The NIH’s Amended Conflict of Interest Regulations: A New, Weaker Approach to Intellectual Property Interests?

Yesterday, at long last, the National Institutes of Health released the final revisions to its regulations governing financial conflicts of interest on the part of applicants for federal research funds.  And there is good news.  The rule’s sunshine provisions have not, as was feared, been “gutted.”  Grant recipients will have to make their investigators’ financial conflicts of interest publicly accessible.  While an institution will not have to post the details of each conflict on its website, as was provided in the proposed regulations, if it does not it will instead have to provide the information in writing to anyone who asks for it.  Academics, advocates, federal and state prosecutors, other regulators, and members of the news media will have the access they need.  For sure, prospective patients or research participants will be less likely to come across information about investigator conflicts, but, as Kathleen Boozang explains here, it is far from clear that they would find such information helpful.

Of potentially more significance than the weakened sunshine provisions, the final regulations diverge from the proposed regulations with regard to the treatment of intellectual property.  Under the prior regulations, investigators were required to inform their institutions about relevant intellectual property rights, including copyrights, patents, and royalties in excess of $10,000.  The proposed regulations modified the definition to require disclosure of copyrights, patents, and royalties (and agreements to share in royalties) regardless of amount.  Under the final regulations, investigators do not need to tell their institutions about their intellectual property rights and interests unless and until they are in “receipt of income related to such rights and interests.”

The preamble to the final regulations is somewhat confusing.  For example, while the final regulations define significant financial interest to exclude intellectual property rights and interests that do not produce income, the agency states in the preamble that it “would expect institutional policies to require disclosure upon the filing of a patent application or the receipt of income related to the intellectual property interest, whichever is earlier.”  The preamble also contradicts itself with regard to the applicability of the rule’s $5,000 threshold, stating at one point that the threshold “applies to licensed intellectual property rights (e.g., patents, copyrights), royalties from such rights, and agreements to share in royalties related to licensed intellectual property rights,” while explaining (correctly, I think) at another point that “the $5,000 threshold would apply to equity interests and ‘payment for services,’ which would include salary but not royalties.”

The NIH’s explanation of its addition of the “receipt of income related to such rights and interests” qualifier to the definition of a significant intellectual property right or interest is especially confusing.  The agency writes that its intent was to exclude from the definition

“the rare cases when unlicensed intellectual property is held by the Investigator instead of flowing through the Institution,” because “it is difficult to determine the value of such interests.”  The agency’s point about valuation may be true, but that is an argument in favor of disclosure not against it.  With regard to equity interests, the final regulation requires investigators to disclose any equity interest in a non-publicly traded entity; the Food and Drug Administration similarly requires disclosure of equity interests “whose value cannot be readily determined through reference to public prices[.]“  The FDA also requires disclosure of any “[p]roprietary interest in the tested product,” without regard to value.

When an investigator has a proprietary interest in a product under study the potential exists for a serious conflict regardless of the interest’s current value or whether it is currently income-generating.  Seton Hall Law’s Center for Health & Pharmaceutical Law & Policy and others have recommended a near-total ban on serving as an investigator in that case.  Such a ban cannot, of course, be implemented unless investigators are required to tell their institutions about their proprietary interests.

Generic Drugs, Cost-Effectiveness, and Confidence

Smarter prescribing and better medication management are linchpins of current efforts to care for those with chronic medical conditions in a more consistent, coordinated, and, it is hoped, affordable manner.  A study reported in last month’s Health Affairs found that using medication to control patients’ blood sugar levels and lower their blood pressure and cholesterol is not just cost-effective, it can actually save money by reducing “downstream complications and the use of health services that outweigh the cost of the medications themselves.”  Notably, these cost savings can only be achieved if the medications in question are generics.  The authors conclude that “in a health care system strapped for resources, physicians will increasingly use generics, and patients will have to expect that most of their medications will be generic.”

As the authors also note, resistance to generics, on the part of both patients and their doctors, is longstanding and persistent.  Some of this can be chalked up to the intense and wide-ranging marketing campaigns that innovator companies mount on behalf of branded drugs.  Branded medications used to treat chronic conditions are especially heavily marketed, including through the use of free samples.  Numerous studies (here’s a recent one out of Vermont) show that physicians with sample closets in their offices are less likely than those without sample closets to prescribe generics where appropriate.

Interestingly, the Centers for Medicare and Medicaid Services announced earlier this year that Medicaid Part D prescription drug plans “may incur expenses related to distribution of and reporting on generic drug samples, provided to members within a physician’s office setting, under the plan’s administrative cost structure if doing so is consistent with a cost effective drug utilization management program.”  CMS explained that generic samples have the potential to reduce the government’s overall costs and to promote compliance with drug therapies by reducing enrollees’ current and future cost sharing expenses.  (George Van Antwerp argues here that CMS overstates the benefits of generic samples, but only because generic fill rates are rising so fast without them.)

Marketing is not the whole story behind lingering resistance to generics, though.  As the New York Times recently reported, most generic drugs are manufactured in “a shadowy network of facilities in China and India that are rarely visited by government inspectors, who sometimes cannot even find the plants.”  While plants in the United States are inspected at least once every two years, the Food and Drug Administration has historically lacked the resources to provide the same level of oversight to foreign facilities.  An “epoch-making” agreement between the FDA and generic drug manufacturers will, assuming it is approved by Congress, change this.  The manufacturers have agreed to pay $299 million in annual fees to, among other things, fund inspections of foreign plants on the same schedule that applies to domestic plants.  As the Times notes: “[T]he generic drug industry is no longer a motley collection of struggling mom-and-pop companies.  Years of consolidation have created giants like Israel-based Teva Pharmaceuticals that understand that their businesses depend on winning the confidence of patients and regulators alike, and they can afford to pay the fees needed to achieve that confidence.”

The Ban on Off-Label Promotion after Sorrell v. IMS Health

In the wake of Sorrell v. IMS Health, in which the Supreme Court invalidated on First Amendment grounds a Vermont law barring drug companies from using physician-specific prescribing data to craft physician-specific sales pitches, lawyers on both sides of the case have weighed in on the opinion’s implications for the Food & Drug Administration’s ban on off-label promotion.  In doing so, they build upon an exchange between the dissent and the majority in Sorrell.  Writing in dissent, Justice Breyer argued that the fact that the Vermont ban is “speaker-based” (i.e., that it only applies to drug companies) should not mean that it is subject to heightened scrutiny, because in the regulatory context it is not unusual for rules to apply only to regulated entities.  By way of example, Justice Breyer cites the ban on off-label promotion, which limits what manufacturers but not others can say to doctors about unapproved uses.  In response, the majority suggests that the government “might defend” the ban on the ground that it “will prevent false or misleading speech.”  The majority then reiterates that Vermont’s interest in banning data mining “instead turns on nothing more than a difference of opinion” between the state and the companies about the truthful marketing messages to which doctors should be exposed.

