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.
 

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.

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.

FDA's Center for Devices and Radiological Health Publishes Draft Guidances on the Medical Device Premarket Approval Process

This post was written by Jillian W. Riley

Earlier this week, FDA’s Center for Devices and Radiological Health (CDRH) published two separate draft guidance documents to advance the dual goals of FDA and industry to provide pathways for medical devices to reach the market quickly while ensuring the safety and efficacy of the product.

The first guidance, entitled Balancing Premarket and Postmarket Data Collection for Devices Subject to Premarket Approval, clarifies FDA’s current thinking on creating an effective means to achieve “the right balance of premarket and postmarket data collection facilitates timely access to important new technology without undermining patient safety.” Greater reliance on postmarket data collection can help a new product reach the market – and patients – sooner. One key factor FDA considers when determining whether postmarket data collection is appropriate is the device’s potential impact on public health. For example, and as discussed more thoroughly in the separate guidance discussed below, FDA may accept greater pre-approval uncertainty regarding specific benefits and risks of devices where there is demonstrated potential to address unmet medical needs.

The second guidance, Expedited Access for Premarket Approval Medical Devices Intended for Unmet Medical Need for Life Threatening or Irreversibly Debilitating Diseases or Conditions, proposes a new expedited review program for medical devices that address unmet medical needs and are subject to premarket approval (PMA) applications. The program laid out in the draft guidance establishes opportunities for earlier and more active engagement between sponsors and FDA staff, including earlier involvement of senior management to ensure more consistency in messaging to industry. The early interactions aim to establish better plans for efficient collection of the scientific and clinical data necessary to support FDA’s approval determinations. The guidance also describes the criteria an applicant must meet in order to obtain an expedited access PMA designation.

FDA will be accepting comments regarding the draft guidances until July 23, 2014.

China Issues New Regulations Prohibiting Commercial Bribery in the Health Care Industry

This post was written by John Tan, Amy Yang, and Crystal Xu.

In late December, China’s National Health and Family Planning Commission (NHFPC), the successor organization to the Ministry of Health, issued two sets of anti-corruption regulations for the health care industry: the 2013 Regulations on the Establishment of a Commercial Bribery Blacklist for the Purchase and Sale of Medicines (关于建立医药购销领域商业贿赂不良记录的规定) (2013 Blacklist Regulations), and The 9 Prohibitions for Building a Healthy Medical Industry (加强医疗卫生行风建设"九不准) (The 9 Prohibitions). The 2013 Blacklist Regulations target pharmaceutical and medical device manufacturers and distributors. These regulations revise and update earlier blacklist regulations issued in 2007 (2007 Blacklist Regulations). In contrast, The 9 Prohibitions focus on health care providers and institutions, providing general principles for eliminating corruption in the Chinese health care industry.

These new regulations are part of the Chinese government’s ongoing focus on corruption in the health care industry, and significantly increase the risks faced by pharmaceutical and medical device manufacturers and distributors.

Blacklist Regulations

The 2013 Blacklist Regulations maintain the 2007 Blacklist Regulations’ system of provincial blacklists for pharmaceutical and medical device manufacturers and distributors who are found to have engaged in commercial bribery based on any of the following criteria:

  • A judicial finding of guilt, even if the offense was so minor that a fine or other penalty did not need to be imposed
  • The bribery was so minor that the People’s Procuratorate decided not to bring criminal charges
  • Communist Party disciplinary agencies investigated and imposed discipline for bribery
  • An administrative punishment for bribery was imposed by the Treasury Department, the Administration for Industry and Commerce (AIC), the China Food and Drug Administration (CFDA) or other administrative agency; or
  • Other evidence as determined by relevant laws and regulations

Although these criteria are the same as under the 2007 Blacklist Regulations, there are a number of new developments under the 2013 regulations.

National Publication

The 2007 Blacklist Regulations called for blacklists to be maintained by each province’s local health authorities. In practice, implementation was sporadic, with many provinces never publishing a blacklist. Although the 2013 Blacklist Regulations maintain the provincial blacklist system, they call for each province to report the contents of its blacklist to the NHFPC, which will publish a national blacklist on its website.

National Punishment

Under the 2007 Blacklist Regulations, manufacturers or distributors who were blacklisted in a province could not sell to public health care entities, e.g., government-run hospitals, in that province for two years. The 2013 Blacklist Regulations maintain this prohibition, and further provide that companies that are blacklisted in any province will receive less consideration when bidding to supply public health care entities in other provinces nationwide for two years after blacklisting.

Repeat Offenders

The 2013 Blacklist Regulations contain new penalty provisions indicating that companies that are blacklisted twice in five years will be subject to a two-year nationwide ban on procurement by public health care entities.

Integrity Agreements

The 2013 Blacklist Regulations contain a new requirement that when health care entities contract with manufacturers or distributors for the purchase of pharmaceuticals or medical devices, they should also sign an "ethical sales contract," which will list the names of relevant sales representatives and contain anti-bribery language.

Detailed Listing

The 2013 Blacklist Regulations contain new, detailed requirements for the information that will be published as part of the blacklist, including the name of the manufacturer or distributor; its place of business; the name and title of the legal representative or person responsible; the reason for listing; documents relating to the finding of commercial bribery; and the duration of listing.

The 2013 Blacklist Regulations are part of an increased focus on eradicating corruption in the Chinese health care industry. In recent years, the Chinese government has issued the Regulations on Centralized Procurement of Pharmaceuticals by Medical Institutions (医疗机构药品集中采购工作规范) in 2010; the Trial Regulations on Centralized Procurement of High Value Consumable Medical Supplies (高值医用耗材集中采购工作规范(试行)) in 2012; the Trial Regulations on Centralized Procurement of Large Scale Medical Equipment (甲类大型医用设备集中采购工作规范(试行)) in 2012; and the Ministry of Health Guidance on Strengthening Anti-Bribery Control at Public Medical Institutions (卫生部、国家中医药管理局关于加强公立医疗机构廉洁风险防控的指导意见), also in 2012 – all of which contain similar blacklisting provisions for commercial bribery, as well as procurement-specific provisions for blacklisting companies that provide falsified bidding documentation, etc.

The 9 Prohibitions

The 9 Prohibitions prohibit bribery, re-emphasize existing PRC regulations on donations to hospitals, and prohibit linking doctors’ income with prescriptions or medical tests. The 9 Prohibitions also forbid health care professionals from providing statistics about the use of pharmaceuticals or medical devices to manufacturers’ sales representatives. Where the 2013 Blacklist Regulations focus on medical manufacturers and distributors, The 9 Prohibitions primarily focus on health care professionals and institutions, although they instruct local officials to create commercial bribery blacklists as well.

Just as the 2013 Blacklist Regulations follow on earlier regulations, The 9 Prohibitions are not entirely new, but follow on the Health Care Professionals’ Code of Conduct (医疗机构从业人员行为规范), published in June 2012, and other similar regulations.

