Recommended Reading: New Legal Scholarship from Ryan Abbott and Jennifer Herbst on Pharmacovigilance Topics

In his article Big Data and Pharmacovigilance: Using Health Information Exchanges to Revolutionize Drug Safety, which is forthcoming in the Iowa Law Review, Ryan Abbott argues that third parties, including academics, insurance companies, and rival drug companies, should be incentivized via an “administrative bounty proceeding” to analyze the large and rich datasets that will be generated by health information exchanges.  Should a third party’s original statistical analysis reveal safety or efficacy concerns about a drug, Abbott suggests, it could submit the results to the Food and Drug Administration and be paid a taxpayer-funded bounty, the amount of which would be based on the value of the new information to the government in terms of health care dollars saved.  If a drug’s manufacturer knew or should have known about the concerns brought to light by the third party, Abbott proposes that the manufacturer fund the bounty, the amount of which would be based on the drug’s sales; depending on its degree of culpability, a manufacturer could even be liable to both the third party and the government for damages.

Abbott believes that the bounty system he proposes would level the pharmacovigilance playing field in a way that would redound to the benefit of consumers.  In his words: “The public deserves an advocate as equally committed to challenging the safety and efficacy of approved drugs as product sponsors are to maintaining these drugs on the market.”  Writing about Abbott’s proposal at the Bill of Health blog, Dov Fox distills it down to the following provocative question: Are we “better off evaluating medicines under an inquisitorial system or an adversarial system”?

I also recommend Jennifer Herbst’s article How Medicare Part D, Medicaid, Electronic Prescribing and ICD-10 Could Improve Public Health (but Only if CMS Lets Them), which is forthcoming in Health Matrix: Journal of Law-Medicine.  While the title might seem daunting, the article itself brings clarity to a murky, highly-technical area of the law with enormous significance for public policy.  As Herbst explains, although both Medicare Part D and Medicaid limit reimbursement to drugs prescribed for “medically accepted indications,” this limitation is not enforced, at least not at the time of payment.  And, while the government’s attempts to enforce it retroactively have led to headline-making settlements with pharmaceutical companies, they have not resulted in a significant dent in the rate of unscientifically-supported prescribing.

Herbst recommends that the government take advantage of the inroads made by electronic prescribing and require that patient diagnosis codes be made a condition of payment for outpatient prescription drugs.  Linking drugs to diagnoses in this way would allow pharmacists to do a more thorough safety review of the prescriptions they fill and it would give the government a powerful pharmacovigilance tool.  Of course, it would also allow the government to decline to provide reimbursement for drugs prescribed for indications that are not “medically accepted.”  Herbst argues that this would be a mistake because it could lead to widespread miscoding – there’s a disconnect between what the government deems medically accepted and what providers consider sound medical practice – which would undermine the value of the data being collected.  I wonder, however, whether it would be politically feasible for the Centers for Medicare & Medicaid Services “to continue its current policy of paying for all outpatient prescriptions not subject to prior authorization (contrary to the letter of the Medicare Part D and Medicaid statutes)” in the face of the data Herbst’s proposal would generate.

Online Health Law Graduate Certificate Programs

Adventures in Health Care Cost Cutting

Expect to keep hearing more talk about health care cost cutting, despite charts like this. It’s an idee fixe of the Wall Street/Washington corridor, and will only be implemented more vigorously over time.  So perhaps we should take stock of a few cost cutting initiatives. Medicare Part D, it seems, is coming way under its projected budget.  But maybe that’s because of ”a sharp fall in the number of breakthrough drugs,” a sign that innovation in pharma is stalling.  Cost cutting triumph, or logical outgrowth of a system that fails to reward actual contributions to health?

There’s also been a lot of pressure on skilled nursing facilities to hold the line on costs.  What are we getting in return? Here’s a summary from OIG:

Skilled nursing facilities (SNF) are required to develop a care plan for each beneficiary and provide services in accordance with the care plan, as well as to plan for each beneficiary’s discharge. . . For 37 percent of stays, SNFs did not develop care plans that met requirements or did not provide services in accordance with care plans. For 31 percent of stays, SNFs did not meet discharge planning requirements. . . . [R]eviewers found examples of poor quality care related to wound care, medication management, and therapy. These findings raise concerns about what Medicare is paying for. They also demonstrate that SNF oversight needs to be strengthened to ensure that SNFs perform appropriate care planning and discharge planning.

I’m sure the health care cost cutters will use this evidence to demand the SNFs be paid even less–rather than, say, investing real funding in proper training and pay in this vital service sector.  At some point, though, costs get cut so much that Medicaid will become little more than a meaningless plastic card, and “SNF” will stand for “Scarce Nursing Forever.”

This post first appeared on HealthLawProf Blog.

FDA Warning Letters to Cosmetic Companies Leading to Consumer Fraud Litigation

This past September, the Food and Drug Administration (FDA) issued a Warning Letter against L’Oreal, the world’s largest cosmetics company.  The FDA cited claims gathered online from a subsidiary of L’Oreal, Lancôme, about its expensive Genifique, Absolue, and Renergie anti-aging creams and serums. Claims such as “[U]nique R.A.R.E. oligopeptide helps to re-bundle collagen” and “[B]oosts the activity of genes and stimulates the production of youth proteins” were deemed “intended to affect the structure or any function of the body,” thus rendering the claims to be drug-like under section 201(g)(1)(c) of the FDCA. Lancôme could either submit their cosmetics to the rigorous New Drug Approval process, in which safety and efficacy would be tested, or discontinue making such claims.  Lancôme chose the latter.