In an article for BNA’s Pharmaceutical Law & Industry Report, Lisa Blatt and colleagues (who represented PhRMA, one of the respondents in the case) contend that: “Sorrell builds on prior Supreme Court precedent in establishing a strong foundation to argue that a pharmaceutical company’s truthful, non-misleading information about its products cannot be subjected to content-based and speaker-based restrictions.”  And they predict (correctly) that “[t]he implications of Sorrell for the FDA’s off-label promotion regulatory regime may be tested in litigation, as well as in new regulations, in the months ahead.”  On July 14, 2011, as reported here, the Second Circuit ordered supplemental briefing on the implications of Sorrell for its pending decision in United States v. Caronia, a criminal case in which a sales representative was convicted of conspiring to misbrand the sleep aid Xyrem by promoting it for a number of off-label uses.  On the regulatory front, on July 5, 2011, seven leading pharmaceutical companies filed a citizen petition asking “the Commissioner of Food and Drugs to clarify FDA regulations and policies with respect to manufacturer dissemination of information relating to new uses of marketed drugs and medical devices.”

In a very provocative blog post at The Incidental Economist, Kevin Outterson (who wrote an amicus brief on the side of the petitioner in Sorrell on behalf of, among others, the New England Journal of Medicine) appears to concur with Blatt that “[i]n the wake of Sorrell … we can expect the FDA to relax rules against off-label promotion.”  Professor Outterson characterizes the Supreme Court’s decision as a radical adjustment of the regulatory balance between the FDA and the companies it regulates.  Under our current system, data on the safety and efficacy of drugs is largely generated privately, as a condition of marketing approval.  The ban on off-label promotion is a key component of the system, because it provides manufacturers with a powerful push to continue to study their products after they are initially approved for sale.  Without it (or, even more radically, without any requirement that a manufacturer establish that a drug is efficacious before marketing it), we’ll either need to find other ways to incentivize private sector research or spend more public money on the study of drugs, both easier said than done.  Professor Outterson suggests a third way, that: “the US could simply free ride off the studies produced to satisfy Europe’s Phase III approval process.”  As he points out, however, “[t]hat would work only so long as the EU didn’t make the same changes.”

Perhaps naively, I am hopeful that the ban on off-label promotion will survive the coming wave of legal challenges largely intact.  In addition to its role in incentivizing research (a neutral function which distinguishes it from the data mining law at issue in Sorrell), I think that the ban serves as an important prophylactic against false and misleading product promotion.  (I elaborate on this argument here.)  This preventive role further distinguishes the ban on off-label promotion from the law invalidated in Sorrell.

Recommended Reading: Recent Legal Scholarship on Decision-Making about Health and Healthcare

In Health Choices: Regulatory Design and Processing Modes of Health Decisions, Orly Lobel and On Amir briefly summarize a fascinating series of experiments they have conducted with the support of the Robert Wood Johnson Foundation that test individuals’ ability to make decisions about their health in the face of cognitive depletion or overload.  A longer version will be available in September, but the summary is well worth reading.  Lobel and Amir begin by reviewing a line of research demonstrating, perhaps unsurprisingly, that “psychological depletion caused by a prior task” — in one study it was eating radishes while resisting cookies–leads to a reduced ability to exercise “executive control” and “persist in demanding cognitive activities.”  As the authors note, applying this research to the context of health related decision-making is important because patients and providers alike are frequently asked to process information about relative risk and make reasoned, reasonable decisions under conditions of cognitive depletion or overload.

To test their hypothesis that “absent sufficient resources for executive functions individuals will take more risk in their [health-related] decisions,” Lobel and Amir conducted a lab experiment with approximately 700 participants and a web-based one with over 3000 participants, including 300 medical doctors.   The findings from their studies support the conclusion that depletion affects people’s ability to process risk, albeit not in entirely intuitive or predictable ways.  For example, when parents are cognitively depleted, they become more risk averse regarding vaccinating their children, but when policymakers are cognitively depleted, they become less risk averse regarding population-wide vaccination.  When consumers are in a state of attention and focus, a long list of potential side effects will deter them from using a new drug.  When cognitively overloaded, though, they paid “less attention to warning lists the longer they were.”  The implications of Lobel and Amir’s work are many, varied, and vast; I am looking forward to reading the full paper when it comes out in September.

I also highly recommend Christopher Tarver Robertson’s Biased Advice, which was published in the Emory Law Journal earlier this year.  Robertson conducted a series of experiments that built on the groundbreaking 2005 study by Daylian M. Cain, George Loewenstein & Don A. Moore evaluating the effect of a conflict of interest, and of disclosure of the conflict, on the quality of advice given by advisors regarding the number of coins in a jar and on the accuracy of advisees’ estimation of the number of coins in the jar.  Cain and his colleagues’ most surprising finding was that when a conflict existed, disclosing it caused the accuracy of advisees’ estimates to decline, in part because advisors gave more biased advice when their conflicts were disclosed than when they were not disclosed.

Among other questions, Robertson examined whether a more concrete disclosure about an advisor’s bias–that is, that “prior research has shown that advisors paid in this way tend to give advice that is $7.68 higher on average than the advice of advisors who are paid based on accuracy”–would aid advisees.  It did not, because advisees did not do what “one would hope and expect” and simply subtract $7.68 from the advisor’s estimate.  Rather, it appears that they “used the bias disclosure not as a mechanism of calibrating their reliance more precisely, but rather as a strengthened warning suggesting that the advice is altogether worthless.”

On the other hand, disclosing to advisees that an advisor was paid based on the accuracy of the advisee’s estimate–i.e. that the advisor’s financial interest aligned with that of the advisee–led advisees to rely more heavily on the expert’s advice and, as a result, to more accurately estimate the number of coins in the jar.  Disclosure of a conflict of interest is also likely to be valuable where advisees can seek out another advisor; a second, unconflicted, opinion dramatically increased the accuracy of advisees’ estimates.

Robertson’s research is important and interesting.  As he observes, one of the reasons that it is so difficult to rein in health care costs is that “[t]he health care industry is characterized by radically distributed decision making, with each patient deciding upon her own course of treatment within the range of treatments offered by providers and covered by public and private insurers.”  Improving individual decisions may be key to bending the cost curve.  Robertson’s research suggests that a disclosure mandate could help under certain circumstances, where, for example, there is “epistemic charlatanism” and a physician’s disclosure of a financial conflict of interest would lead a patient to reject the physician’s not-so-expert recommendations.  Robertson emphasizes, however, that disclosure does not improve layperson decision-making nearly as much as unbiased advice does.