FDA Updates TSE and Mad Cow Disease Guidance for Medical Devices

This post was written by Evelien Verpeet

While many of us may think of medical devices as complex combinations of metals, plastics, and electronics, many medical devices also contain animal-derived materials. Examples include bovine materials used to make heart valves, sutures, tear duct plugs, and dental implants. These animal-derived materials are not without risk. They may carry transmissible spongiform encephalopathies (TSEs) – including Mad Cow Disease – when improperly collected, stored, or manufactured. The risks are compounded by the fact that currently, there are no treatments for TSE diseases and no way of screening for them in a live person or animal.

To address the risks of TSEs, FDA recently released a draft guidance entitled “Medical Devices Containing Materials Derived from Animal Sources (Except for In Vitro Diagnostic Devices).” This guidance is meant to replace an earlier 1998 guidance that focused on the risk of transmitting bovine spongiform encephalopathy (BSE), commonly known as Mad Cow Disease. While BSE is still included, FDA’s latest guidance also contains the risks of other forms of TSEs, such as scrapie (found in sheep), chronic waste disease (found in deer), and Creutzfeldt-Jakob Disease (found in humans). The guidance is applicable to all medical devices that contain or are exposed to animal-derived materials (e.g., bovine, ovine, porcine, avian materials), with the exception of in vitro diagnostic devices.

FDA recommends that companies using any material derived from an animal with potential to carry TSE infection (e.g., cattle, sheep, goats, and cervids such as deer and elk) document the following:

  • Animal species
  • Specific tissue used (if multiple tissues are used, identify all tissues used)
  • Animal’s country of origin and country of residence (or a more specific geographic information when appropriate)
  • Methods for actively monitoring the health of herd and the health of specific animals from which tissues are collected
  • Information concerning the long-term health of the herd (e.g., documented breeding history, animal traceability, absence of TSE disease, and standard vaccinations such as live modified viruses that could co-purify in the desired tissue)
  • The frequency and type of veterinarian inspections
  • Animal feed composition (e.g., animal feed history records, including recordation of co-mingling of feeds, and labeling of animal feed composition at distribution locations)
  • USDA status of the abattoir 
  • Animal age at sacrifice
  • Animal sacrifice methods that reduce the risk of cross contaminating non-TSE tissues with material from tissues that could contain TSE
  • Specifics of the pre- and/or post-mortem inspections (e.g., gross visual inspection, specific organs and anomalies exams, lab tests such as PrP testing)
  • Tests performed (and release criteria) for permitting tissue to be further processed and/or combined with other tissues and device components (e.g., a Certificate of Analysis)

FDA further recommends that companies maintain test results for each lot of material at the manufacturing facility. Methods for maintaining the records as well as a description of the tests performed should be provided in regulatory submissions. Moreover, companies should analyze the source of their animal-derived materials, as non-TSE-transmitting animals may be slaughtered in facilities that also process TSE-transmitting animals.

Although FDA’s most recent guidance is a draft, companies using animal-derived material should take note of FDA’s expanded view of not only which animal materials contain risk (i.e., no longer limited to bovine material), but also which steps are appropriate to ensure the safety of those materials. Moreover, companies should remain vigilant about future developments. To date, no test exists that can reliably identify TSE-containing materials. However, should one be developed, “FDA will consider revisiting this guidance as appropriate and recommending that such a test be introduced into the standard operating procedures for bovine tissue collection and processing.”

Long Delays Still Expected for TSRA License Applications

Reed Smith’s Global Regulatory Enforcement Law Blog recently featured a post about the U.S. Treasury Department’s Office of Foreign Assets Control’s review of applications filed under the Trade Sanctions Reform and Export Enhancement Act of 2000. Although restrictions on the export and re-export of some medical devices and medicines were lifted a year ago, license processing times still remain long, limiting companies’ ability to take advantage of these changes. To learn more about the license applications and potential enforcement actions for non-compliance, read the full alert.

China's Life Sciences Regulatory Crackdown: September 10 Update

The regulatory enforcement environment in China remains tense, as both the Chinese government and media bring new actions and allegations against life sciences manufacturers in both the pharmaceutical and device sectors. We are seeing:

  • Increased attention to medical device sector
  • Enforcement actions spreading to smaller cities
  • Continued pressure on pharmaceutical sector
  • Reports of misconduct by local manufacturers
  • Questionable vendors named

Reed Smith continues to monitor the life sciences regulatory and media environment in China and has prepared a summary of recent developments. For additional information, please contact Reed Smith lawyer John Tan at jtan@reedsmith.com.

China: Life Sciences Regulatory Crackdown Spreads to Medical Device Sector

This post was written by John Tan and Crystal Xu.

On August 15, 2013, the local Beijing office of the Ministry of Health (MOH) of the People's Republic of China announced (Chinese link) that it has started a three-month review of the use of high-value medical consumables and large-scale medical equipment in Beijing. In its announcement, the Beijing MOH noted that prior inspections of hospitals had found continuing problems with the misuse and overuse of medical devices to increase profits. The investigation is intended to strengthen hospitals’ management of the use of medical devices and to regulate the use of high value medical consumables.

In addition to this investigation, the Beijing MOH will also develop a database that will track the price and model of devices implanted in each patient, require hospitals to improve their purchasing management systems, and conduct periodic inspections of hospitals’ purchasing and management of medical consumables.

This latest investigation follows on increased regulatory enforcement actions throughout China's life sciences industry. In the last two months, there have been criminal and administrative enforcement actions targeting the pharmaceutical sector and a pricing investigation by the National Development and Reform Commission (NDRC) into the infant formula sector that culminated in the largest fine in the history of China's enforcement of its anti-monopoly law. The NDRC is also conducting an ongoing investigation of pharmaceutical industry pricing practices and considering systemic revisions to China's drug pricing system. Additionally, on August 14, 2013 the State Administration for Industry and Commerce (SAIC) announced a new three-month-long investigation into the pharmaceutical and medical services sectors, targeting bribery, fraud and anti-competitive practices.

The August 15th announcement by the Beijing MOH appears to signal the first recent enforcement action to specifically target the medical device sector.

In the run up to these enforcement actions, Chinese authorities issued a number of administrative regulations targeting the life sciences industry, including a new code of conduct for HCPs, and new guidance on strengthening anti-bribery controls in public medical institutions. Authorities also issued regulations on the centralized purchasing of medical consumables and large scale medical equipment containing provisions that would exclude companies found to have engaged in commercial bribery from participation in centralized purchasing.

At the end of 2012, China's Supreme People's Court, in conjunction with the Supreme People's Procuratorate, issued a new judicial interpretation of China's criminal law prohibiting bribery. This interpretation was widely viewed as signaling a new emphasis by Chinese authorities on prosecuting not just officials who accept bribes, but those who pay bribes as well.

OIG Views PODs As "Inherently Suspect" Under the Anti-Kickback Statute

This post was written by Elizabeth B. Carder-Thompson, Catherine A. Hurley, Joseph W. Metro and Elizabeth Doyle O'Brien.