Although the FDA possesses the authority to regulate cosmetics companies, traditionally the agency has not enforced provisions of the FDCA against big name cosmetics corporations.  However, Lancôme has not been the only major cosmetics company to recently receive a Warning Letter for making drug-like claims. In October of 2012, the FDA sent a Warning Letter to Avon citing claims from their Anew product line.  The drug-like claims included, “The at-home answer to wrinkle filling injections.  Start rebuilding collagen in just 48 hours;” “[W]rinkles are a result of micro-injuries to the skin, so AVON studied how skin heals… ANEW’s Activinol Technology helps reactivate skin’s repair process to recreate fresh skin & help dramatically reverse visible wrinkles;” and, “In just 3 days, see tighter, firmer, more lifted skin.” As with Lancôme’s products, the FDA concluded that these products “are not generally recognized among qualified experts as safe and effective for the above referenced uses.”

The  ultimate impact of an FDA Warning Letter in terms of litigation remains unclear, but the legal industry has taken notice.  Attorneys at Venable LLP point out in their analysis of the FDA’s Warning Letter to Lancôme, “[F]ederal action has been shown to encourage consumer class action lawsuits.” Attorneys at Shook Hardy & Bacon LLP note, “Plaintiffs will allege that consumers were defrauded into purchasing the product because of illegal marketing claims and trumpet those same FDA warning letters as proof that the marketing claims were deceptive under state consumer fraud statutes.”

Those predictions turned out to be true.  Both Avon and L’Oreal and subsidiary Lancôme have been named defendants in multiple proposed class action suits for defrauding consumers. For cases naming L’Oreal and Lancôme as defendants, see Nino v. L’Oreal USA Inc., Case No. 1:12-cv-12362 (S.D. Fl.), Schwartz v. L’Oreal USA, Inc., Case No. 2:12-cv-5557 (N.D. Cal.), and Kallen v. L’Oreal USA, Inc., Case No. 12-9479 (C.D. Cal.).  For cases naming Avon as defendants, see Trujillo v. Avon Products, Inc., Case No. 12-9084, (C.D. Cal), Quinta v. Avon Products Inc., Case No. CV12-09629 (C.D. Cal.).

Attorneys at Morelli Ratner PC, who took part in filing Nino v. L’Oreal USA, Inc., write on their website: “The complaint alleges that the Defendants have advertised their “anti-aging” creams as having been scientifically tested, making claims and promising results to consumers that the Defendants know to be unfounded. Earlier this month, the Food and Drug Administration sent Lancôme a formal warning letter about the misleading advertising. The complaint alleges that L’Oreal has made millions of dollars by knowlingly  [sic] and willfully misleading consumers.” The complaint addresses that the lawsuit seeks restitution and disgorgement of profits, along with “benefits and other compensation obtained by Defendants from their wrongful conduct.”

All of the complaints for the proposed class actions cite to the Warning Letters issued against the companies.  The class actions against L’Oreal and Lancôme are to be centralized in the New Jersey District Court in the Newark Office with presiding Judge William J. Martini. In re L’Oreal Wrinkle Cream Mktg. & Sales Practices Litig., 2012 U.S. Dist. LEXIS 177694 (J.P.M.L. Dec. 12, 2012). With the potential rise in Warning Letters used in consumer fraud litigation against cosmetics companies, cosmetic companies, as Shook Hardy & Bacon LLP write, can no longer afford “to take a sit-back-and-wait approach.” It would seem that big name cosmetic companies have been put on notice: complying with FDA cosmetics regulations is now necessary for those who wish to maintain good public standing and to avoid costly litigation.

Center for Health & Pharmaceutical Law & Policy Introduces First Edition of Pharmaceutical and Medical Device Compliance Manual

The Seton Hall Law Center for Health & Pharmaceutical Law & Policy, American Health Lawyers Association (AHLA) and the Food and Drug Law Institute (FDLI) have released the first edition of the Pharmaceutical and Medical Device Compliance Manual. The Manual is a guide to deciphering the intricate web of federal and state laws and the practices of regulatory and enforcement authorities within the healthcare and life sciences arena, while also providing the practical skills needed to implement an effective compliance program.

Designed to aid health law attorneys, compliance professionals and others in the pharmaceutical and medical device field, the Manual explains the law in layman’s terms in addition to providing advice and guidelines on creating, managing, monitoring and auditing an effective compliance program, in essence, marrying legal expectations with the operational demands of business units.

The book was co-edited by Seton Hall Law Associate Dean Kathleen M. Boozang, J.D., LL.M., who founded the school’s Health Law program in 1990, ranked among the top 10 by U.S. News & World Report for the past 16 years; and by Simone Handler-Hutchinson, J.D. ’93, Executive Director of the Center for Health & Pharmaceutical Law & Policy.

Dean Boozang notes: “Over the last two decades the trend in government oversight has resulted in a regulatory environment of increased accountability among organizations across a number of sectors, with the health and life sciences industries being the subject of particular attention – a trend that shows no sign of waning. We produced this manual for compliance officers, health and life sciences lawyers and their clients to enable them to build a framework for creating and sustaining an effective compliance function.”

As co-editor, Ms. Handler-Hutchinson said, “Each chapter was written by a leading regulatory official, practicing attorney, or healthcare consultant who has either shaped the policies as an official and/or counsel in the nation’s regulatory agencies, served as counsel to or built compliance functions within life science corporations. They offer first hand, in-depth compliance insight and actionable advice.”

The Pharmaceutical and Medical Device Compliance Manual is available as a softbound book and a variety of eBook formats; it may be ordered by visiting http://law.shu.edu/compliancemanual.