Distribution Controls: A Potentially Powerful Weapon Against Inappropriate or Dangerous Off-Label Use

When supplies of sodium thiopental dried up earlier this year, states turned to other drugs to carry out executions by lethal injection.  The anti-seizure drug pentobarbital, marketed as Nembutal, is one such drug.  An estimated two-thirds of the thirty-four states with the death penalty have switched or considered switching to Nembutal; states that have made the switch include Georgia, Ohio, Oklahoma, South Carolina, and Texas.  As of earlier this month, Nembutal had been used in eighteen executions this year.

Like sodium thiopental, Nembutal is an off-patent drug that serves a relatively small market.  The sole company licensed to manufacture Nembutal in the United States, the Danish firm Lundbeck Inc., has been the target of a public relations and investment campaign by human rights activists calling for the end to the use of the drug in executions.  Lundbeck has never sold Nembutal directly to prisons, however, and initially the company said that there was nothing it could do to control the drug’s re-sale.  As a spokesperson explained:

We can’t withdraw the product because it is used for treating severe epilepsy and sometimes it’s the only treatment option.  All we can do is write to the prisons urging them to stop misusing using our product which was designed to help sick people.  It’s a really unfortunate situation.

Earlier this month, Lundbeck announced that it had determined that there were steps it could take beyond letter writing.  The company considered ceasing production of the drug altogether–it represents less than one percent of the company’s sales and is, in the company’s words, “economically insignificant”–but decided against doing so in light of survey evidence that the fifty million doses of the drug it sells in the United States each year are important for treating epilepsy that is severe and refractory (that is, unresponsive to other drugs).

Lundbeck decided instead to distribute Nembutal through Cardinal Health’s Specialty Pharmaceutical Services on a “drop-ship” basis, directly to hospitals.  Less than ten percent of drugs are distributed directly to end-user customers in this way, typically “cancer treatments that are expensive, difficult to make, or not in high demand.”  Lundbeck will review each Nembutal order and deny those from “from prisons in states currently active in carrying out death penalty sentences.”  Every purchaser will be required to represent in writing “that the purchase of [Nembutal] is for its own use and that it will not redistribute any purchased product without the express written authorization of Lundbeck.”  Lundbeck’s CEO has warned that the company will take unspecified “legal action” against any purchaser who violates these terms.

Lundbeck’s decision to use a drop-ship program and purchaser agreements to take responsibility for the off-label uses to which its product is put once it leaves the company’s control raises the question whether other companies could or should be asked to do the same.  In some cases, issues of scale will foreclose such an approach.  In other cases, a company and/or regulators may have concerns about inappropriate or dangerous off-label use but not be able to link it to an easily identified class of would-be purchasers like “prisons in states currently active in carrying out death penalty sentences.”  (Note that even in Lundbeck’s case the agreements are overbroad to the extent that they deny access to Nembutal to prisoners in death penalty states who need the drug to treat severe, refractory epilepsy.)  In still other cases, however, taking control of distribution will be a feasible, and powerful, compliance tool.  The Risk Evaluation and Mitigation Strategy (REMS) for Lazanda (fentanyl) Nasal Spray, recently posted to the Food and Drug Administration website, which provides that would-be distributors enroll in the REMS program and agree to limit their distribution to specially-certified pharmacies which are also enrolled in the program, is just one example.

Cupcakes, Patty-Cake, and the Physician Shortage

In a recent New York Times op ed, anesthesiologist and mother of four Karen Sibert argues that physicians have a moral obligation to practice medicine full-time, an obligation that arises out of (1) the fixed (or even falling) number of slots in residency programs  and (2) the growing shortage of doctors, particularly primary care doctors.  It is fair, Dr. Sibert argues, to ask students who aspire to go to medical school “to consider the conflicting demands that medicine and parenthood make before they accept (and deny to others) sought-after positions in medical school and residency.”  “Women especially” should consider whether they are willing to fulfill the “real moral obligation to serve” that a medical education confers.  Those who cannot put aside their naïve “rosy vision of limited work hours and raising children” should choose another profession.

Unsurprisingly, Dr. Sibert’s salvo in what Michelle Au terms “The Mommy Wars, Medical Edition” swiftly inspired a vigorous and thought-provoking debate.  Dr. Au — like Dr. Sibert, an anesthesiologist and mother — calls Dr. Sibert’s “views sexist, inflammatory, and frankly discouraging” and argues that “medicine needs to catch up with the rest of society, and as such adopt some of the models other industries have created to recruit and retain the best and the brightest, regardless of gender.”  While conceding that part-time work is not possible during the “grueling training years,” Dr. Au notes that there are already “fields that present different structures to the workday and different practice models to recognize the full potential of modern physicians while also making the practice of medicine less inimical to family life.”  Others have taken Dr. Sibert’s side (see the letters and emails summarized here and here), with some making the additional argument that diagnostic acumen and surgical skill can decline with lack of use.

The relationship between the physician shortage and the increasing number of physicians who choose to work part-time may not be as straightforward as Dr. Sibert presumes. Several commentators have pointed out that an expectation that every physician practice medicine full-time for as long as he or she is physically able could actually exacerbate the physician shortage.  Carolyn Anderson, an ophthalmologist who works three long days per week, contends that discouraging part-time alternatives could deter entry into the field and make retention of older doctors more difficult.  Discouraging women from entering medicine could also backfire, because, although women physicians are more likely than men to work part-time, they are also more likely to go into primary care, and it is primary care physicians that are desperately needed.  More pointedly, it seems unfair (and likely ineffective) to try to solve a complex, multi-factorial, societal problem by asking individual young women — at the outset of their careers, typically before they have had children — to make morally-binding choices about balancing their work with parenthood.

Lastly, it would be easier for physicians and others to hear and understand Dr. Sibert’s arguments if her penultimate paragraph did not include the condescending concession that she “never took cupcakes to my children’s homerooms or drove carpool[.]“  Dr. Megan Duffy, who wrote into the Times in response to Dr. Sibert’s op ed, was similarly dismissive of the work of parenting, noting that she could not fathom putting her “lucrative career on the shelf to play patty-cake.”  It should not be necessary to diminish what parents who work part-time do in their “free” time to make the case that, when it comes to their careers, “women especially” should lean in, not back.