Referencing what it deems a “proliferation” of physician-owned distributors (PODs), on March 26, 2013, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) released a Special Fraud Alert identifying significant concerns with such entities under federal anti-kickback principles.1 For purposes of the Alert, the OIG defines a POD as “any physician-owned entity that derives revenue from selling, or arranging for the sale of, implantable medical devices,” including “physician-owned entities that purport to design or manufacture, typically under contractual arrangements, their own medical devices or instrumentation.” Specifically, the OIG describes in somewhat unusual detail the multiple “attributes and practices” of PODs that the OIG believes “produce substantial fraud and abuse risk and pose dangers to patient safety.”

Notably, the Alert is focused on PODs that derive revenue from selling, or arranging for the sale of, implantable medical devices that are ordered by physician-owners for use in procedures that physician-owners “perform on their own patients at hospitals or ambulatory surgical centers (ASCs).” However, the OIG states that “the same principles would apply when evaluating arrangements involving other types of physician-owned entities.”

Brief Background

The legitimacy of PODs has been subject to question for a number of years by both Congress and the OIG. In June of 2011, a Finance Committee Minority analysis released by Sen. Orrin Hatch examined the growth of PODs, primarily in the orthopedic implant (spine and total joint) sector of the device industry. The Finance report concluded that "[t]he very nature of PODs seem to create financial incentives for physician investors to use those devices that give them the greatest financial return and that, in the process, patient treatment decisions may be based on personal financial gain. This is especially troubling given numerous concerned allegations provided to the Committee that, due to their financial interest, physician investors in PODs may perform more procedures than are medically necessary or may use implants of inferior quality or that are not best suited for the procedure." For background on the Congressional activity, see our earlier update.

The OIG’s Work Plan for 2012 included an entry on PODs, as follows:

We will determine the extent to which physician-owned distributors (POD) provide spinal implants purchased by hospitals. We will also analyze Medicare claims data to determine whether PODs we identify in our review are associated with high use of spinal implants. PODs are business arrangements involving physician ownership of medical device companies and distributorships. PODs are focused primarily in the surgical arena and are currently primarily involve orthopedic implants such as spine and total joints. However, PODs appear to be quickly growing into other areas such as cardiac implants. Congress has expressed concern that PODs could create conflicts of interest and safety concerns for patients. (OEI; 01-11-00660)

Although the OIG report was expected in FY 2012, it has not yet been issued. Evidently, the OIG’s ongoing analysis has been such that it concluded a Fraud Alert was the most advisable next step.

Terms of POD Fraud Alert

The OIG summarizes the attributes and practices of PODs about which it has significant concerns as follows:

  • Selecting investors because they are in a position to generate substantial business for the entity;
  • Requiring investors who cease practicing in the service area to divest their ownership interest; and
  • Distributing extraordinary returns on investment compared to the level of financial risk involved.

The OIG states that such “questionable features” present four “major concerns” that are typical of kickbacks: (1) corruption of medical judgment; (2) overutilization; (3) increased costs to federal health care programs and beneficiaries; and (4) unfair competition. The OIG goes on to provide a more detailed series of POD characteristics that elevate the level of fraud and abuse risk in the OIG’s view (reprinted at end). The OIG adds that a POD “exclusively” serving its physician-owners’ patient base poses a higher risk of fraud and abuse than “a POD that sells to hospitals and ASCs on the basis of referrals from nonowner physicians.”

The OIG dismisses the notion that “disclosure to a patient of the physician’s financial interest in a POD is sufficient” to address its concerns, maintaining that “PODs are inherently suspect under the anti-kickback statute,” and cautions that the Alert should not be viewed as a road map for structuring acceptable POD entities. That said, the OIG acknowledges that the lawfulness of a particular POD under the anti-kickback statute is a fact-specific analysis and depends on the parties’ intent, and that certain safeguards and characteristics might support the defensibility of a POD. The OIG also concedes that the “anti-kickback statute is not a prohibition on the generation of profits.”2

The OIG specifically discusses in the Alert how PODs generating “disproportionately high rates of return for physician-owners may trigger heightened scrutiny.” Moreover, if “physician-owners are few in number” or “alter their medical practice after or shortly before investing in the POD,” in terms of the number of surgeries performed or the type of device the physician uses (for example, sudden exclusive use of the POD device), the OIG is particularly likely to view the POD as problematic under the anti-kickback statute. It believes such facts tend to show that referral volume bears directly on financial returns to the physician-owners.

Regarding PODs that “purport to design or manufacture their own devices,” the OIG states that the “risk of fraud and abuse is particularly high” where the physician-owners of the POD “are the sole (or nearly the sole) users of the devices” and that “claims—particularly unsubstantiated claims—by physician-owners regarding the superiority of [their] devices . . . do not disprove unlawful intent.”

Significantly, the Alert emphasizes that potential liability under the anti-kickback statute can extend to any ASC or hospital that purchases devices from a POD in order to “maintain or secure referrals from the POD’s physician-owners.” Thus, the third POD risk characteristic cited by the OIG in this regard looks at whether the physician owners (i) have stated or implied they will perform surgeries or refer patients elsewhere if the hospital or ASC does not purchase devices from the POD, (ii) have promised or implied they will move surgeries to the hospital or ASC if it does purchase devices from the POD, or (iii) have required the hospital or ASC to enter into an exclusive purchase arrangement with the POD.

Based on past experience, publication by the OIG of a Special Fraud Alert signals that increased investigative and enforcement activity is likely to follow. Given this, parties to existing POD arrangements—PODs themselves, device manufacturers, as well as hospitals and ASCs with POD purchasing arrangements—should work with their health care regulatory counsel to assess or reassess risk under the anti-kickback statute in light of the OIG’s detailed commentary.

 

POD Characteristics That Elevate Risk Per The OIG Fraud Alert:

  • The size of the investment offered to each physician varies with the expected or actual volume or value of devices used by the physician.
  • Distributions are not made in proportion to ownership interest, or physician-owners pay different prices for their ownership interests, because of the expected or actual volume or value of devices used by the physicians.
  • Physician-owners condition their referrals to hospitals or ASCs on their purchase of the POD’s devices through coercion or promises, for example, by stating or implying they will perform surgeries or refer patients elsewhere if a hospital or an ASC does not purchase devices from the POD, by promising or implying they will move surgeries to the hospital or ASC if it purchases devices from the POD, or by requiring a hospital or an ASC to enter into an exclusive purchase arrangement with the POD.
  • Physician-owners are required, pressured, or actively encouraged to refer, recommend, or arrange for the purchase of the devices sold by the POD or, conversely, are threatened with, or experience, negative repercussions (e.g., decreased distributions, required divestiture) for failing to use the POD’s devices for their patients.
  • The POD retains the right to repurchase a physician-owner’s interest for the physician’s failure or inability (through relocation, retirement, or otherwise) to refer, recommend, or arrange for the purchase of the POD’s devices.
  • The POD is a shell entity that does not conduct appropriate product evaluations, maintain or manage sufficient inventory in its own facility, or employ or otherwise contract with personnel necessary for operations.
  • The POD does not maintain continuous oversight of all distribution functions.
  • When a hospital or an ASC requires physicians to disclose conflicts of interest, the POD’s physician-owners either fail to inform the hospital or ASC.

