Recognition of Preemption For Design Defect Claims

Over on the Drug & Device Law blog, Reed Smith partner Eric Alexander calls attention to Booker v. Johnson & Johnson, 2014 WL 5113305 (N.D. Ohio Oct. 10, 2014), a recent decision from the Ortho Evra multi-district litigation (MDL) extending the U.S. Supreme Court’s decision in Mutual Pharmaceutical Co. v. Bartlett, 133 S.Ct. 2466 (2013) from warnings-based claims to design-based claims. Booker recognized that Georgia law was preempted under Bartlett because it was impossible for the pharmaceutical company to comply with both the state law (which mandates that the product’s design be changed) and the federal law (which mandates that the product’s design not be altered after commercial released). The Drug & Device Law blog had predicted that design-defect preemption would be a natural extension or application of Bartlett, and Booker now provides legal authority for that proposition. Read the full post here.

Omnicare's Appellate Victory Upheld by U.S. Supreme Court

The February 2014 decision (discussed in an earlier blog post) in which the U.S. Court of Appeals for the Fourth Circuit dismissed the False Claims Act (FCA) charges brought in United States ex rel. Rostholder v. Omnicare, Inc. was confirmed on October 6, 2014, when the U.S. Supreme Court declined to review the Rostholder decision. The case – in which Omnicare had been represented by Reed Smith – involved alleged violations of the FCA stemming from reimbursement claims for drugs that were purportedly improperly packaged according to federal guidelines. The Fourth Circuit ruled that approval of a drug is sufficient for reimbursement qualification and, as a result, reimbursement claims for approved drugs cannot be considered “false” under the FCA solely for being “processed in violation of FDA safety regulations."

To read the Reed Smith client alert about the Supreme Court’s dismissal, click here.

New California Amendment Aims to Increase Breach Responsibility and Accountability

Reed Smith’s Global Regulatory Enforcement Law Blog features a post on a California bill recently signed into law which expands the scope of requirements for entities that own, license, and maintain personal data or information about a California resident. “Did California Just Impose a First-in-the-Nation Requirement for Breaching Companies To Offer Identity Theft Prevention and Mitigation Services?” written by Reed Smith attorneys Paul Bond, Lisa Kim, and Leslie Chen, focuses on the three sections of the California Civil Code affected by the amendment:

  1. An entity that “maintains” an individual’s data or information – such as a retailer – is required to employ appropriate anti-breach protection. Previously this was only required of companies who “owned” or “licensed” personal information;
  2. An entity identified as the source of a breach of social security numbers or driver’s license numbers must offer affected individuals appropriate anti-breach protection and mitigation services for a period of at least one year; and
  3. An entity is disallowed – except in particular circumstances – from selling, advertising, or offering for sale an individual’s social security number.

The amendments will go into effect on January 1, 2015, after which point entities that do not follow these regulations will be at risk for legal action brought by affected individuals.

To read the full post, click here.

Applying the Attorney-Client Privilege to Outside Media Consultancy Communications

While attorney-client privilege is a well-established concept in the U.S. legal system, application of the policy becomes murky when the communications in question are between a client and an outside public relations firm hired to advise on issues related to forthcoming high-profile litigation. What makes this issue particularly tricky is that legal precedent is limited.

Reed Smith attorneys Colleen Davies, Andrew Stillufsen, and I (Lisa Baird) authored an article on the subject, “PR That’s Protected,” which appears in the October edition of Corporate Counsel. The article provides several recommendations for in-house counsel to minimize the chances of having communications with an outside media consultancy become part of the discovery or subpoena processes. Among these recommendations are a strict adherence to good document practices, the creation of a carefully-worded confidentiality agreement to be signed by the media consultancy and its members, and a clear distinction between public relations advisement for issues related to the litigation matter and public relations advisement for non-litigious issues – even if that entails the hiring of multiple media consultancies.

To read the article, click here.

OIG Warns About Ineligibility of Health Care Program Beneficiaries for Pharmaceutical Coupon Programs

The Office of Inspector General (OIG) of the Department of Health & Human Services issued a Special Advisory Bulletin (SAB) on September 19, 2014 discussing the coupon programs employed by many pharmaceutical manufacturers to reduce or entirely eliminate patient copayments to obtain brand-name drugs. As mentioned on our Health Industry Washington Watch blog, the SAB cautions that there are several risks associated with manufacturers utilizing such coupon programs, and that the manufacturers must make efforts to prevent federal health care program beneficiaries from using the coupons if they wish to avoid these risks. Among the potential issues that can arise from an improperly-regulated coupon program are violations of the Anti-Kickback Statute (when programs – which qualify as remuneration – are purposely paid with the intent to encourage the use of items or services payable by a federal health care program) and False Claims Act (when a claim includes items or services resulting from a kickback violation). While the SAB’s focus is on manufacturer coupon practices, in a footnote, the OIG states that pharmacies accepting coupons for Part D copayments may also be subject to these sanctions.