The Disturbing Rise in Drug Shortages: A “Multifactorial” Problem

With the Annual Meeting of the American Society of Clinical Oncology this past week came a wave of news stories about cancer and cancer treatment.  Frank Pasquale highlights a disturbing warning issued by oncologists at the meeting, that “cancer medicines desperately needed by sick children and adults are in short supply, undermining the ability of U.S. doctors to administer treatments.”  Supplies of other medicines are running short, too, including treatments for anaphylactic shock, attention deficit hyperactivity disorder, cardiac arrest, cystic fibrosis, and infertility.

Writing for the AP, Lauran Neergaard reports that “[t]he problem of scarce supplies or even completely unavailable medications isn’t a new one but it’s getting markedly worse.”  According to Lancet Oncology, there were a record 211 drug shortages in 2011, up from 166 in 2009, 149 in 2008, 129 in 2007, and 70 in 2006.  Neergard adds that “another 89 drug shortages have occurred in the first three months of this year[.]”

Most of the medicines that have run short are sterile injectable drugs, which are complex and time-consuming to manufacture.  (The anesthesia drug sodium thiopental which I blogged about here falls into this category.)  And, most, or even all, of the shortfall drugs are no longer subject to protection from a patent or Food & Drug Administration-administered exclusivity period, so the innovator firms that developed them are subject to competition from generic manufacturers.  The resultant lower prices and slimmer profit margins mean that, in the words of leading oncologist Dr. Richard Schilsky, the manufacturers’ return on investment is “pretty low.”

Among the reasons cited for the rise in drug shortages are the inherent challenges of manufacturing sterile injectable drugs, the low return on investment facing generic manufacturers, which has led the number of manufacturers of any given generic drug to dwindle, drug company mergers, which can result in the discontinuation of one of two similar products, the time it takes the FDA to approve applications to make manufacturing changes, for example a change in the source of a drug’s active ingredient, and the failure of the FDA to act expeditiously in investigating manufacturing problems and clearing plants to resume production once the problems have been resolved.

The Preserving Access to Lifesaving Medications Act, introduced in February by Senators Robert Casey and Amy Klobuchar, would require manufacturers to notify FDA “of a discontinuance, interruption, or other adjustment of the manufacture of the drug that would likely result in a shortage of such drug[.]“  Per Lauran Neergard, the FDA “was able to prevent 38 close calls from turning into shortages last year by speeding approval of manufacturing changes or urging competing companies to get ready to meet a shortfall.”  The FDA has even permitted (temporarily) the import of medicines approved outside the United States when necessary to mitigate shortages.

Participants in a Drug Shortages Summit convened late last year by the American Society of Clinical Oncology and others recommended that additional legislative and regulatory reforms be explored, ranging from providing incentives to manufacturers in exchange for a guarantee that they continue producing critical drugs, to charging manufacturers fees to fund expedited FDA review of applications for permission to manufacture generic drugs, to requiring manufacturing redundancies (e.g. that more than one source for a drug’s active ingredient be identified) as a condition of approval.  Interestingly, while some participants in the Drug Shortages Summit argued that products liability exposure could cause companies to withdraw drugs from the market, the manufacturers who attended denied this, calling the decision “multifactorial.”  There is evidence to support the manufacturers’ claim.  As I discussed here, in late 2004, after Chiron Corporation announced that it would not be able to provide flu vaccine for the United States market that year due to manufacturing issues, Congress brought the flu vaccine into the Vaccine Injury Compensation Program fold.  Unfortunately, liability relief did not result in an increase in the number of manufacturers in the flu vaccine market.  Targeted reforms like those that the Summit participants recommend be explored seem more likely to be effective at ensuring a steady, reliable supply of vital medicines.

…After the Horse Has Already Left the Barn: FDA Continues to Postpone Conflicts Review Until Studies Are Complete

On Tuesday, the Food and Drug Administration released a draft guidance on financial disclosure by clinical investigators, targeted at the investigators themselves, at drug and device companies and others who sponsor clinical trials, and at the agency staff who review the disclosures.  In the draft guidance, which updates an earlier one, the FDA briefly reviews the financial disclosure regulations, which have not changed, and then provides heavily revised and expanded answers to frequently asked questions.

The draft guidance is a response to a January 2009 report by the Department of Health and Human Services’ Office of the Inspector General (OIG) which recommended that the FDA (1) “ensure that sponsors submit complete financial information for all clinical investigators[,]” (2) “ensure that reviewers consistently review financial information and take action in response to disclosed financial interests[,]” and (3) “require that sponsors submit financial information for clinical investigators as part of the pretrial application process.”  The draft guidance addresses the first two recommendations but, unfortunately, FDA has still not taken action on the third.

The draft guidance responds to the OIG’s first recommendation in a number of ways, including in its response to the question “What does the FDA mean by due diligence?” which has grown from three sentences in the earlier guidance to four paragraphs in this one.  The draft guidance sets forth in detail what those applying for marketing approval must do to obtain financial information from every investigator who worked on every clinical trial submitted in support of the application.  For example, when an applicant is missing an investigator’s financial information because it cannot find him or her, it must try to locate the investigator by making at least two phone calls, sending at least two certified letters, and requesting new contact information from the investigator’s previous institutions.  From there, the search might progress to contacting professional associations and conducting internet searches.  The draft guidance’s recommendations, if followed, should drastically reduce the number of applications that rely on the due diligence exemption to excuse missing financial information.

With regard to the OIG’s second recommendation, the draft guidance adds and answers the following question: “What will FDA’s reviewers consider when evaluating the financial disclosure information?”  In its answer, the FDA explains that “outcome payments (that is, payment that is dependent on the outcome of the study) elicit the highest concern, followed by proprietary interests (such as patents, royalties, etc.); but these are rarely seen.”  More typical are equity interests and significant payments of other sorts, in which case the agency takes into consideration the amount and nature of the payment as well as other factors such as the total number of investigators and subjects in the study, whether and how the study is blinded, controlled, and randomized, and whether the study endpoints were objective or subjective.  While the agency elsewhere rejects the idea that the financial disclosure requirements be waived for “efficacy studies that include large numbers of investigators and multiple sites[,]” it would appear to agree that the likelihood of a single investigator biasing such a study’s results is low.

The FDA has not taken action on the OIG’s third recommendation, that investigators’ financial information be submitted to the agency as part of the investigational new drug applications (IND) and investigational device exemptions (IDE) applications that are filed before studies in humans are initiated.  The draft guidance does exhort sponsors to consult the FDA early and often to minimize potential bias.  The draft guidance explains that “[b]y collecting the information prior to the study start, the sponsor will be aware of any potential problems, can consult with the agency early on, and can take steps to minimize any possibility for bias.”