 

__________________________________________

1  See OIG, “Special Fraud Alert: Physician-Owned Entities” (Mar. 26, 2013).

2  The OIG perhaps is referencing a notable statement in a recent fraud and abuse opinion by the Sixth Circuit Court of Appeals, finding in favor of an entity under investigation, to the effect that: “Why a business ought to be punished solely for seeking to maximize profits escapes us.” U.S. ex rel. Williams v. Renal Care Group Inc., 2012 WL 4748104 (6th Cir. 10/5/12).

China Life Sciences and Health Industry Client Briefing - November 2012 (December 13, 2012)

This post was written by Jay J. Yan, Hugh T. Scogin, Jr., John J. Tan, Mao Rong, Katherine Yang, May Wong, Amy Yin and Gordon B. Schatz.

Reed Smith’s China Life Sciences and Health Industry Client Briefing provides a summary of the monthly news and legal developments relating to China's Pharmaceutical, Medical Device, and Life Sciences/ Health Care Industries.

Some important developments during November include:

  • Priorities, Practical Tips and Lessons Learned from Reed Smith’s China Device Regulatory Briefing on December 4, 2012
  • Drug Firms Pursue Joint R&D
  • Drug Makers and the Unpredictability of Drug Development; New Draft Regulations on Stem Cell Industry to be Issued
  • SFDA Approval concerning Drug Registration and Appraisal Reform on Pilot Basis in Guangdong Food and Drug Administration
  • MOH Stresses Monitoring Medical Costs in New Announcement; PRC to Allocate RMB 27.26 Billion to Support Public Health Services for 2013
  • Nestlé in Chinese Medicine Deal with Li Ka-Shing's Firm

To read the full briefing by Reed Smith China team members, click here.

Massachusetts Releases Final Regulations, Restores Annual "Sunshine" Reporting Requirement for Drug/Device Manufacturers

This post was written by Elizabeth B. Carder-Thompson, Katie C. Pawlitz and Nancy E. Bonifant.

On Wednesday, November 21, 2012, Massachusetts’ Public Health Council (“Council”) approved amendments to the State’s Marketing Code of Conduct, which restricts certain gifts and payments by pharmaceutical and medical device manufacturers to Massachusetts health care practitioners (“HCPs”) and requires disclosure of payments and transfers of value to HCPs. The final regulations, effective as of December 7, 2012, primarily adopt the emergency regulations issued by the State in September but make a few substantive changes.

Importantly, the final regulations do not include language from the emergency regulations that eliminated the requirement that manufacturers report annually specific information regarding payments in connection with sales and marketing activities after calendar year 2012 reports. Instead, the final regulations only prohibit duplicative reporting to Massachusetts if manufacturers have already reported the same information pursuant to federal law (for example, the federal Physician Payment Sunshine Act), and such information is available to the Massachusetts Department of Public Health (“DPH”).

The Council also adopted the revised provisions regarding modest meals substantially as written in the emergency regulations. Under the revision, manufacturers are allowed to provide modest meals and refreshments to HCPs at non-CME educational presentations, as long as manufacturers file quarterly reports detailing such meals. Notably, the Council declined to define “modest” with a clear monetary limit or specifically to ban alcohol at industry-funded events and presentations, as requested by public commenters. With regard to the required quarterly reports, the Council did include a new, open-ended category of information that must be reported: “such other information as determined necessary by the Commissioner.” It is not clear whether this requirement will be clarified in further regulations or guidance that DPH is expected to issue.

Looking forward, the full effect of Massachusetts’ final regulations will not be clear until the release of the final rule for the federal Physician Payment Sunshine Act, because that rule will determine the extent to which Massachusetts’ annual reporting requirement will be preempted. Based on Massachusetts’ final regulations, however, it appears the quarterly reports regarding meals at non-CME educational presentations will not be subject to preemption. Massachusetts’ final regulations are available here.
 

Massachusetts Signals Potential Elimination of HCP Payment Reporting Requirement Through Emergency Regulatory Amendments

This post was written by Elizabeth Carder-Thompson, Katie C. Pawlitz and Nancy E. Bonifant.

On September 19, 2012, the Massachusetts Public Health Council approved emergency amendments to the State’s Marketing Code of Conduct regulations, 105 CMR 970.000, which restrict certain gifts and payments by pharmaceutical and medical device manufacturers to Massachusetts health care practitioners (“HCPs”) and require disclosure of payments and transfers of value to HCPs. The regulations, effective as of September 19, 2012, follow amendments to the underlying statute, Massachusetts General Laws, Chapter 111N, signed into law in July by Governor Deval Patrick as part of the FY2013 State Budget. The July statutory amendments are further discussed here in our earlier Client Alert.

The emergency regulatory amendments include many expected changes as a result of the July statutory amendments, including now allowing manufacturers to provide modest meals and refreshments to HCPs at non-CME educational presentations, as long as manufacturers file quarterly reports detailing such meals. However, the emergency amendments also provide that a manufacturer shall be deemed to have met such reporting requirements if the company makes all disclosures required under federal law (for example, the federal Physician Payment Sunshine Act), and such disclosures are then reported by the Secretary of Health and Human Services to the Massachusetts Department of Public Health (“DPH”).

In addition, and importantly, the emergency regulations include new language eliminating the requirement that manufacturers report specific information regarding payments in connection with sales and marketing activities after such reports are made for calendar year 2012. Therefore, although the July 2012 statutory amendments prohibit duplicative reporting to Massachusetts if manufacturers have already reported the same information pursuant to federal law and DPH can obtain the information, the emergency regulatory amendments go even further by eliminating the Massachusetts reporting requirement altogether.

Notably, emergency regulations remain in effect for only three months unless they are formally promulgated according to the Massachusetts Administrative Procedure Act. Therefore, further regulatory action will be necessary to eliminate fully the reporting requirement in 2013 and going forward.

On October 19, 2012, DPH held a public hearing and solicited public testimony regarding the emergency regulations. While some industry stakeholders supported the current definition of “modest meals,” which focuses on “local standards,” others requested that DPH define “modest” with a clear monetary limit and specifically ban alcohol at industry-funded events and presentations. Additionally, stakeholders disagreed regarding whether quarterly reports related to modest meals and refreshments at non-CME educational presentations should be required, given that similar reporting obligations under federal law. Regardless of whether the reporting requirement is permanently eliminated, however, Massachusetts’ broad restrictions remain with respect to gifts and other benefits provided by manufacturers to HCPs.

As we await DPH’s final determination regarding the emergency regulatory amendments, Massachusetts’ potential elimination of the reporting requirement may portend what can be expected from other states as we near release of the final rule for the federal Physician Payment Sunshine Act.