The Seton Hall Law Center for Health & Pharmaceutical Law & Policy advances scholarship and recommendations for policy on the varied and complex issues that emerge within pharmaceutical and health law. Additionally, the Center is a leader in providing compliance training on the wide-ranging state, national and international mandates that apply to the safety, promotion and sale of drugs and devices. Seton Hall University School of Law, New Jersey’s only private law school and a leading law school in the New York metropolitan area, is dedicated to preparing students for the practice of law through excellence in scholarship and teaching with a strong focus on experiential learning. Founded in 1951, Seton Hall Law School is located in Newark and offers both day and evening degree programs. For more information visit law.shu.edu.

The American Health Lawyers Association (AHLA) is the nation’s largest nonpartisan educational organization devoted to legal issues in the healthcare field. The Association’s 11,000 members practice in a variety of settings in the healthcare community. For information about our resources, publications, and educational offerings, visit www.healthlawyers.org.

Canaries in a Coal Mine: Patient Complaints (Finally) Lead to Withdrawal of Generic Wellbutrin XL

Recently, the Food and Drug Administration announced that the manufacturer Impax Laboratories has asked the agency to withdraw its approval of a generic version of the antidepressant Wellbutrin XL 300 mg that is manufactured by Impax and marketed by Teva Pharmaceuticals.  A bioequivalence study sponsored by the FDA compared the Impax/Teva 300 mg generic to Wellbutrin XL 300 mg and found that the generic tablets failed to release the medication’s active ingredient into the blood “at the same rate and to the same extent” as the name brand.  While the results of the study only recently became available, the FDA acknowledges that it has been aware of concerns about the Impax/Teva 300 mg generic for over five years.

The Impax/Teva 300 mg generic was approved in 2006 on the basis of a study establishing that Impax’s 150 mg generic was bioequivalent to Wellbutrin XL 150 mg.  The FDA did not require that a bioequivalence study of the 300 mg generic be done, because the 300 mg dose of the drug poses a risk of seizures.  Soon after the Impax/Teva 300 mg generic was approved, the FDA began to receive “reports describing either adverse events or lack of an effect.”  As ABC News reports here, Joe Graedon of the consumer advocacy group the People’s Pharmacy was hearing the same things, and, in 2007, he asked Consumer Lab –according to its website, “the leading provider of independent test results and information to help consumers and healthcare professionals identify the best quality health and nutrition products”–to compare the Impax/Teva generic to its name brand counterpart.

Consumer Lab published an analysis demonstrating that “[i]n the first two hours of a dissolution test, we found [the generic] released 34 percent of the drug, while Wellbutrin released 8 percent” and that “[a]t four hours, the [Impax/]Teva product released nearly half of its ingredients, while original Wellbutrin released 25 percent.”  Consumer Lab’s president explained to ABC that the patent on the extended release technology used in Wellbutrin XL was still in effect when the Impax/Teva generic was approved.  As a result, the generic contained the same medication as the original but used a different (or perhaps no) extended release technology.

The FDA was made aware of Consumer Lab’s results, but declined to act on them.  The agency believed that differences in rate of release were unlikely to be clinically significant because “[t]he antidepressant effect of this drug does not appear for several weeks after initiation of treatment, and the effect is, in large part, related to long-acting metabolites.”  The FDA concluded that “[t]he recurrent nature of [major depressive disorder] offers a scientifically reasonable explanation for the reports of lack of efficacy following a switch to a generic product.”

As the FDA explains in a Questions and Answers document posted to its website, despite its conclusion that the Impax/Teva generic was clinically equivalent to the name brand, in November 2007 the agency “asked Impax/Teva to conduct a study directly on its 300 mg extended-release product to compare its bioequivalence to Wellbutrin XL 300 mg … [in]patients who had reported lack of efficacy after switching from Wellbutrin XL 300 mg to [the Impax/Teva product].”  That study was terminated in late 2011 because “Impax/Teva was unable to recruit a significant number of affected patients to generate the necessary data.”  It was not until 2010 that the FDA decided to sponsor its own bioequivalence study.  That study, of 24 healthy adult volunteers, was not completed until August of this year, because the agency had to “get funding for the study, design[] the study, obtain[] approval from the Institutional Review Board for Protection of Human Subjects, recruit[] and enroll[] healthy volunteers, conduct[] the study, develop[] an analytical method of analyzing the data, and complete[] its analysis of the study data.”

As a result of its experience with the Impax/Teva 300 mg generic, the FDA reports that it “is revising its guidance to industry for how to conduct premarket bioequivalence studies in generic [Wellbutrin] products.”  It will no longer be possible for a company to extrapolate the results of bioequivalence studies done on 150 mg tablets to 300 mg tablets.

One wonders whether there might be other lessons to be learned from the Impax/Teva 300 mg generic experience.  For one, I wonder if the FDA could have–and, if so, if it should have–acted more quickly.  The agency does seem to have taken patients’ complaints about the Impax/Teva tablets seriously.  At the same time, it took six years to withdraw a generic drug that patients complained about immediately upon its approval.   Delays of this sort have the potential to undermine trust in generics generally.

Another potential lesson to be learned from the Impax/Teva 300 mg generic experience is specific to antidepressants.  As Michelle Hottinger and Bryan A. Liang note in their article Deficiencies of the FDA in Evaluating Generic Formulations: Addressing Narrow Therapeutic Index Drugs, which is forthcoming in the American Journal of Law and Medicine, much about antidepressants’ mechanism of action is still not understood, which “may leave some uncertainty as to [their] pharmacokinetics.”  Even where an antidepressant meets the FDA’s bioequivalence standards, Hottinger and Liang write, “therapeutic equivalence is not guaranteed.”  Given this, the FDA might be well-advised to pay heightened attention to adverse event reports about generic antidepressants.