When sponsors do choose “to consult the FDA early”, the draft guidance provides that agency staff should “focus on the protection of research subjects and the minimization of bias from all sources.”  The suggestion that agency staff play a role in protecting research subjects is interesting.  It is not mentioned in the regulations or anywhere else in the draft guidance and it is only possible where sponsors voluntarily seek the FDA’s input.  By the time an applicant is required to turn over investigators’ financial information, as part of an application for marketing approval, the horse has left the barn.  The clinical trials are complete and it is too late to protect participant’s rights and interests.  Bias, by contrast, can sometimes be addressed retroactively.  The draft guidance notes that the FDA’s “[r]eviewers might … compare results from more than one investigator, re-analyze the data excluding the investigator’s results, analyz[e] the data in multiple ways, and/or determin[e] if results can be replicated over multiple studies.”  Even bias is better dealt with prospectively, though, not least because agency staff are aware of and sensitive to the expense associated with conducting clinical trials and are likely to be highly reluctant to disregard a trial’s results.

Because prospective review of investigators’ financial information would allow the FDA to “focus on the protection of research subjects and the minimization of bias” across the universe of studies, not just those in which the sponsor chooses “to consult the FDA early,” the financial disclosure regulations should be revised per the OIG’s recommendations to require that financial information be submitted as part of the pretrial application process.

Comments on the draft guidance are due by July 25, 2011.

Recommended Reading: Recent Legal Scholarship on “Risk Classification by Design”

Tom Baker’s Health Insurance, Risk, and Responsibility after the Patient Protection and Affordable Care Act (forthcoming in the University of Pennsylvania Law Review) is short (it would seem a theme is beginning to emerge in my Recommended Reading posts), tightly-reasoned, and instructive.  I highly recommend it.

Professor Baker’s essay “explores the contours of the solidarity and individual responsibility” embodied in [the Patient Protection and Affordable Care Act].”  He identifies a number of challenges to the Act’s vision of “achieving … solidarity through individual responsibility[,]” including what he terms “risk classification by design.”   With the passage of the Act, health insurance companies will no longer be able to evaluate each prospective policyholder to determine the risk that he or she will need medical care and then charge him or her a premium that accounts for his or her individual level of risk.  Risk classification by design could still occur, however, “as individuals’ self select into different health care products according to their self-assessed health risk status.”  For example, ["h]igh health risk people tend to prefer more complete health insurance coverage, fewer restrictions on their choice of doctors, and other plan features that make it easier to consume more health care.”  If a plan offering with those features attracts a disproportionate number of high risk individuals, the health care costs associated with that plan would rise and premiums would increase accordingly.  The end result would be high risk individuals paying more than low risk individuals for their health insurance, “challenging the core non-discrimination value embodied in the Act.”

Professor Baker points to a number of regulatory tools that the Act gives the states, the health insurance exchanges that states have begun to create, and the Department of Health and Human Services, to address the challenges posed by risk classification by design.  These include (1) the minimum coverage requirements, which allow “less room for variation in plans that can be used to segment people into separate risk groups,” (2) the exchange certification requirement, pursuant to which an exchange can decline to certify a plan that uses “marketing practices or benefit designs that have the effect of discouraging” enrollment by high risk individuals, (3) the medical loss ratio requirements, which work by “requiring a successful cream skimming insurer to return to its policyholders all or most of the benefits of the cream skimming,” and (4) the risk adjustment procedure, the goal of which is premiums that reflect the entire exchange pool as opposed to the  pool that has self-selected into a particular plan.  These tools, Professor Baker argues, will only be partially successful, but that “will simply mean that more actuarial fairness survives than the Act’s drafters may have intended.”  And actuarial fairness, he notes, has “many supporters, not all of whom are insurance industry apparatchiks.”

I also highly recommend two other recent articles addressing the post-reform potential for risk classification by design, Will Employers Undermine Health Care Reform by Dumping Sick Employees? (published in the March 2011 issue of the Virginia Law Review) by Amy Monahan and Daniel Schwarcz, and PPACA in Theory and Practice: The Perils of Parallelism (forthcoming in the Virginia Law Review), in which David Hyman responds to the arguments made by Professors Monahan and Schwarcz.  Professors Monahan and Schwarcz warn of a “substantial prospect that [the Act] will lead some, and perhaps many, employers to implement a targeted dumping strategy designed to induce low-risk employees to retain [their employer-sponsored health insurance (ESI)] but incentivize high-risk employees to voluntarily opt out of ESI and instead purchase insurance through the exchanges[.]“  This dynamic, they fear, “could render insurance exchanges unsustainable and thereby jeopardize health insurance reform writ large.”  Professor Hyman counters that what Monahan and Schwarcz consider a “bug” might in fact be a “feature” of health reform, particularly since for “dumping/[risk classification by design] to ‘work,’ Monahan & Schwarcz are clear that it has to make employers and employees better off-both individually and collectively.”

Mother’s Day Maternal Health Update

Inspired to act to reduce maternal mortality after she survived a postpartum hemorrhage, renaissance woman Christy Turlington has been making the rounds promoting her documentary No Woman No Cry, which tells the stories of at-risk pregnant women in Bangladesh, Guatemala, Tanzania, and the United States.  If you have been in a Starbucks lately you may have seen the compilation compact disc of the same name, the proceeds of which support the advocacy organization Turlington founded, Every Mother Counts.  As Turlington writes, “almost all of the hundreds of thousands of maternal deaths that occur each year are preventable. Yes, 90 percent!”

While the developing world bears the brunt of the global burden of maternal mortality and morbidity, the United States is not immune.  Women in 49 other countries have a better chance of surviving childbirth.  Passage of the Maternal Health Accountability Act of 2011, which was introduced by Representative John Conyers (D-MI) on March 3, 2011 and is currently pending in the House Committee on Energy and Commerce’s Subcommittee on Health, would be an important step towards redressing the problem of maternal mortality and morbidity here at home.

Among other things, the Act would provide funds to states to improve the reporting and tracking of pregnancy-related deaths.  In a recently-released report, the Council of State and Territorial Epidemiologists noted that maternal & child health “is the one program area in which overall state-level epidemiology and surveillance capacity increased progressively from 2004 to 2009, bucking the trend of an overall decrease in state-level epidemiology capacity.”  On the other hand, “the MCH epidemiology capacity glass is only half full: nearly half of all states lack even substantial MCH epidemiology and surveillance capacity, and in only a minority of jurisdictions do MCH epidemiologists participate substantially in policy development; have access to important data sets; and work with colleagues in substance abuse, mental health, and occupational health.”