The Physician Payment Sunshine Act requires applicable manufacturers of drugs, devices, biologicals, or medical supplies covered under Medicare, Medicaid, or CHIP to report annually to the Secretary of the Department of Health and Human Services certain payments or other transfers of value to physicians and teaching hospitals. Once implemented, the federal Act will preempt any state law that requires a manufacturer to disclose the same type of information required to be reported under the federal law. However, the federal Act does not preempt any state laws that require the disclosure or reporting of information that falls outside of the scope of the Physician Payment Sunshine Act. For example, while the federal law only applies to payments and transfers of value to physicians and teaching hospitals, the Massachusetts reporting requirements cover a broader group of HCPs, including nurse practitioners and physician assistants. As such, but for the recent emergency regulatory amendments, certain Massachusetts reporting requirements would still apply, notwithstanding federal preemption.

Massachusetts’ emergency amendments are available here.

China Life Sciences and Health Industry Client Briefing - August 2012 (September 18, 2012)

This post was written by Jay J. Yan, Hugh T. Scogin, Jr., John J. Tan, Mao Rong, Katherine Yang, May Wong, Amy Yin and Gordon B. Schatz.

Reed Smith’s Life Sciences Health Industry China Briefing provides a summary of the monthly news and legal developments relating to China's Pharmaceutical, Medical Device, and Life Sciences/ Health Care Industries.

Some important developments during August include:

  • New Regulations Concerning Hospital Procurement of Class-A Large-Scale Medical Equipment
  • MOH to Investigate Infection Events in Hospitals
  • Wenzhou Develops New Plans to Attract Private Medical Investors
  • Notice Concerning Public Hospital Reform in 2012
  • MOH to Establish EDLs for Secondary and Tertiary Hospitals
  • Pricing Developments for Drugs of Foreign Companies
  • Revised Regulations on Criminal Prosecutions for Leaks of Confidential Patient Information
  • State Council to Release Regulation Permitting Local Governments to Buy Commercial Insurance on for Serious Illnesses

To read the full briefing by Reed Smith China team members, click here.

Vermont Offers Limited Amnesty to Device and Biologic Manufacturers who Failed to Report Payments to Health Care Providers

This post was written by Katie C. Pawlitz.

Today the Office of the Vermont Attorney General announced that the Vermont Attorney General is offering limited amnesty to medical device and biologic manufacturers who have failed to report pursuant to Vermont’s Prescribed Products Gift Ban and Disclosure Law. The offer will remain open until October 1, 2012. In order to take advantage of the offer, manufacturers must email prescribedproducts@atg.state.vt.us with the following information: (1) manufacturer name; (2) reporting periods not reported; and (3) name, address, email, and phone number of the representative with whom Vermont should communicate.

The reporting obligation under the Vermont Law became effective July 1, 2009 and, to date, manufacturers have been required to report to Vermont with respect to three reporting periods. The amnesty offer is limited to financial penalties authorized under the Law and does not apply to back-payment of registration fees or penalties for violations of other aspects of the Law, such as gift ban violations. The Office of the Attorney General has indicated that it does not anticipate seeking full disclosure for unreported activity, but that it does anticipate requiring at a later date, disclosure of aggregate information regarding the activity.

China Life Sciences and Health Industry Client Briefing - July 2012 (August 8, 2012)

This post was written by Jay J. Yan, Hugh T. Scogin, Jr., John J. Tan, Katherine Yang, May Wong and Gordon B. Schatz.

Reed Smith’s Life Sciences Health Industry China Briefing provides a summary of the monthly news and legal developments relating to China's Pharmaceutical, Medical Device, and Life Sciences/ Health Care Industries

Some important developments during July include:

  • Counterfeit Drug Crackdown in China
  • China Agencies Drafting Policies to Accelerate Development of Medical Devices
  • Mindray Medical Completes Acquisition of Dragonbio's Orthopedics Business
  • Multinational Medical Device Companies Focus on Grassroots Market
  • J&J Plans Training Center in China
  • New Round of Drug Price Cuts Expected
  • MOH Enhances Planning of Private Medical Institutions and Further Relaxes Threshold for Private Investors

To read the full briefing by Reed Smith China team members, click here.
 

As Federal Sunshine Looms, Massachusetts Loosens Manufacturer Gift Ban and Disclosure Law, and Allows Certain Drug Coupons and Vouchers

This post was written by Elizabeth Carder-Thompson, Katie C. Pawlitz and Nancy E. Bonifant.

As drug and device manufacturers continue to await final regulations and subsequent implementation of the federal Physician Payment Sunshine Act, passed as part of the Affordable Care Act, Massachusetts has relaxed its similar state law banning the provision by manufacturers of gifts to health care practitioners (“HCPs”) and requiring disclosure of payments and transfers of value to HCPs. The revisions are intended to loosen certain restrictions related to providing meals and other expenses to HCPs, and also expressly to relieve manufacturers of the duty to report to Massachusetts information that has already been disclosed to federal agencies, such as data reported to the Centers for Medicare & Medicaid Services ("CMS") pursuant to the Physician Payment Sunshine Act. In addition, Massachusetts will now permit pharmaceutical manufacturers to offer drug coupons and other reductions to Massachusetts residents, as long as certain conditions are met.

The Massachusetts gift ban and disclosure amendments come at a time when manufacturers continue to consider how the new federal disclosure requirements will impact state reporting requirements. Massachusetts’ revisions also represent a growing shift in states’ willingness to defer to federal reporting, in lieu of requiring their own reporting.

Notwithstanding this shift, state laws continue to impose their own differing restrictions on certain payments and gifts to HCPs, an issue that is not addressed by the federal law. The Physician Payment Sunshine Law requires manufacturers to disclose to CMS information related to payments and transfers of value to physicians and teaching hospitals, but does not otherwise restrict the types or levels of payments and benefits that may be provided to physicians and teaching hospitals. Multiple states, including Massachusetts, have more prescriptive laws that dictate the types of payments or benefits pharmaceutical and medical device manufacturers can provide to HCPs, including physicians. CMS has indicated that manufacturers may be required to begin tracking reportable payments and other transfers of value for purposes of the Physician Payment Sunshine Act as soon as January 1, 2013.

Amendments to the Massachusetts Marketing Code of Conduct

On July 6, 2012, the governor of Massachusetts signed into law, as part of the FY2013 State Budget, revisions to Massachusetts General Laws, Chapter 111N, the Pharmaceutical and Medical Device Manufacturer Code of Conduct or “Massachusetts Marketing Code of Conduct,” which restricts certain gifts and payments by manufacturers to Massachusetts HCPs.