Childhood Cancer: Pushing and Pulling Against a Powerful Foe

Since September is National Childhood Cancer Awareness Month –a calendar of events can be found here– a review of relevant recent and pending federal legislation seemed appropriate.  The Food and Drug Administration Safety and Innovation Act (FDASIA), which the President signed into law on July 9, 2012, included a number of provisions that it is hoped will speed development of drugs to treat childhood cancers and other rare diseases.  As Peter L. Saltonstall, who heads up the National Organization for Rare Disorders (NORD), explains here, the central purpose of the FDASIA was to reauthorize the Prescription Drug User Fee Act, but several separately-introduced bills “of particular importance to rare disease patients and supported by NORD” were incorporated into it.  These included the Creating Hope Act, which was powerfully advocated for by Kids v Cancer and the bi-partisan Congressional Childhood Cancer Caucus.

The Creating Hope Act expands the FDA’s priority review voucher (PRV) program– which was passed to incentivize the development of treatments for neglected tropical diseases, malaria, and tuberculosis– to cover rare pediatric diseases, including childhood cancers.  Under the program, “[t]he [FDA] shall award a priority review voucher to the sponsor of a rare pediatric disease product application upon approval by the [FDA] of such rare pediatric disease application.”  The fully-transferable voucher can be redeemed for review of–and action on–another new drug application within just six months.  In an influential 2006 article in Health Affairs, David Ridley and colleagues estimated that if a “voucher speeds FDA approval by a year, it could increase the present value of sales of a blockbuster drug by more than $300 million.”

While a voucher worth as much as $300 million would seem to add up to an attractive “pull” mechanism, the PRV program for neglected tropical diseases has, unfortunately, not lived up to expectations.  Only one company, Novartis, has received a PRV, for an anti-malaria drug which was already approved and marketed outside the United States.  Writing at The Incidental Economist earlier this year, Kevin Outterson characterized the PRV program as “unsuccessful” and its extension to rare pediatric diseases as “disappointing.”  More promising, Professor Outterson suggests, are “push” mechanisms like the Innovative Medicines Initiative (IMI) in Europe, described here, which will, among other things, funnel $738 million to antibiotics researchers between now and 2020, with the initial goals of “building and training networks of researchers, facilitating and increasing the exchange of research data, and improving the efficiency of clinical trials on new antibiotics through better laboratory tests and better trial design” and the long-term goal of “speed[ing] up the development of much-needed antimicrobial drugs.”  Notably, the IMI was established with $1.23 billion of European Union funds and an impressive $1.23 billion of “mainly in kind contributions (consisting mostly of research activities)” from the European Federation of Pharmaceutical Industries.

The National Pediatric Research Network Act of 2012, which is currently pending in the House and Senate, bears some similarities to the IMI’s antimicrobial drug development effort.  The Act would appropriate government funds to support the establishment and operation of a network of pediatric research consortia that would conduct “basic, clinical, behavioral, or translational research to meet unmet needs for pediatric research” and “train[] researchers in pediatric research techniques.”  The Act provides that “an appropriate number of such awards” must be awarded to consortia that, among other things, agree to “conduct or coordinate one or more multisite clinical trials of therapies for, or approaches to, the prevention, diagnosis, or treatment of one or more pediatric rare diseases or conditions[.]”

Childhood cancers are not specifically mentioned in the text of the National Pediatric Research Network Act, however, and, should it pass, the Network it establishes is likely to focus on other rare pediatric diseases.  An existing network, the Children’s Oncology Group (COG), which is principally supported by the National Cancer Institute, “unites more than 8,000 experts in childhood cancer at more than 200 leading children’s hospitals, universities, and cancer centers across North America, Australia, New Zealand, and Europe in the fight against childhood cancer.”  COG “has nearly 100 active clinical trials open at any given time … include[ing] front-line treatment for many types of childhood cancers, studies aimed at determining the underlying biology of these diseases, and trials involving new and emerging treatments, supportive care, and survivorship.”  The existence and success of COG — it’s “research has turned children’s cancer from a virtually incurable disease 50 years ago to one with a combined 5-year survival rate of 80% today,” although it has suffered from budget cuts in recent years–likely explains why advocates have turned their attention to pull mechanisms like the Creating Hope Act that build on existing incentives aimed at increasing industry investment in drug research.

Another model for increasing industry involvement is to require it.  This could perhaps be described as a strong pull mechanism.  The Pediatric Research Equity Act (PREA) takes this approach, requiring, with some exceptions, that a sponsor of a new drug application study that drug in children.  FDASIA, as the FDA summarizes here, makes PREA “permanent — no longer subject to reauthorization every five years[,] … requires earlier pediatric study plan submission by drug manufacturers subject to PREA and gives FDA new authority to help ensure PREA requirements are addressed in a more timely fashion.”  PREA, though, has not worked to generate research into pediatric cancer treatments, and the FDASIA reforms will not change that.  In remarks delivered at the 2^nd Annual Childhood Cancer Summit in September 2011, Dr. Peter Adamson, the Chair of the Children’s Oncology Group, explained that an exception to PREA’s requirements “can be granted for most new cancer drugs, as the common cancers observed in adults essentially do not occur in children.”