The Maternal Health Accountability Act would also direct the National Institutes of Health to “organize a national workshop to identify definitions for severe maternal morbidity and make recommendations for a research plan to identify and monitor such morbidity in the United States.”  As the Act’s findings section explains, “[s]evere complications that result in women nearly dying, known as a ‘near miss’ or severe morbidity, according to some estimates, increased by 25 percent between 1998 and 2005, to approximately 34,000 cases a year. However, there is no scientific consensus on uniform definitions of severe maternal morbidity and best practices for data collection, making it difficult to measure the full extent of severe morbidity and developing evidence-based interventions.”  Finally, the Act would direct the Secretary of Health and Human Services to conduct research and establish demonstration projects targeting the stark geographic, racial, and socioeconomic disparities in maternal health outcomes.  According to Amnesty International’s Spring 2011 Deadly Delivery report, “[n]ew government data shows that for 2005-2007, the maternal mortality ratio (deaths per 100,000 live births) was highest among non-Hispanic black women (34.0), followed by American Indian/Alaska Native women (16.9), Asian/Pacific Islanders (11.0), non-Hispanic whites (10.4), and Hispanics (9.6).”

Importantly, tackling the problem of maternal mortality and morbidity need not wait until Congress acts.  In an article in the April issue of the American Journal of Obstetrics & Gynecology, Hospital Corporation of America, a chain of 114 inpatient facilities that claims to be the “largest obstetrical health care delivery system in the United States,” reported on its highly-successful obstetric patient safety program.  Among other things, HCA expanded the number of free, online programs it offers on topics such as fetal heart rate monitoring, postpartum hemorrhage, and shoulder dystocia, with the goal of educating providers and ensuring that they use “common terminology and thus avoid potentially hazardous miscommunication.”  In addition, HCA engaged in process standardization efforts including the development of checklist-based protocols and supported the development of national quality metrics to facilitate benchmarking.  HCA has been effective at reducing elective delivery before 39 weeks gestation and it “instituted a policy of universal perioperative pneumatic compression device use in all patients undergoing cesarean delivery.”  (I discussed the latter intervention here.)  HCA reports that its efforts have paid off, not just in outstanding perinatal outcomes, but also in reductions in litigation, as reflected by reported claims.  In 2009, the company’s losses due to “accidents on hospital grounds” exceeded its losses due to maternal mortality and morbidity.  Even more impressive, its “perinatal loss (in dollars) … is rapidly approaching the level of loss seen in the category ‘occupational therapy.’”

HCA opines “that adoption of our approach on a national level could, within 5 years, both dramatically reduce adverse perinatal outcomes and to a large extent eliminate the current national obstetric malpractice crisis.  In reality, a relatively small number of repeated errors lead to most preventable adverse outcomes, and may be reduced by the approaches outlined above.”  The company is not optimistic that its approach will be widely adopted, however, because it believes that efforts to improve perinatal outcomes have been hindered by “an alternative culture in which physician autonomy and anecdotal experience trump available data and the recommendations of the Institute of Medicine, contributing to a ‘normalization of deviance’ at odds with a safety-based culture.”  I wonder how physicians would respond to this interesting and provocative claim.  Might they argue that hospital policies and practices are at least in part to blame for our stalled efforts to reduce maternal mortality and morbidity?

Left to Our Own Devices?

Lucia Burgos sued Satiety, Inc. after an experimental stomach stapling device perforated her esophagus.  Her first complaint was dismissed on preemption grounds, but she was given permission to “replead her claims as state-law parallel claims.”  So called “state-law parallel claims” are state law tort claims where the duty that the defendant manufacturer is alleged to have violated stems from the Food Drug & Cosmetic Act or its implementing regulations.  Such claims are not preempted because they do not impose additional duties on defendants, beyond those imposed by Congress and the Food & Drug Administration.

Ms. Burgos amended her complaint to state two new claims, including a state law negligence cause of action founded on Satiety’s alleged failure to manufacture the device in conformance with the requirements of its investigational device exemption (IDE).  Ms. Burgos believes that it was the device (as opposed to human error) that caused her injury because of an incident report filed by her treatment team, but, because the documentation supporting the FDA’s grant of an IDE is confidential, her complaint does not specify how the device deviated from the IDE.  On April 5, 2011, Judge John Gleeson of the Eastern District of New York held that Ms. Burgos had stated a claim for negligence and that, despite the lack of specifics, her suit could proceed “to a brief and strictly-cabined period of discovery in order to determine the terms of Satiety’s IDE, and to explore whether or not the specific device used in her procedure was manufactured in accordance with the IDE.”

The Burgos case is of interest to civil procedure buffs because of what the BNA Medical Research Law & Policy Report characterized as Judge Gleeson’s “liberal approach” to the pleading of parallel claims, but it is important to the rest of us, too, because of what it tells us about the state of the products liability backstop to FDA’s oversight of medical devices.  In the words of Ms. Burgos’ attorney, there is only a “narrow window” for parallel claims.

The limited recourse that those injured by medical devices have in court makes the FDA’s pre-market clearance and approval processes and its post-market surveillance and recall oversight efforts that much more important.  Testimony given earlier this month by Marcia Crosse, Health Care Director at the Government Accountability Office, before the Senate’s Special Committee on Aging suggests that there is cause for concern.  As Ms. Crosse explained, in January 2009 the GAO issued a report in which it “found that a significant number of high-risk devices-including device types that FDA has identified as implantable; life sustaining; or posing a significant risk to the health, safety, or welfare of a patient-were cleared for the U.S. market through FDA’s less stringent 510(k) review process.”  Section 510(k) of the FD&C Act allows for streamlined review and clearance of devices that are shown to be substantially equivalent to devices already on the market.  Data from clinical trials is typically not required to make this showing.

The FDA agreed with the GAO’s 2009 recommendations.  If the devices at issue did not actually belong in the highest-risk class, Class III, they should be re-classified.  On the other hand, if they did belong in Class III, they should be subject to the more stringent premarket approval process, which typically requires clinical data in support of an agency determination that a device is safe and effective for its intended use.  In her testimony, Ms. Crosse noted that, to date, the FDA has issued a final rule reclassifying one device — a blood test for herpes — from Class III to Class II.  Rules regarding the classification of another five devices are pending.  “There are still 26 types of high-risk devices, including, for example, automated external defibrillators and implantable hip joints, that can enter the market via 510(k).”  Moreover, since January 2009, “FDA cleared at least 67 individual submissions that fall within 12 of these class III device types through the 510(k) process.”

While the GAO has not completed its review of the FDA’s post-market activities, Ms. Crosse testified that their “preliminary findings suggest that shortcomings in FDA’s oversight of the medical device recall process may limit the agency’s ability to ensure that the highest-risk recalls are being implemented in an effective and timely manner. These shortcomings span the entire range of the agency’s oversight activities-from the lack of a broad-based program to systematically assess trends in recalls, to inconsistencies in the way FDA ensures the effective completion of individual recalls.”