The revisions to the Massachusetts law include the following:

  • Expenses related to technical training. In a much-needed development, manufacturers are now permitted to provide payment for reasonable expenses necessary for technical training on the use of medical devices, regardless of whether such expenses are covered by a pre-existing purchase agreement. Previously, the law restricted this practice to situations in which such expenses were part of a vendor’s actual purchase contract for the device.
  • Meals Permitted at Non-CME Educational Presentations. Previous Massachusetts law restricted manufacturers from directly providing meals to HCPs except in office or hospital settings. The recent revisions relax this requirement by allowing manufacturers to provide or pay for “modest meals and refreshments” in connection with non-CME educational presentations for the purpose of educating and informing HCPs about the benefits, risks and appropriate uses of prescription products, disease states or other scientific information. The new exception applies only to presentations occurring in a “venue and manner conducive to informational communication.” The term “modest meals and refreshments” is to be defined by the Department of Public Health (“DPH”) through regulations.
  • Detailed Quarterly Reporting of Meals at Non-CME Educational Presentations. To the extent that manufacturers avail themselves of this exception, they must file quarterly reports detailing all presentations at which meals or refreshments are provided. These reports must specify: (1) the location of the non-CME presentation; (2) a description of the products discussed at such presentation; and (3) the total amount expended on such presentation and an estimate of the amount expended for meals and refreshments per participants. This quarterly reporting requirement is in addition to manufacturers’ already-detailed annual reporting requirement with respect to payments or benefits of $50 or more provided to HCPs. However, while the annual reporting requires identification of HCPs, the new quarterly requirement does not appear to be HCP-specific, although amounts per HCP must be disclosed. The revisions make clear that the DPH may require manufacturers to pay a to-be-determined fee to cover the costs of administering this new section.
  • Duplicative Reporting Not Required. The revisions prohibit the DPH from requiring manufacturers to disclose information to the DPH that they have already disclosed to a federal agency pursuant to federal law, if DPH can obtain the federal information. Accordingly, once manufacturers begin disclosing information to CMS under the Physician Payment Sunshine Act, the same information will not need to be disclosed to Massachusetts.
  • Public Availability of Data. Pursuant to a newly added section, the DPH is required to make publicly available and easily searchable on its own website all disclosed data it receives from CMS in annual reports related to manufacturer disclosures pursuant to the Physician Payment Sunshine Act.

As passed on July 8, 2012, these amendments to the Massachusetts Marketing Code of Conduct do not specify an effective date, although the fiscal year of the state budget during which they were passed began July 1, 2012. The DPH has been charged with defining certain terms included in the amendments, and is also expected to make additional conforming amendments to the existing regulations, currently at 105 C.M.R. 970.000. Accordingly, manufacturers should continue to comply with the current regulations, even as they look toward taking advantage of the expanded opportunities for the provision to Massachusetts HCPs of certain meals and expenses consistent with the latest amendments.

Amendments Related to the Coupons, Vouchers, and other Reductions

Separate and apart from the revisions to the Massachusetts Code of Conduct, the FY2012 State Budget also relaxes the Massachusetts anti-kickback statute, which previously prohibited the provision of all coupons, vouchers, and other reductions for prescription medications.

The latest revision limits the prohibition to discounts, rebates, product vouchers or other reductions in an individual's out-of-pocket expenses, including co-payments and deductibles, only to those prescription drugs having an AB-rated generic equivalent. Accordingly, discounts, rebates, vouchers and other reductions can be offered for all drugs except for those with generic equivalents, provided that they are “provided directly or electronically to the individual or through a point of sale or mail-in rebate, or through similar means.” Moreover, manufacturers offering such coupons or reductions cannot exclude or favor any pharmacy for customer redemption

* * * * *

Device manufacturers need to be able to provide education to physicians and hospital staff regarding actual and contemplated equipment purchases, and permitting the common courtesy of a modest snack or meal in connection with such training is a needed improvement. At the same time, given how comprehensive the federal disclosure requirements will be once implemented, and with results published on the Internet, we question the need for states to impose their own complicated and more expansive prohibitions and disclosure requirements, considering the significant operational and recordkeeping burdens they impose on manufacturers, not to mention the sometimes absurd practices that result (e.g., complex signage at conference booths with differing instructions for practitioners from different states entering the booth). On balance, it seems that funds for such manufacturer activities would be better dedicated to needed research and development.

We continue to monitor developments with respect to state and federal manufacturer marketing reporting requirements and gift bans. Please contact Elizabeth Carder-Thompson (202 414 9213 or ecarder@reedsmith.com), Katie C. Pawlitz (202 414 9233 or kpawlitz@reedsmith.com), Nancy Bonifant (202 414 9353 or nbonifant@reedsmith.com), or any other member of the Reed Smith Health Care Group with whom you work, if you would like additional information or if you have any questions.
 

House Approves ACA Device Tax Repeal Bill in Face of Veto Threat

This post was written by Ruth N. Holzman, Angelo Ciavarella and Debra A. McCurdy.

Yesterday the House approved by a vote of 270-146 legislation to repeal the ACA’s controversial 2.3% excise tax on the sale price of certain medical devices, which is scheduled to apply to sales after December 31, 2012. The repeal provision is included in H.R. 436, the Health Care Cost Reduction Act of 2012, which also would: repeal ACA provisions that disqualify expenses for over-the-counter medicine under certain health savings arrangements; allow employees with health flexible savings arrangements funded through salary deductions to “cash out” any remaining balance at year-end (up to $500), and treat such funds as taxable compensation; and require individuals who receive ACA health insurance exchange subsidies to which they are not entitled to repay the full amount of overpayments. The bill now moves to the Senate, where its fate is uncertain, particularly since the Administration has threatened to veto the bill. According to the Administration, the medical device industry will benefit from expanded health insurance coverage under the ACA, and a repeal would “fund tax breaks for industry by raising taxes on middle-class and low-income families.”

House Leaders Plan June Vote on ACA Medical Device Tax Repeal

This post was written by Debra A. McCurdyRuth N. Holzman, and Angelo Ciavarella

A vote on legislation to repeal the ACA’s medical device excise tax could come in June, House Majority Leader Eric Cantor announced today.  The ACA imposes a 2.3% excise tax on the sale price of medical devices sold by the manufacturer, producer, or importer of the device after December 31, 2012. Citing the negative impact of this “draconian tax” on jobs in the medical device industry, Cantor plans a vote on H.R. 436, which would repeal the medical device tax, as early as the week of June 4, 2012. The bill would then await Senate action.

Life Sciences Health Industry China Briefing - April 2012 (May 21, 2012)

Reed Smith’s Life Sciences Health Industry China Briefing provides a summary of the monthly news and legal developments relating to China's Pharmaceutical, Medical Device, and Life Sciences/ Health Care Industries.  Some developments during April include:

  • Chinese Government to Review Drug Pricing Differences Between Ex-factory and Bid Prices
  • Heightened Attention to Hospital Mark-ups of Drug Prices
  • State Council to Cancel Drug Price Addition and Raise Medical and Surgery Fees
  • Cessation Drugs to be Included in Medical Insurance: Multinational Pharmaceutical Companies Play a Large Role in Government Procurement
  • 13 Products of 9 Pharmaceutical Companies Using Capsules Suspected of Excessive Chromium Contamination
  • Growth in Home Care Medical Devices

To read the full briefing by Reed Smith China team members, click here.

CMS Announces Data Collection for the Physician Payments Sunshine Act Will Not Be Required Before 2013

The Centers for Medicare & Medicaid Services (CMS), tasked with implementing the Physician Payments Sunshine Act, announced yesterday that it will not require pharmaceutical, device, and other applicable manufacturers and group purchasing organizations (GPOs) to begin collecting reportable data before 2013.  Once implemented, the Physician Payments Sunshine Act (Section 6002 of the Affordable Care Act) will require manufacturers and GPOs to report information regarding payments to physicians and physician ownership and investment interests.