Of course, industry involvement could increase though profit-driven activity without additional pushes or pulls from government.  Childhood cancers have not, thus far, been an industry focus.  In the past twenty years, the FDA has approved just two drugs, clofarabine and erwinaze, to treat pediatric-specific cancers.  It was not until this past August that the agency approved the first “pediatric-specific dosage form” of a cancer-fighting drug, everolimus.  A story reported in Fortune’s September 3, 2012 issue entitled Rare Diseases Mean Big Profits (an online version is available here), suggests that there may be hope that the pace of development will accelerate.  According to Fortune:

Wall Street skews bullish on Alexion[, a specialty pharmaceutical company that developed and sells the drug Soliris which is used to treat two rare disorders,] and its peers in the ultra-rare-disease market.  With Pfizer and other big pharma companies facing devastating revenue drops as blockbuster drugs like Lipitor go off patent, niche players like Alexion look good because of their monopoly pricing power.

Soliris, Fortune reports, costs “around $400,000 per patient per year.”  There may be, then, cause for hope that in the coming years the private sector will increase its investment in the surpassingly important search for treatments for childhood cancers and other rare pediatric diseases.  I welcome your thoughts.

Graduate Certificate Program in Pharmaceutical & Medical Device Law & Compliance to Start Again, October 7, 2012

Seton Hall Law School’s Center for Health & Pharmaceutical Law & Policy starts classes again on October 7th for the Graduate Certificate in Pharmaceutical & Medical Device Law & Compliance. The priority application date is September 24, 2012.

The Graduate Certificate in Pharmaceutical & Medical Device Law & Compliance is a non-degree program designed for individuals who seek in-depth knowledge about legal, regulatory, and ethical issues related to the pharmaceutical and medical device industries. Taught exclusively online, it offers students nationwide a targeted immersion in key substantive issues along with the practical skills necessary to research and communicate effectively about the law.

The intensive program is geared to busy professionals who want to cover a significant amount of material in a relatively short period of time. The program is open to students who have earned a baccalaureate degree from an accredited college or university. It is specifically designed to meet the needs of mid- to senior-level professionals in the health care industry, but highly motivated students from other backgrounds are also welcome to apply. It is not necessary to have prior academic or work experience in health care in order to do well in the program.

Additional information and registration is available here.

Why study pharmaceutical and medical device law at Seton Hall School of Law?

Seton Hall Law School has specialized in health law for more than a decade, and its health law program is consistently ranked among the top ten in the nation by U.S. News & World Report.  The Law School’s health law faculty specialize in a wide range of health law topics, including healthcare organizations, nonprofit governance, healthcare financing, healthcare fraud and abuse, food and drug law, research with human subjects, genetics and the law, public health law, and bioethics.  In addition to training future lawyers, Seton Hall Law offers a Master’s of Science in Jurisprudence degree for individuals working in the health care industry, as well as an innovative compliance certification program for pharmaceutical and medical device professionals.  Seton Hall Law is also a center for scholarship and public policy development related to health care, particularly through its Center for Health & Pharmaceutical Law & Policy, whose mission is to foster informed dialogue among policymakers, consumer advocates, the medical profession, and industry.

Another Multi-Billion-Dollar Settlement for Pharma

As reaction to the Supreme Court’s decision on the Affordable Care Act (“ACA”) continues to make headlines with mind-numbing political arguments surrounding the distinction (or lack thereof) between a “tax” and a “penalty,” healthcare fraud enforcement rolls on unchanged.  This week brought news of yet another pharmaceutical company entering into an eye-popping settlement following damning allegations that it fraudulently marketed their drugs and misled the FDA.

In another record-breaking settlement amount, GlaxoSmithKline agreed to pay the U.S. government $3 billion – a criminal fine of $1 billion and civil fine of $2 billion – for fraudulent promotion of Paxil, Wellbutrin, and six other drugs, and for failing to notify the FDA of safety information on Avandia, its blockbuster diabetes drug.

Particularly, GSK’s marketing staff is alleged to have illegally paid doctors in an effort to increase usage of its drugs.  This allegedly included speaking engagements, vacations (including hunting trips, spa vacations, and trips to Hawaii), and tickets to entertainment events – including a Madonna concert.  The government also alleged that GSK marketed Paxil for use in children, for which it was never approved, and marketed Wellbutrin for sexual dysfunction and weight loss, two conditions for which it was not approved.  Regarding Avandia, the Justice Department alleged that GSK did not notify the government of post-approval studies that indicated that taking the drug may result in heart disease and/or heart attacks.

However, as the New York Times reported, GSK made $10.4 billion on Avandia, $11.6 billion on Paxil, and $5.9 billion on Wellbutrin during the years covered by the settlement – totaling nearly $28 billion in profits on these three blockbuster drugs.  We’ve seen this before.

As Professor Katrice Bridges Copeland has impressively written in her article Enforcing Integrity in the Indiana Law Journal, and as this blog has noted in the past, corporate integrity agreements (“CIAs”) and large fines continue to hold questionable – if not very little – deterrent value.  As Copeland has argued, pharmaceutical companies continue to expect to be subject to fines and a new CIA following each new fraud offense.  As long as the company does not get excluded from any of the federal healthcare programs, none of its executives go to jail, and the monetary penalties make up only a fraction of the profits the pharmaceutical company makes on the drug, there are few incentives for companies to change their fraudulent practices.

Unfortunately, the ACA does relatively little to bring about change in healthcare fraud enforcement.  Sure, there are some statutory changes (e.g., now an Anti-Kickback statute violation explicitly constitutes a predicate offense for the False Claims Act), and it provides more funding for anti-fraud efforts, but the underlying structural problems that have failed to prevent or curtail healthcare fraud remain.  Put simply, the amount of offenders and settlement amounts continue to grow.  Indeed, the ACA may have altered the healthcare landscape, but the industry’s major enforcement challenges remain.