Recommended Reading: “Diagnosing Liability: The Legal History of Posttraumatic Stress Disorder”

In her fascinating article Diagnosing Liability: The Legal History of Posttraumatic Stress Disorder (forthcoming in the Temple Law Review and available on SSRN), Deirdre Smith describes the role that legal considerations–of eligibility for benefits and liability for harm–played in the development of the posttraumatic stress disorder diagnosis, from its earliest roots in the mid-1800s, when the term “railway spine” was coined to describe post-traumatic symptoms in survivors of train accidents, to its eventual inclusion in the Diagnostic and Statistical Manual of Mental Disorders in 1980.  Concluding that “[t]he line between law and medicine is not merely blurred in PTSD; it is absent,” Professor Smith contends that courts should consider “PTSD’s development and long-standing association with assigning legal responsibility” when determining whether to admit evidence that a criminal complainant or civil plaintiff was so diagnosed.

As Professor Smith explains, when veterans of the Vietnam War “began to seek treatment and compensation for their persistent psychiatric difficulties, there was no diagnosis that clearly captured their symptomatology.”  They were diagnosed with “‘character disorders’ or schizophrenia, either of which would rule out any ’service-connected’ disability compensation.”  It was at least in part a desire to eliminate barriers to care and compensation for these veterans that persuaded the American Psychiatric Association to include the PTSD diagnosis in the DSM-III.   And, it worked.  “With a diagnosis built around their experiences, veterans [of the Vietnam War] were indeed more successful in obtaining, not only health coverage and disability benefits, but also validation from the United States government itself that they had endured an experience that transformed a ‘normal’ person into one who was ill and in need of care and compassion.”  (This history provides an interesting context for the current controversy over the diagnosis of mild traumatic brain injury in veterans of the wars in Iraq and Afghanistan, which I discussed here.)

To be diagnosed with PTSD, individuals must meet a number of criteria.  The “A” or “stressor” criterion requires that the person being evaluated have been exposed to a traumatic event.  The remaining criteria relate to the existence, duration, and functional significance of symptoms experienced in the wake of, and presumably as a result of, the trauma.   Professor Smith focuses on “two contexts in which courts have permitted PTSD, and particularly the A criterion, to take a critical role in establishing liability: (1) to prove that a criminal complainant or civil plaintiff was subjected to a traumatic event, such as child sexual abuse; and (2) in tort cases, to establish liability for [emotional distress in the absence of physical injury].”  She argues persuasively against using the diagnosis in these ways.  To do so creates a “problem of circularity” because “[c]linicians cannot apply the PTSD diagnostic criteria without opining about the nature, extent, or even the existence of a reported or purported stressor event.”  Judicial findings that suggest otherwise notwithstanding, one cannot determine based on a given cluster or presentation of symptoms that an individual has been exposed to a particular traumatic event.

Professor Smith’s article brings to mind the important work that Joan Kaufman and colleagues have done documenting the underdiagnosis of PTSD in the child welfare system.  Dr. Kaufman’s data demonstrate the limits of a number of potential sources of information about a child’s trauma history, including the children themselves, their parents, their protective service workers, and their protective service case records.  She argues that mental health professionals should use multiple sources to build the complete trauma histories that are key to both accurate diagnosis and effective treatment.  Notably, Dr. Kaufman does not suggest that a child’s symptoms be used to divine his or her history.  To the contrary, she observes that “[w]ithout knowledge of children’s trauma experiences, trauma-related symptoms can appear to reflect manifestations of other diagnoses.”

Hastings Center Releases Special Report on Psychiatric Illness in Children

Earlier this month, The Hastings Center released a special report “Troubled Children: Diagnosing, Treating, and Attending to Context” that is well-worth reading.  Co-authored by Erik Parens and Josephine Johnston, the report carefully and thoroughly addresses the “intense debates” about the increasing number of children in the United States who receive psychiatric diagnoses and psychotropic medications.

The first section of “Troubled Children” discusses the complexities involved in both defining psychiatric disorders and matching individual children to diagnostic categories; the second section discusses available treatments and the evidence base that supports their use.  The third and final section of the report, in which the authors suggest reasons “why many children do not receive careful diagnoses, why evidence-based treatments are often not available, and why promising changes to children’s environments are not made,” is the most directly relevant to students and teachers of health law.

Among the reasons discussed are the “imbalance between investments in the development of new pharmacological compared with psychosocial treatments,” that physician visits are brief and often “less frequent than is necessary for optimal treatment management,” that insurance “coverage for psychosocial treatments is often more limited than for medication treatments,” and that “the system is fragmented among primary care physicians, hospitals, and various other mental health providers, with little cross-communication or coordination following referrals and limited interaction with other systems that care for children, including child protective services, juvenile justice, and schools.” Expanding on the fragmentation concern, the authors tell an all-too-familiar story, explaining that “payers are not willing to reimburse professionals for consulting with one another or developing systems that streamline communication and coordinate care. … This leaves families who are committed to psychosocial treatments to identify, access, and navigate them alone.”

In addition to its central text, which is neutral and scholarly in tone, “Troubled Children” includes ten “sidebars,” each written by a different author with an overt advocacy position.  One sidebar raises the possibility of “overmedicalization,” a negative consequence of which is that “everything becomes pathologized, turning all human difference into medical problems.”  The author of another sidebar objects that “[t]he theory of ‘medicalization’ … makes parents into scapegoats instead of grasping the real problem.”  This author notes that she “can’t imagine anyone seriously discussing the role that ‘values’ play in diagnosing cancer or suggesting that medications that shrink cancers are just tools to force people who are different to be like everyone else.”

A third sidebar discusses the correlation between adverse childhood experiences–such as parental mental illness, substance abuse, or criminality, family violence, physical abuse, sexual abuse, and neglect–and adult mental health and function and suggests that “the question whether medications are overused can actually distract us from the other important question: how do we alleviate stress in families?”  (Also recommended, this fascinating article from this week’s issue of The New Yorker profiling a pediatrician in San Francisco who hopes to use insights about the relationship between poverty, child development, and health to transform the treatment of survivors of childhood trauma.)  The authors of “Troubled Children” make reference to the “other important question” in the conclusion to their report.  They write that “[o]ur ethical obligations to children require that we–including policy-makers, educators, medical professionals, and parents–remember that in addition to changing children (by pharmacological or psychosocial means), we have the power to change the contexts in which children are embedded, which can be key to lasting improvements in their mental health.”