To learn more about this development regarding the Physician Payments Sunshine Act, please see the full post written by Elizabeth B. Carder-Thompson, Katie C. Pawlitz, Nancy E. Bonifant and Debra A. McCurdy on Reed Smith’s Health Industry Washington Watch blog.


 

Update: New Hampshire State Senate Hearing on Prohibition of Certain Physician Relationships with Medical Device Companies

This post was written by Elizabeth Carder-Thompson and Nancy E. Bonifant.

The New Hampshire State Senate held a hearing on April 19, 2012 regarding HB 1725, a new measure that would prohibit all health care practitioners from prescribing or referring any U.S. Food and Drug Administration class II or class III implantable medical device if the practitioner stands to “profit indirectly or directly from the sale of [the] medical device by any supplier in which the health care practitioner has a direct or indirect ownership interest.” The testimony from supporters and opponents at the hearing, as well as recent commentary on the bill, indicate that there is significant disagreement over the reach of the measure and in particular whether the definition of “ownership interest” will include “royalty arrangements” between practitioners and medical device manufacturers.

As currently drafted, HB 1725 incorporates the following broad definition of “ownership interest”:

Any and all ownership interest by a healthcare practitioner or such person’s spouse or child, including, but not limited to, any membership, proprietary interest, stock interest, partnership interest, co-ownership in any form, or any profit-sharing arrangement. It shall not include ownership of investment securities purchased by the practitioner on terms available to the general public and which are publicly traded.

At the hearing, supporters of the bill clearly stated that the bill’s purpose is to address growing concerns regarding physician-owned distributors (“PODs”), which can implicate state and federal anti-kickback prohibitions. Opponents, however, argued that the current definition of “ownership interest” could reach much further. On the one hand, “royalty arrangements” between practitioners and medical device manufacturers could arguably be deemed “compensation arrangements” involving the transfer of intellectual property rather than “ownership interests,” and hence fall outside of the bill’s proscriptions. At the same time, the broad definition in the proposed legislation of “any and all ownership interests” followed by a non-exclusive list of examples, and the current significant disagreement over the measure’s reach, suggest that the bill would benefit from additional drafting for clarity.

We will continue to monitor developments in this area. To view our previous post on this topic, click here.
 

New Hampshire Quietly Considers Prohibition Of Physician Relationships With Medical Device Companies

This post was written by Elizabeth Carder-Thompson and Nancy E. Bonifant.

On March 29, 2012, the New Hampshire House of Representatives recommended for passage HB 1725.  If passed, HB 1725 would prohibit all health care practitioners from prescribing or referring any U.S. Food and Drug Administration class II or class III implantable medical device if the practitioner stands to profit, directly or indirectly, from the sale of the device, or from performing any procedure involving the device.

Proponents of the bill assert that it is necessary to address growing concerns regarding physician-owned distributors (“PODs”).  As drafted, however, the bill reaches much further than PODs by incorporating the definition of "ownership interest" from Sections 125:25-a to 125:25-c of the New Hampshire Revised Statutes, which requires practitioners to disclose to patients and licensing authorities “any and all ownership interests” the practitioner has in entities that provide diagnostic and therapeutic services.  A relationship that triggers the disclosure requirements, therefore, is not limited to PODs.  As a result, HB 1725 could prohibit legitimate intellectual property relationships between practitioners and medical device companies that exist to develop and promote life-saving medical devices.  Thus, the bill could significantly affect a practitioner’s ability to continue practicing in his or her specialty in New Hampshire if that practitioner has an ownership interest in a medical device related to his or her practice.

In addition to constituting an unfair or deceptive act or practice in violation of New Hampshire law, failure to comply with the prohibition would expose practitioners to a $5,000 fine per procedure for a first offense and potential suspension or loss of professional licensure, and up to a $10,000 fine, for a second offense.

HB 1725 has been fast-tracked to the New Hampshire Senate, where it is expected to meet with approval.  A hearing has been scheduled for this Thursday, April 19.
 

Life Sciences Health Industry China Briefing - March 2012 (April 13, 2012)

Reed Smith’s Life Sciences Health Industry China Briefing provides a summary of the monthly news and legal developments relating to China's Pharmaceutical, Medical Device, and Life Sciences/ Health Care Industries.  Some developments during March include:

  • American Medical Device Maker Accused of Bribery to Doctors in China and other Countries
  • Qiagen Inks HPV Screening Deal with China's KingMed Diagnostics
  • Medical Care Administration to Improve through Health Cards
  • Cuts in Drug Prices
  • Notice Concerning Registration after Adjustment of Classification of Medical Devices
  • MOH Encourages Private Capital into Medical Rehabilitation Services

To read the full briefing by Reed Smith China team members, click here.
 

Life Sciences Health Industry China Briefing - February 2012 (March 13, 2012)

This post was written by Jay J. Yan, Mao Rong, Zack Dong, Katherine Yang, Joyce Sun, Sara Lai and Gordon B. Schatz.

Reed Smith’s Life Sciences Health Industry China Briefing provides a summary of the monthly news and legal developments relating to China's Pharmaceutical, Medical Device, and Life Sciences/ Health Care Industries.

Some important developments during February include:

  • Release of the 12th Five-Year Plan on Drug Safety and Standards
  • SFDA: Concentrated Rectification Action in National Drug Manufacturing and Distribution Sectors
  • Twelve Ministries: Crackdown on Serious Illegal Advertisement Broadcasting
  • SFDA: Electronic Drug Supervision Plan from 2011 – 2015
  • MOH: Administrative Measures on Health Card for Residents (for Trial Implementation)
  • MOH: Revised Diseases Classification and Code

To read the full briefing by Reed Smith China team members, click here.
 

Life Sciences Health Industry China Briefing - January 2012 (February 13, 2012)

This post was written by Jay J. Yan, Mao Rong, Zack Dong, Katherine Yang, Joyce Sun, Sara Lai and Gordon B. Schatz.

Reed Smith’s Life Sciences Health Industry China Briefing provides a summary of the monthly news and legal developments relating to China's Pharmaceutical, Medical Device, and Life Sciences/ Health Care Industries.

Some important developments during January include:

  • Outline of China's Nursing Development Plan from 2011 to 2015
  • Promulgation of Eight Recommended Medical Product Industry Standards
  • Strengthening Implementation of 2010 GMP Amendment
  • Circulation of the 12th Five-Year Plan for Medical Device Technology Industry

To read the full briefing by Reed Smith China team members, click here.
 