Of Drug and Device and a Lack of Personal Jurisdiction

As much as I write about medical malpractice, it seems only fair that I devote a post and direct our fair readers to the other side of the bar: The Drug and Device blog put out by a number of Dechert, LLP attorneys involved in pharmaceutical and medical device product liability litigation– from the defense side– And  Writing in Their Individual Capacities (yes, I read the disclaimer– which is itself a piece of art).

I don’t know that our non-law-based readers would find the site of much interest, but for those of you who do have a legal background– it’s really quite good– and rather funny (though it doesn’t hurt if you have a taste for the acerbic). And I’m not just saying this because today’s post I so enjoyed turned out to have a hat tip to former classmate and worthy opponent Lincoln Wilson at the bottom of it. The blog is good. And if you’re a lawyer– or a law professor– today’s post should be disquieting for you.

The post, entitled “Another Homework Failure By Plaintiffs,” is about a suit against Endo Pharmaceuticals  re: Darvocet and how the plaintiffs cause of action burst into flames when it saw the light of a federal judge– for lack of personal jurisdiction. The article points out (pointedly) that the court notes that although the burden of showing jurisdiction is “relatively slight,” plaintiff’s offered no facts. None. Plaintiffs asserted that Endo, which purchased three entities (which still now exist) that had formerly produced the drug in question, “may have assumed responsibility for the acts…” and claimed the court needed to find personal jurisdiction based on the facts. The court:

But what “facts”? The portion of the complaint relied upon by the plaintiffs merely implies that the Endo Defendants “may have” somehow assumed the liabilities of their subsidiaries; the only factual assertion [plaintiff's allegation] contains is that the plaintiffs do not have the information they need to establish personal jurisdiction.  Thus, even if the plaintiffs were permitted to stand on their pleadings, they would fall woefully short of the necessary prima facie showing.

I think that’s going to leave a mark.

I said above that if you were a law professor or a lawyer you would find the Drug and Device post disquieting. But maybe I was hasty with regard to other lawyers. Although there is great value in a learned bar, the value of an unprepared opponent is, I suppose, inestimable. At least in the short run.

Having said that, if you have a few minutes, check out the Drug and Device blog article– and the slip opinion of the case they’ve conveniently provided. It’s worth it. From a stand point of pedagogy, it may not be as useful as the numerous Texas appeals filed late resulting in execution, but it could certainly function as a cautionary tale.

First Circuit Finds Generic Drugmaker Had State Law Duty to Stop Selling Unsafe Drug

Earlier this month, the First Circuit surprised observers when it held, in Bartlett v. Mutual Pharmaceutical, that a state law product liability suit founded on the claim that a generic drug was unreasonably dangerous due to a design defect was not preempted by the Federal Food, Drug, and Cosmetic Act (FDCA).  In coming to its decision, the First Circuit distinguished Pliva v. Mensing, in which the Supreme Court held that the FDCA does preempt a state law product liability suit founded on the claim that a generic drug was unreasonably dangerous due to a label that failed to warn of the drug’s dangers.

Pliva hinged on the fact that the FDCA and its implementing regulations “require that the warning labels of a brand-name drug and its generic copy must always be the same– thus, generic drug manufacturers have an ongoing federal duty of ‘sameness.’”  Because the defendant in Pliva could not fulfill its alleged state law duty to add stronger warnings to its label without violating the federal duty of sameness, the Supreme Court held that the state law product liability suits at issue could not go forward.  As the First Circuit put it in Bartlett, “Congress cannot have wanted the generic to pay damages under state law for a label that the FDA required.”

The defendant in Bartlett argued that, because generic manufacturers cannot alter the composition of a drug, “[Pliva's] policy of encouraging generics by preempting state tort claims should extend to design defect as well as claims based on inadequate warning.”  The First Circuit rejected this argument, finding that

“…although Mutual cannot legally make [the drug at issue] in another composition (nor is it apparent how it could alter a one-molecule drug anyway), it certainly can choose not to make the drug at all; and the FDCA might permit states to tell Mutual it ought not be doing so if risk-benefit analysis weights against the drug, despite what the Supreme Court made of similar arguments in the labeling context.”

James M. Beck, at the defense-oriented blog Drug and Device Law calls this result “startling[,]” pointing out that “before Bartlett the post-[Pliva] precedents had universally rejected arguments that supposed state-law duties (no state high court has ever recognized such a duty) to remove generic drugs from the market altogether could survive preemption.”  Beck argues that

“[a]nybody could always avoid liability by not selling any products at all — but that would make preemption ‘illusory,’ and also totally defeat the purpose of the Hatch-Waxman Amendments to encourage production of generic drugs. Sooner or later, one plaintiff or another will argue that every generic drug ever approved should be removed from the market.”

While plaintiffs may argue that generic drugs have design defects and should be removed, their arguments are unlikely to succeed.  As the First Circuit explains, many state courts refuse to review claims that FDA-approved prescription drugs are defectively designed.  Even where such claims are permitted, manufacturers can defend against them by showing that a drug “was unavoidably unsafe but was highly useful and had an adequate safety warning[.]“  For unknown reasons, the defendant in Bartlett “abandoned that defense on the eve of trial.”

That said, Bartlett highlights a number of important questions.  Should generic manufacturers, as the First Circuit decision suggests, have a duty to perform their own continuous risk-benefit analysis of the drugs that the FDA has approved them to sell?  They may be in the best position to do so, although monitoring is likely to be more complicated the more manufacturers of a single drug there are.  Should they have a duty to stop selling a drug as soon as the risk-benefit balance — in their sole estimation — tips?  Maybe, maybe not.  Drugs are, after all, “highly useful” and there are inevitably winners as well as losers when manufacturing is discontinued.  Such a decision might be better entrusted to the FDA.