To read the entire post, click here.

First Amendment, False Claims, and Off-Label Promotion Allegations

The Drug & Device Law blog recently posted an analysis of an interesting case, United States ex rel. Solis v. Millennium Pharmaceuticals, Inc., that takes an issue the government has fought in the past – off-label promotion – and attempts to provide a link between it and the false claims issues that relators bring under the government’s name. Solis asserts that the dissemination of certain published medical articles on the part of the defendant constituted off-label promotion and resulted in the submission of false claims for federal reimbursement.

As Reed Smith partner Jim Beck discusses in his post, False Claims Act (FCA) litigation may provide drug and medical device counsel with ample opportunity to cite the First Amendment as a means of defense. The defense in Solis – supported in an amicus curiae brief filed by the Pharmaceutical Research and Manufacturers of America– argues that the dissemination of the medical articles was not “false” in that it did not present incorrect or misleading information, was protected by First Amendment, and did not lead to the submission of any false claims.

Academic Physician Compensation Plans Take a New "Curve" Towards Performance Incentives

Over the last several years, there has been a trend on the part of Academic Medical Centers (AMCs) to adopt more performance incentive-based faculty compensation plans for their physicians. AMCs must take several items into consideration when designing these plans, particularly in regards to financial allocation. As Reed Smith partner Karl Thallner and Ronald Vance, Managing Director at Navigant Consulting, point out in an American Health Lawyers Association member briefing entitled “Developing Progressive Academic Physician Compensation Plans for an Emerging ‘Curve 2’ Health Care Market,” most AMCs are demonstrating an increased reliance on clinical health care delivery revenue as a result of decreased funding for other pursuits, such as teaching and research. Such constraints present additional challenges for AMCs trying to construct viable financial models that will support incentive-based physician compensation plans.

To read the member briefing, click here.

U.S. Senator Schumer Calls for Increased Regulation of Wearable Electronic Devices to Avoid Data Privacy Issues

Reed Smith’s Global Regulatory Enforcement Law Blog features a post on the recent phenomenon of wearable electronic devices and the legal issues that may arise from these gadgets. "Wearable Device Privacy - A Legislative Priority?," written by Reed Smith attorneys Frederick Lah and Khurram Gore, discusses a recent press release issued by U.S. Senator Chuck Schumer of New York expressing concern that personal health data collected by wearable devices and fitness apps, including medical conditions, sleep patterns, calories burned, GPS locations, blood pressure, weight, and more, will be provided to third parties without the user knowing it. Schumer, citing this as a threat to personal privacy, has urged the Federal Trade Commission to mandate that device and app companies provide users with an explicit “opt-out,” allowing them to block the distribution of this information to any third parties.

As the authors note, with the rising popularity of these types of devices, we expect regulators, legislators, and companies to start paying closer attention to the data security and privacy risks associated with their use.

Recent Data Breaches Serve as Warning for Companies to Assess Their Cybersecurity Insurance Coverage

Earlier this week, numerous media outlets reported on the Russian crime ring which had managed to steal more pieces of Internet data than any other group of hackers in history – a whopping collection of at least 1.2 billion user name and password combinations and over 500 million email addresses. The magnitude of data that this group has managed to accumulate, coupled with several other recent high-profile hacking incidents, is a wake-up call for businesses that cybersecurity has become a major contemporary concern. Data breaches are increasing in frequency, severity, and cost, and the potential consequences for an affected company can be devastating.

This trend and its insurance implications are discussed in a client alert by Reed Smith partners Doug Cameron, David Weiss, Andy Moss, and Cristina Shea, who point out that companies must start being proactive with their cybersecurity efforts. Businesses should take the time to assess their current cybersecurity insurance coverage as well as their coverage needs. Cyber-related insurance is an evolving area, so extensive research and consulting with counsel may be necessary before a company can select an insurance policy that maximizes its coverage.
 

Are You Sure Your Company Is "At Home" In All 50 States?

As Jim Beck (of the Drug and Device Law Blog) and Michelle Cheng explain in a recent Washington Legal Foundation Legal Backgrounder, "The Other Shoe Drops on General Jurisdiction: Making the Most of Supreme Court’s Bauman & Goodyear Rulings," corporate defendants might want to think twice before making a general appearance in new cases filed in states other than the states in which they have incorporated or have located their principal place of business.

