vii)(IV).

However, once a generic drug manufacturer has filed an ANDA with a paragraph IV certification, it has by law infringed on the underlying patents and the brand-name drug manufacturer may bring a patent infringement suit. As a result, challenging patents can be costly for generic manufacturers. To encourage the production of generic drugs, federal law provides the first generic drug manufacturer who files an ANDA containing a paragraph IV certification, whose ANDA is ultimately approved by the FDA, a 180 day exclusivity period in which it may manufacture its generic version free from competition from other generic manufacturers. 21 U.S.C. § 355(j)(5)(B)(iv).

The Mylan case stems from competing ANDAs for the production of a generic equivalent of Lipitor. Plaintiff, Mylan Pharmaceuticals, through its subsidiary Matrix labs, filed an ANDA for its generic of Lipitor two years ago and, at the time of the suit, the FDA was still evaluating its application for approval. Mylan argued that its generic should be eligible for approval and marketing by June 28, 2011 when the exclusivity on Lipitor patents begin to expire.
In this case, Mylan also alleged that a competitor, Ranbaxy Laboratories, Ltd. (“Ranbaxy”), whose own ANDA for a generic equivalent of Lipitor was filed nine years prior to the suit, was the first generic manufacturer to file an ANDA with a paragraph IV certification for Lipitor, therefore making Ranbaxy eligible for the 180 exclusivity period should its product become approved. Mylan further alleged that Lipitors manufacturer Pfizer and Ranbaxy reached a patent infringement settlement that prohibits the production of a generic equivalent by Ranbaxy until November 2011.

As a result of this settlement, and the additional 180 exclusivity period that Ranbaxy would be entitled to should its ANDA be approved, Mylan would be unable to market is product until May 2012. Mylan further argued that Ranbaxy should be stripped of its 180 day exclusivity period for violations of the FDA application integrity policy (“AIP”). The AIP was developed by the FDA to ensure validity of data submissions called into question by the agency’s discovery of wrongful acts such as fraud, untrue statements of material fact, bribery, and illegal gratuities and to withdraw approval of, or refuse to approve, applications containing fraudulent data. More information on the FDAs AIP can be found on the FDAs website here.

The case addressed whether drug manufacturers can sue the FDA and force the agency to take action on pending ANDAs filed by their competitors. Mylan brought its action against the FDA alleging two counts: 1) the FDA violated the APA by unreasonably or unlawfully delaying a determination that Ranbaxy violated the integrity policy; and 2) the FDAs failure to approve Mylans ANDA on the basis of Ranbaxys 180 exclusivity violated the APA because it is arbitrary and capricious. In response, the FDA Filed a Motion to Dismiss for lack of subject matter jurisdiction.

In rejecting Mylans arguments and granting the FDAs Motion to Dismiss, the Court focused on standing and ripeness, two basic requirements lawsuits. Put simply, standing is the right of a person to bring a case. In order to establish standing, a plaintiff must demonstrate: 1) that it has suffered an injury in fact, which is an actual or imminent invasion of a legally protected, concrete and particularized injury; 2) causation, i.e. the alleged injury must have been caused by the defendants conduct at issue; and 3) redressability, i.e. the court can provide a remedy to rectify the injury. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-561 (1992).

In determining that Mylan lacked standing, the Court found that because Mylans ANDA had yet to be approved it faced no imminent injury from the FDAs possible approval Ranbaxys ANDA and 180 day exclusivity period. Further, the Court found that no case within the D.C. Circuit has ever granted standing to a drug manufacturer who was a subsequent ANDA filer and who has not yet received FDA approval to compel the FDA to take action on a competitors ANDA.

Additionally, the Court went on to find that even if Mylan could assert an imminent injury, it still lacked standing because its injury could not be redressed by the relief it requested. As stated above, Mylans own ANDA has not yet been approved by the FDA. Therefore, even if the Court granted the relief Mylan requested, denying Ranbaxys ANDA and extinguishing its 180 day exclusivity period, Mylan could be no more certain that its own generic could begin being marketed in June 2011.

The Court went on to hold that even if Mylan could establish standing to sue the FDA, the case must still be dismissed because it was not ripe. The ripeness concept is closely related to the idea of standing to sue. In order to determine whether a controversy is ripe, the court must “evaluate both the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration.” Texas v. United States, 523 U.S. 296, 301 (1998).