Legislation is pending in Congress that would overturn Pliva by giving generic manufacturers the same authority that branded manufacturers have to add warnings to their labels.  Perhaps Congress should also clarify manufacturers’ obligations (or lack thereof) with regard to removing drugs from the market.

Recommended Reading: The FDA on Its Post-2007 Safety Ramp-Up and Barbara Evans on the Ethics of FDA-Mandated Postmarketing Studies

The FDA has released a report — Advances in FDA’s Safety Program for Marketed Drugs — in which the agency declares that, as a result of reforms implemented following the passage of the Food and Drug Administration Amendments Act (FDAAA) in 2007, it “now oversees the safety of both innovator and generic marketed drugs with the same rigor and focus as for premarket drug review.”  The FDA is likely engaging in a bit of hyperbole, given the vast disparity in resources allocated to pre- and postmarket review and its previous representation to Congress that “postmarket surveillance will ultimately require a level of staffing and organizational structure similar to that used for premarket review.”  As Professor Barbara Evans points out in her most recent article, The Ethics of Postmarketing Observational Studies of Drug Safety under Section 505(o)(3) of the Food, Drug, and Cosmetic Act (forthcoming in the American Journal of Law & Medicine), the FDA spends upwards of $500 million a year on pre-market review while Congress authorized expenditures of just $25 million a year for the years 2008 to 2012 to implement FDAAA’s various provisions related to post-market safety.

Still, the FDA does marshal some impressive facts and figures in its report.  Among the changes the FDA highlights, the Office of Surveillance and Epidemiology, which is “primarily responsible for monitoring postmarket drug safety data[,]” grew in size from 123 employees in 2007 to 245 employees today.  New safety positions have also been established within each of the 18 divisions of the Office of New Drugs, to ensure that “postmarket safety issues that arise related to the drugs approved in their division are handled effectively[,]” and within the Office of Generic Drugs’ Division of Clinical Review, to “evaluate[] and track[] reports of potential inferior generic product quality, adverse events, and reports of different therapeutic effect compared to the relevant reference listed drug.”   In addition, the FDA now has “a team of biostatisticians dedicated exclusively to postmarket safety evaluation.”

Since 2008, the FDA has used its new powers under FDAAA to require manufacturers (1) to conduct more than 385 postmarket drug safety studies, (2) to adopt “new safety labeling 65 times … generally for whole classes of drugs,” and (3) to implement 64 risk evaluation and mitigation strategies (REMS).  The agency receives many more adverse event reports today than in the past — the number more than doubled between 2005 and 2010, from 323,384 to 673,259 reports — and it has developed new data mining algorithms to identify patterns that might indicate new or increased drug safety risks.  The FDA has also “carried through on its commitment to communicate early and often about new drug safety issues[,]” issuing 68 Drug Safety Communications (DSCs) in 2011, up from 39 DSCs in 2010.  The FDA notes that “[t]he DSC webpage has now become one of the most visited pages on the FDA’s website, receiving more than 8  million page views in 2011.”

On top of all of the above-described activity, the FDA has been working to develop the  FDAAA-authorized Sentinel System, which will be “a national electronic system for securely accessing health care data [such as insurance claims and clinical records] to monitor the safety of drugs and other FDA-regulated medical products.”  The FDA explains in its report that it has developed a “Mini-Sentinel” pilot program that provides the agency with access to the “electronic health information of more than 125 million patients, provided by 17 data partners nationwide.”  The agency has therefore met the target set in FDAAA that it have access to the information of 100 million patients by July 2012.

In her interesting and important article, Professor Evans addresses a potential intersection between the Sentinel System and the observational studies that FDAAA authorizes FDA to require manufacturers to conduct.  A key concern about these studies is that personal health information that is disclosed to a drug or device company that is unrelated to one of that company’s products “may be subject to no federal regulatory protections whatsoever: not HIPAA, not the Common Rule, and arguably not even FDA’s human subject protections.”  As a result, institutional review boards “understandably may conclude that privacy risks are not minimal and refuse to approve [a HIPAA] waiver” allowing the data to be disclosed.  If this data access problem is not solved, the FDA could be forced to order companies to conduct randomized controlled trials “to answer questions that could have been answered using observational approaches[,]” which “is troubling since, by their nature, postmarketing [randomized controlled trials] of drug safety are ethically dubious affairs that pose special risks for human subjects.”  Based on a careful analysis of the language of FDAAA, Professor Evans concludes that the data access problem is not insolvable, because the FDA can enter into collaborative agreements pursuant to which manufacturers cover the cost of performing studies using the Sentinel System.  She cautions, though, that protecting patient interests will require, in addition to “a strong set of contractual provisions[,]” “an open, transparent public process for deciding the content of those provisions and for ensuring their careful, ongoing enforcement.”

Online Graduate Certificate Programs in Pharmaceutical & Medical Device Law and Health & Hospital Law

The next sessions for the Seton Hall Law Online Graduate Certificate Programs will commence in June, 2012. These 8-week non-degree programs are designed for individuals who seek a greater understanding of key aspects of the health care field.

The Pharmaceutical & Medical Device Law & Compliance Program will begin on June 10, addressing the legal, regulatory and ethical issues related to the pharmaceutical and medical device industries. Priority application deadline is May 24.

The Health & Hospital Law Program will commence online on June 24 and offers an exploration of the legal, regulatory and ethical issues regarding health care delivery. Priority application deadline is June 2.