In short, doing business in all 50 states no longer necessarily subjects a corporation to suit in all 50 states, and International Shoe v. Washington, 326 U.S. 310 (1945) is not the last word on general jurisdiction. Based on the Supreme Court’s 2011 decision in Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846 (2011), and this term’s Daimler AG v. Bauman, 134 S. Ct. 746 (2014), “general” personal jurisdiction has been limited, and should no longer be assumed to support jurisdiction over a non-resident corporation—even one engaged in substantial, continuous and systematic business. These recent decisions establish that general personal jurisdiction can be asserted against corporations only in three limited circumstances: (1) the corporate defendant’s state of incorporation, (2) its principal place of business, or (3) “in an exceptional case” where the corporation’s in-state activities are “so substantial and of such a nature as to render the corporation at home in that State.”

Specific personal jurisdiction may still exist based on corporate activities related to a particular resident plaintiff, but this newly defined general personal jurisdiction standard bodes well for corporate defendants who would like to limit forum shopping but often are forced to litigate in other states against non-resident plaintiffs, merely because their products or services enter the “stream of commerce” within that state. As a result, when new lawsuits are filed by non-resident plaintiffs in states other than the state of incorporation and the state of the principal place of business, corporate defendants may wish to dust off procedural options many have not used for some time, like FRCP 12(b)(2) motions to dismiss for lack of personal jurisdiction, or state court motions to quash.

For more, click here. You can also read about the implications of the Bauman decision as discussed in Jim’s Drug and Device Law blog post.

Was It Worth the Wait? - FDA Releases Two Social Media Guidance Documents for Drug/Device Industry

Earlier this week, the FDA issued two draft guidances on social media, and in this client alert, attorneys Colleen Davies, Celeste Letourneau, Kevin Madagan, and Jennifer Pike have analyzed them both in detail. The first guidance pertains to product claims and risk information on platforms like Twitter and sponsored links, and the second to correcting third party misinformation that appears in social media, such as in comments on a Facebook page or website.

A key date to keep in mind is that the deadline for comments is September 16, 2014.

To read the client alert, click here.

Law360 Article - U.S. and French Sunshine Laws Present Compliance Challenges for Manufacturers

In “From Sea to Shining Sea: French and US Sunshine Laws,” (Law360 subscription required), Reed Smith attorneys Elizabeth Carder-Thompson and Daniel Kadar discuss recent legislation from both sides of the Atlantic designed to increase the transparency of relationships between drug and medical device manufacturers on one hand and physicians and teaching hospitals on the other. While both the U.S. and French Sunshine Acts are intended to address the same general issue, there are several key differences between the two resulting from the respective environments in which they were passed. In addition to providing an overview of the legislation and its immediate effects, the article also discusses some of the compliance issues that have resulted from these laws, including determination of the extent to which non-U.S. headquartered entities or non-U.S. based physicians are subject to U.S. Sunshine Act requirements, and regulation of the amount, organization, and frequency of data disclosure required under the French Sunshine Act.

French Class Actions: How potentially dangerous will they be?

This post was written by Daniel Kadar

I.
Since the entry into force of the new Law on Consumer Protection 17 March 2014 – also known as “Hamon Law” – France now has its own version of a class action, different by many ways from its American counterpart.

To prevent any of what are considered as abuses on the Eastern side of the Atlantic, the French legislator has framed this legal action in several limits, which in turn seems to call in question the effectiveness of the mechanism.

II.
Pursuant to article L. 423-1 of French Consumer Code, officially recognised national consumer protection associations are now allowed to seek damages before civil courts, in order to obtain compensation for the individual and material losses suffered by consumers placed in a similar or identical situation. The harm must have its common cause in a breach by one or several same professionals of their legal or contractual obligations in the context of a sale of goods or provision of services, or when the harm derives from a breach of competition law.

Therefore, the French class action is restricted by four means:

  1. Only individuals can be provided with some compensation through this action since the Hamon Law, for the first time, also defined the consumer as a natural person acting for non-work-related purposes, excluding legal persons from its scope.
  2. Officially recognised associations of national dimension – only 15 to date – are granted an exclusive right to initiate the proceedings, which puts an important limitation to the role of legal counsels in this field, as opposed to the American class action.
  3. These associations can only seek to obtain damages to compensate losses resulting from material or financial damage suffered by the consumers. Such a limitation excludes moral harm or physical injuries, which may be of particularly great importance in many cases (sale of defective or spoiled goods, for instance). Punitive damages are also excluded so far.
  4. As its place in the French Consumer Code clearly indicates, the scope of this mechanism is limited to consumer claims. The legislator’s purpose here was to avoid class actions in sensitive areas, such as public health and environmental damage. However, the legislator has inserted an unusual provision according to which the exclusion of health and environmental damages shall be reconsidered within 30 months after passing the regulation. In fact, discussions have already started with professional health organisations.