Here, the Court found that the case was not ripe for two reasons. First, because Mylans own ANDA had not yet received approval from the FDA, factual uncertainty remained. As stated by the Court, “a claim is not ripe for adjudication if it rests upon contingent future events that may not occur as anticipated.” Further, the Court found that because the FDA has not yet acted, there was no final agency action, which is a required element for review under the APA. Finally, the Court found that any hardship Mylan might suffer by a delayed exclusivity determination was hypothetical because Mylans ANDA has not yet been approved. However, the Court did note that “nothing prevents Mylan from seeking judicial recourse if and when the FDA renders a final exclusivity decision that is not to Mylans liking.”

This decision places Mylan in a very difficult position. We will monitor this case as it makes its way to the D.C. Circuit Court of Appeals and will report when and if this decision is upheld on appeal. For more information regarding the ANDA generic drug approval process or for any questions regarding how your company can maintain FDA regulatory compliance, please contact us at contact@fidjlaw.com.

Sherley V. Sebelius: Federal Appeals Court Vacates Preliminary Injunction on NIH Funding for Embryonic Stem Cell Research

Today, the United States Court of Appeals for the District of Columbia overruled, 2-1, a district court judges preliminary injunction on federal funding of research using embryonic stem cells (ESCs). Two scientists brought this suit to enjoin the National Institute of Health (NIH) from funding research using ESCs pursuant to the NIHs 2009 Guidelines. Opinion ( Opin.) at 2.

The district court had granted the plaintiffs motion for a preliminary injunction, reasoning that the scientists would likely prevail in demonstrating that the NIH Guidelines violated the Dickey-Wicker Amendment. The Dickey-Wicker Amendment is an appropriations rider that the NIH from funding:

  • (1) The creation of a human embryo or embryos for research purposes; or
  • (2) research in which a human embryo or embryos are destroyed, discarded, or knowingly subjected to risk of injury or death greater than that allowed for research on fetuses in utero under 45 C.F.R. 46.204(b) and section 498(b) of the Public Health Service Act (42 U.S.C. 289g(b)).

Opin. at 4.

The plaintiffs in this case, Dr. Sherley and Dr. Deisher, are scientists who conduct research using only adult stem cells. These scientists assert that the NIH violated the Dickey-Wicker Amendment by funding ESC research projects. Id. The plaintiffs had originally filed suit with several other individuals and organizations in August 2009. As we previously reported, the district court granted the Governments motion to dismiss due to a lack of standing. However, the plaintiffs appealed and the federal appeals court held that the doctors alone had standing because they competed with ESC research for funding from the NIH. Opin. at 7.

On remand, the district court granted the doctors motion for a preliminary injunction “providing Ëœthat defendants and their officers, employees, and agents are enjoined from implementing, applying, or taking action whatsoever to the [2009 Guidelines], or otherwise funding research involving human embryonic stem cells as contemplated in the Guidelines.” Id.

The Government appealed the district court decision. The appeals court found that the NIH reasonably concluded that government funding for ESC research pursuant to the 2009 Guidelines is not prohibited by the Dickey-Wicker Amendment. The Court reasoned that barring funding would be detrimental to ESC research by preventing new research projects and hindering projects that are currently underway. Circuit Judge Ginsburg, writing for the Court, reasoned that the NIH Guidelines accounted for the Dickey-Wicker Amendment by making distinctions between stem cells and embryos. Opin. at 6. Additionally, Judge Ginsburg reasoned that the Guidelines allow for federal funding of research on ESCs that are already in existence or have been created by private funding. The Guidelines state that federal funding cannot be used to fund the derivation of new cells lines which are obtained through the destruction of embryos.

The courts analysis turned on the ambiguity of the Dickey-Wicker Amendment, specifically, a lack of definition for the word “research.” Opin. at 13. The court determined that the present tense of the Amendment, with no reference to embryos that “were destroyed,” implied that the Amendment did not ban ESC research on stem cell lines in existence at the time of the Amendments enactment. Opin. at 11. Judge Ginsburg also pointed out that Congress has continued to leave the Dickey-Wicker Amendment unchanged every year since 1996 even though Congress has had “full knowledge” that the Department of Health and Human Services has been funding ESC research since 2001. Opin. at 16.

For now, the courts decision to vacate the preliminary injunction means that federal funding can continue while pending lawsuits challenging the expansion of ESC research continue.