Click here to learn more about the Pharmaceutical & Medical Device Program and to apply; here to learn more about the Health & Hospital Law Program and apply. For further information, please contact Helen Cummings, Assistant Dean for Graduate Programs, at helen.cummings@shu.edu or call 973-642-8380.

Ruane v. Levy: Both Sides of the Bar Meet in Health Care Fraud and Abuse Class

[Ed note: This article was authored by John Barry '13, a second year law student pursuing a Health Care Concentration at Seton Hall Law.  A native of New York, he graduated in 2005 from the University of Pennsylvania with a degree is psychology.]

Recently, Professor Zack Buck’s Health Care Fraud and Abuse class was treated to a spirited panel on the current state of health care fraud, prosecution and defense.  The panel, meeting again this year to allow students an opportunity to hear details about actual practice from both sides of the bar, was moderated by Chris Zalesky, the Vice President of Global Policy & Guidance for Johnson & Johnson in the Office of Health Care Compliance & Privacy.  Zalesky has more than 20 years of experience in regulatory affairs, quality assurance and research and development functions within the medical device and pharmaceutical industries. He has also taught as an Adjunct here at Seton Hall Law.

The panel included Maureen Ruane, Assistant U.S. Attorney and Chief of the Health Care & Government Fraud Unit for the United States Attorney’s Office, District of New Jersey, and Bruce Levy, an attorney with the firm of Gibbons, P.C.  Ruane served as Assistant United States Attorney from 1998 to 2004, and returned to the office in 2010 after working as a partner in the law firm of Lowenstein Sandler.  Levy, also formerly an Assistant U.S. Attorney, currently focuses his practice at Gibbons on criminal, civil, and administrative cases arising from federal and state health care fraud investigations, health care compliance, The False Claims Act and qui tam cases, corporate investigations, and white collar criminal law.

Touching on a wide variety of topics, Ruane explained that the “sea of health care fraud is so deep” that it affects all aspects of the American health care system, from hospitals to physicians to pharmacies and all other health care providers.  Many of the fraud prosecutions that flow through Ruane’s office come in the form of qui tam actions under the False Claims Act.  Coming from a Latin phrase meaning “[he] who sues in this matter for the king as [well as] for himself,” a qui tam action is a unique fixture of the False Claims Act that allows private citizens to act as whistleblowers and sue health care corporations for perpetrating fraud on the government.  The whistleblower, or “relator,” stands to gain a percentage of the civil damages awarded against the corporations.

Having seen countless relators over her time with the government, Ruane was in a rather unique position to speak about the underlying motivations behind the people who sue on behalf of “king and self.”  Contrary to common thinking, Ruane explained that whistleblowers generally did not act out of greed or a desire to hurt the company.  In fact, she felt the opposite:  most relators were actually intensely loyal to their companies and had usually tried to voice their concerns multiple times in-house before bringing a complaint to the attention of government prosecutors.

Working as defense counsel, Levy voiced the concerns of private industry, in particular about the lack of guidance in the current law.  He stressed that many pharmaceutical companies, hospitals, physicians and health care providers feel as if they are trying to act within the bounds of the law when in reality those boundaries are more blurry than clear.  As an example, Levy talked about how he felt the need for clearer guidance on pharmaceutical marketing of “off-label” medications.   When the Food and Drug Administration approves a medication for use in the U.S. health care market, the drug is approved for a specific use or indication.  However, clinical studies often show beneficial uses for medications for additional aliments, and it is legal for physicians to prescribe the drugs for these other uses.  In addition, Medicare and many private insurers will pay for use of a medication for different indications than what the FDA approved, in effect, subsidizing “off-label” use. There are thus competing federal agency views on medications, with the FDA only approving the drug for a particular use, but the Center for Medicare Services alternatively approving use of the drug for other, off-label uses.  Problems arise because there are complex, and Levy felt unclear, regulations as to how pharmaceutical companies may represent or market the drug for off-label use.  Levy explained that he felt new legislation was required to give clear guidance to the industry.

Both Ruane and Levy, approaching the bar from different perspectives,  engaged in lively conversation and took questions from the audience, giving students numerous real-world examples of the theories and topics they learn about in class.  As might be imagined, bringing with them contrasting prosecution and defense-side perspectives, the two often approached the same issues from opposing viewpoints, providing a unique experience for the class.  However, the one thing they both agreed on was that with rising health care costs directly on the government’s radar, aggressive prosecution of health care fraud will not slow down any time in the future.

Must-Read Articles on Drug Shortages

In February, Health Affairs featured Duff Wilson’s article on “Deepening Drug Shortages.”  As Wilson notes, “the number of reported drug shortages in the United States nearly tripled between 2005 and 2010, increasing from 61 to178 and emerging as a systemic problem in the US health care system.”  Sharona Hoffman has recently written on the topic:

How could such shortages plague premier hospitals in the twenty-first century in the wealthiest country in the world? How could even patients with comprehensive health insurance and abundant financial resources be denied adequate care because the medications they require are simply not available in the marketplace?

The Article posits that public health policies and standards must serve multiple roles. They should deter both carelessness that leads to product contamination and strategic decisions to discontinue or suspend manufacturing when such decisions will cause shortages. At the same time, governmental rules should encourage production of vulnerable drugs. Accordingly, the Article proposes a blend of legislative, regulatory, and private-sector interventions that should realign manufacturers’ incentives and significantly diminish the drug shortage phenomenon.

Hoffman’s article is well worth reading in full, and I hope it guides policymakers.  As I noted last year, a plutonomy will not reliably generate even the products that its most powerful consumers may occasionally need.

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