III.
The procedure has been broken down in a three-step process:

  • A judgment must find that the conditions for admissibility are fulfilled, rule on the professional’s liability in relation to the individual cases presented by the association, define the concerned group of consumers, and determine which criteria consumers must meet in order to join the group of consumers to whom the professional is liable.
  • The adhesion of consumers to the class action is based on an “opt-in” system: it is subject to a positive expression of the victim’s will. To make the proceeding operational, the judgment must therefore order publicity measures intended for consumers most likely to belong to the group. The decision also states by which means consumers may join the group (by approaching the professional directly or the association), and in which delay (no less than two months and no more than six months after the publicity measures are taken).
  • Regarding the effective compensation of the consumers, the judgment must fix the timeframe within which the damages have to be paid by the professional and, in the event of a dispute over payment, the judge is required to give its decision in the same ruling.

When “the identity and the number of consumers having suffered harm are known” and “when these consumers have suffered the same loss, or loss of an identical value for a given service or over a given period of time or duration," a simplified procedure is provided, through which the judge may rule on the liability and may order the professional to compensate victims directly and individually, within a fixed delay.

Class actions related to anticompetitive practices suffer a last limitation, since a “follow on” rule is applied in those cases: professionals may only be held liable on the basis of a definitive decision made by competent national or EU authorities or jurisdictions.

Innovative, this class action surely is; its numerous safeguards appear, however, as important obstacles to its success to-date.

An extension to health-related litigation is to be monitored closely.

OIG Advisory Bulletin Addresses Independent Charity Patient Assistance Program Risks

Patient Assistance Programs (PAPs) provide important help to patients of limited means who do not have insurance coverage for drugs and need assistance covering drug costs, often for chronic illnesses. The Office of the Inspector General (OIG) of the Department of Health and Human Services has now issued an advisory bulletin, dated May 21, 2014, intended to expand existing OIG guidelines related to PAPs, which can give rise to anti-kickback statute issues in some circumstances.

The new advisory bulletin, which is summarized in a client alert by Reed Smith partner Joe Metro and summer associate Peter Vogel, focuses specifically on Independent Charity PAPs. Among the issues discussed are the relationship between donors and Independent Charity PAPs, Independent Charity PAPs’ definitions of disease funds and eligible recipients, and the potential illegality of donor actions in relation to support for their own products. The OIG has stated that it will be working with PAPs that previously received advisory opinions to identify potential changes that could provide some clarity to these issues.

China's Medical Device Regulations Receive Notable Revisions

Significant Revisions to China's Regulations on the Supervision and Administration of Medical Devices (State Council Order No. 650)

China’s State Council released its new Administrative Regulation on the Supervision and Administration of Medical Devices March 7, 2014, which will be effective June 1, 2014 (the New Regulation).

The State Council Legislative Affairs Office worked more than six years revising the predecessor of the New Regulation (the Old Regulation), which had been effective since 2000. The revisions are intended to establish a more efficient and scientific regulatory regime for supervision and administration of medical devices. The New Regulation addresses research and development, clinical trials, product approvals, manufacturing, business operations, sales, and advertising. Generally, the New Regulation moderates the oversight of low-risk medical devices and strengthens the supervision on high-risk devices. The New Regulation, summarized in a full client alert written by Reed Smith attorneys Jay Yan, Gordon Schatz, Mao Rong, and Liu Yang, will have a significant impact on all medical device enterprises.

Revised Administrative Measures on Medical Device Quality – CFDA Seeks Comments by June 15

On May 15, CFDA released its Measures on the Supervision and Administration of the Quality of Medical Devices in Use for public comment. Under the measures, medical device operators will be required to establish a quality management system especially for Class III devices. Features of this proposed system cover the purchase of medical devices, an incoming stock inspection and recording system, an inbound and outbound management system, a daily maintenance and recording system, a quality traceability recording system, a management system for disposable medical devices, and a management system for contracts and technical documents for products. Comments are due to CFDA by June 15, 2014 at: 26 Xuanwumen West Street, Beijing, China 100053, and email: xuxy@sda.gov.cn. The proposal can be viewed here.