New Jersey’s Commissioner of Health and Senior Services Discusses Medical Marijuana and Two Other Regulatory “Case Studies” at Seton Hall Law

On Tuesday, March 1, 2011, New Jersey’s Commissioner of Health and Senior Services Dr. Poonam Alaigh gave a lively and illuminating talk to an audience from within and outside the Seton Hall Law School community.  Reflecting her medical training, Dr. Alaigh organized her talk around three “case studies”: (1) the implementation of the New Jersey Compassionate Use Medical Marijuana Act; (2) the rulemaking procedure to amend the hospital licensing standards relating to nurse anesthetists; and (3) the decision by the Department of Health and Senior Services to defer implementation of New Jersey’s menu-labeling law.  Two central themes of Dr. Alaigh’s presentation were the remarkable complexity of the legislative and rulemaking processes and the importance of a patient-centered approach to healthcare regulation.

The bulk of Dr. Alaigh’s presentation addressed the unusually extensive back-and-forth between the Department and the Legislature that has characterized the implementation of New Jersey’s medical marijuana law.  After the New Jersey Senate invalidated the Department’s initial set of draft regulations, on the grounds that they “would not comply with the intent of the law and would make it much too difficult for eligible patients to access relief through marijuana,” the Department promulgated a revised set of draft regulations reflecting the terms of a bi-partisan compromise.  Dr. Alaigh described the massive effort she and her staff — at times, she said, her entire staff — have made to educate themselves about both the science supporting the use of marijuana for medical purposes and the experience of other states with medical marijuana laws.  Dr. Alaigh believes the result of the Department’s hard work is a regulatory regime that serves patients in need while avoiding the fraud and criminal diversion problems experienced in California and Colorado.  She described New Jersey’s medical marijuana program as the “gold standard” and said that the Department has fielded calls from officials in other states interested in adopting something similar.  Among the unique elements of New Jersey’s program is a registry of de-identified patient treatment and outcomes data that will allow researchers to learn more about marijuana’s safety and efficacy.

Dr. Alaigh also spoke about the Department’s rulemaking amending the hospital licensing standards relating to nurse anesthetists.  On the one hand, Dr. Alaigh explained, nurse anesthetists are advanced practice nurses who by statute do not require the supervision of a doctor.  On the other hand, Dr. Alaigh knows from practice how quickly a patient’s condition can turn critical while under anesthesia.  The final regulation provides that nurse anesthetists can administer anesthesia in a hospital setting in accordance with a joint protocol that ensures that an anesthesiologist (1) is available at all times for consultation and (2) is physically present “during induction, emergence and critical change in status.”  Dr. Alaigh noted that this result was not likely to have made either anesthesiologists or nurse anesthetists happy.  A sign of success for a regulator, perhaps?

The third and final case study that Dr. Alaigh discussed was the Department’s decision not to promulgate draft regulations implementing New Jersey’s menu-labeling law and instead to wait for the federal Food & Drug Administration to implement the menu-labeling provisions of the Patient Protection and Affordable Care Act.  As Dr. Alaigh explained in a post on her blog, “[p]ausing to see what the FDA proposes in nine weeks is reasonable.  It avoids unnecessary duplication and costs for restaurant owners who would have to invest in new menus and then redo them when the federal rules supersede the state law.”  That’s right, Dr. Alaigh has a blog, NJ Health Beat.  You can keep up with her here.

Pharmaceutical Promotion, Prescriptions, Payors: Chain, Chain, Chain?

On February 16, 2011, Magistrate Judge Ramon E. Reyes issued a Report & Recommendation in Sergeants Benevolent Assn. Health & Welfare Fund v. Sanofi-Aventis U.S. LLP, Case No. 1:08-cv-00179-SLT-RER (E.D.N.Y. Feb. 16, 2011), recommending that the district court not certify a class of union health and welfare funds and other third-party payors claiming that they paid for prescriptions for the antibiotic Ketek that doctors would not have written but for the defendant Sanofi-Aventis’ fraudulent marketing.  Jim Edwards at Placebo Net summarizes the plaintiffs’ fraud allegations as follows:  “Basically, Sanofi knew in October 2001 that one of its main researchers on the drug was probably faking her data. That researcher was indicted for research fraud in April 2003. Yet in April 2004, the FDA approved Ketek for sale even though both it and Sanofi knew the data on which the approval was based was entirely bogus. In 2007, after 53 cases of liver failure including four deaths, the FDA all but withdrew Ketek from the market.”

Judge Reyes’ R & R is just the latest in a string of decisions rejecting plaintiffs’ attempts to fit the peg of fraudulent or illegal promotion of drugs and devices into the hole of a civil Racketeering Influenced and Corrupt Organizations Act (RICO) class action.  Writing in Defense Counsel Journal in April of 2010, J. Gordon Cooney, John P. Lavelle, and Bahar Shariati explain the reasons why civil RICO is attractive to class action plaintiffs.  The Food Drug & Cosmetic Act does not have a private right of action, so those harmed when a drug is promoted fraudulently or illegally (for an off-label use, for example) cannot simply allege a violation of the FDCA.  Frequently, they claim instead that the promotion at issue constituted mail or wire fraud, both of which count as racketeering activity under the RICO statute, and that the defendant was guilty of conducting a RICO enterprise.  The civil RICO vehicle has several advantages for plaintiffs, including the possibility of treble damages, broad choice of venues, and “[p]erhaps most importantly in the class action context, civil RICO claims conceivably allow plaintiffs to sidestep the predominating choice-of-law issues that typically prevent nationwide class actions based on fraud or deceptive practice law[.]”

As the authors of the defense-oriented blog Drug and Device Law explain, however, third-party payors like the union health and welfare funds who brought the Ketek case have encountered difficulty at the class certification stage.  This is because they have been unable to convince courts that the members of the class could rely on common evidence to prove their claims.  In particular, courts have held that class certification is not appropriate because each plaintiff would have to put on individualized prescription-by-prescription evidence to establish that the promotion in question caused it to pay for prescriptions that would not otherwise have been written.

As Jim Edwards puts it, Judge Reyes held that “[t]he doctor’s decision to write a Ketek prescription removes the ‘proximate cause’ necessary to establish that the plaintiffs paid for the drug based on fraud — even though the only reason the drug was on the market was because of Sanofi’s fraud, and individual doctors are in no position to know whether drugs are backed by fraudulent data or not.”  Edwards suggest that “[i]f Congress wanted to find a cost-free way of reducing government spending on medical bills, then loosening the legal definitions of fraud, kickbacks and false statements to include common sense interpretations of bad behavior would be one way to do it.”

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