Overview and Analysis of the Proposed Federal Sunshine Regulations

On December 19, 2011, the Centers for Medicare & Medicaid Services (“CMS”) published a proposed rule (the “Proposed Rule”) related to section 6002 of the Affordable Care Act, commonly referred to as the “Physician Payment Sunshine Act.” The Physician Payment Sunshine Act requires applicable manufacturers of drugs, devices, biologicals, or medical supplies covered under Medicare, Medicaid, or CHIP to report annually to the Secretary of the Department of Health and Human Services (“Secretary”) certain payments or other transfers of value to physicians and teaching hospitals. Additionally, applicable manufacturers and applicable group purchasing organizations (“GPOs”) must report certain information regarding the ownership or investment interests in them that are held by physicians or their immediate family members.

To learn more about this development regarding the Physician Payment Sunshine Act, please see the full post written by Elizabeth B. Carder-Thompson, Katie C. Pawlitz, Nancy E. Bonifant and Debra A. McCurdy on Reed Smith’s Health Industry Washington Watch blog.

Life Sciences Health Industry China Briefing - December 2011 (January 12, 2012)

This post was written by Jay Yan, Mao Rong, Zack Dong, Gordon Schatz, and Katherine Yang.

Reed Smith’s Life Sciences Health Industry China Briefing provides a summary of the monthly news and legal developments relating to China's Pharmaceutical, Medical Device, and Life Sciences/ Health Care Industries.

Some important developments during December include:

  • SFDA Issues Catalogue of Class II Medical Devices Exempted from Submitting Clinical Trial Materials
  • SFDA Issues Notice Concerning Circulation of Guiding Principles of Phase I Clinical Trial Management of Drugs
  • SFDA Issues Notice on Soliciting Comments on Revisions of the Good Supply Practice for Pharmaceutical Products
  • China Adopts Drug Safety Plan: All Drugs to be Qualified by 2015
  • NDRC Issues Rules on Drug Price Parity to Prevent Disguised Price Hikes
  • Guangdong Issues Drug Price Adjustment Program: 307 Western Drugs’ Price have a 22 percent Reduction in Average
  • Shenzhen Public Hospitals to Revoke Drug Price Addition by the End of 2012

To read the full briefing by Reed Smith China team members, click here.

Life Sciences Health Industry China Briefing - November 2011 (December 6, 2011)

This post was written by Jay Yan, Mao Rong, Zack Dong, Zhao Hong, Gordon Schatz, Dr. David Kan and Katherine Yang.

Reed Smith’s Life Sciences Health Industry China Briefing provides a summary of the monthly news and legal developments relating to China's Pharmaceutical, Medical Device, and Life Sciences/ Health Care Industries.

Some important developments during November include:

  • Beijing Hospital Requirements: Overuse of Antibiotics
  • SFDA Issues Second Batch of Class II Medical Devices, For Which Distributors Do Not Need to Apply for Medical Devices Distribution License
  • Interim Measures on Appraisal of Traditional Chinese Medicine Hospitals: Request for Comments 
  • Two Pharmaceutical Companies Fined for Monopolizing Compound Reserpine API
  • China to Build ADR Monitoring System
  • NDRC to Investigate Ex-factory Prices of Drugs
  • China Finalizes Healthcare Reform 12th FYP
  • China to Launch Massive Survey on TCM Resources
  • Notice Concerning Circulation of the 12th Five-year Plan of Biotechnology Development

To read the full briefing by Reed Smith China team members, click here.

Life Sciences Health Industry China Briefing

This post was written by Jay Yan, Mao Rong, Zack Dong, Zhao Hong, Gordon Schatz, Dr. David Kan and Katherine Yang.

Reed Smith’s Life Sciences Health Industry China Briefing provides a summary of the monthly news and legal developments relating to China's Pharmaceutical, Medical Device, and Life Sciences/ Health Care Industries.

Some important developments during October include:

  • SFDA Issues 2010 Annual Report on Drug Registration and Approval
  • CCTV to Restrict Advertisement of Alcohol, Medical Institutions
  • MOH Requires Improvement of the Reward and Penalty System for Antibacterial Drug Administration
  • Draft Mental Health Law Submitted to NPC Standing Committee for First Deliberation
  • SFDA: All Drugs on Market to Have E-ID by End of 2015
  • SFDA Releases 3rd Batch of Illegal Drugs, Medical Devices and Health Food Advertisements in 2011
  • SFDA issues Notice on Release and Delivery of GMP Certification Announcement
  • SFDA issues Notice concerning Circulation of the Administrative Measures on Drug Supervision in Medical Institutions
  • Detailed Summary of SFDA 2010 Annual Report on Drug Registration and Approval

To read the full briefing by Reed Smith China team members, click here.

Increased Scrutiny for the 510(k) Process

This post was written by Michelle Lyu Cheng.

On November 14, 2011, the Senate Health, Education, Labor and Pensions Committee held a hearing called "Medical Devices: Protecting Patients and Promoting Innovation." The hearing focused on the continued viability of a medical device clearance process that clears for market medical devices that are "substantially equivalent" devices to previously cleared devices (also known as the "510(k) process," in reference to the statutory provision governing this process). Class III medical devices not cleared through this process must undergo the more rigorous and time-consuming Premarket Approval process. Among the issues considered were whether the 510(k) process sufficiently evaluated the safety of devices when clinical data is not necessarily always considered or part of the submission; whether high-risk medical devices should always be considered for the 510(k) process; the user fees for medical device applications; strengthening post-approval monitoring requirements; and the resources and needs for the FDA and the Center of Devices and Radiological Health (CDRH) in reviewing, clearing and approving medical devices. 

Testifying witnesses before the panel were as follows: Jeffrey Shuren, Director of the CDRH of the Food and Drug Administration; Ralph Hall, Professor of Practice, University of Minnesota, Minneapolis; David R. Challoner, M.D., Vice President (emeritus) of Health Affairs, University of Florida, and Chair, IOM Committee on the Public Health Effectiveness of the FDA 510(k) Clearance Process, Gainesville, Fla.; and Gregory Curfman, M.D., Executive Editor, New England Journal of Medicine, Boston. 

The first discussion panel centered on Dr. Shuren and his work with CDRH. In late 2009, the CDRH initiated a review of the 510(k) process, among others, and in 2010, released two reports concluding that the FDA had not managed its premarket programs sufficiently, with the most dire problem being unpredictability in the 510(k) and other premarket processes. This led to other increases in costs to the industry and delays in bringing innovation to the market. The root causes were determined to be the lack of personnel resources in CDRH, as compared with the center for drugs and biologics, insufficient reviewer training, insufficient managers and frontline reviewers, rapidly growing workload caused by increased complexity of devices and number of admissions, insufficient guidance for FDA, and poorly drafted submissions by the industry. In 2011, Dr. Shuren testified that concrete steps for improving the transparency, predictability and consistency of the premarket programs were outlined and evaluated. The Committee members generally focused on the sufficiency of CDRH/FDA's resources and an increase in review times for both the 510(k) and the Premarket Approval processes. One suggestion from Sen. Harkin (D-Iowa) was that the user fees for these submissions should be increased, although later it was conceded that the optimal solution would be if the FDA was independently funded. 

The second discussion panel with Mr. Hall and Drs. Challoner and Curfman focused on the 510(k) process and the National Academies of Science, Institute of Medicine (IoM) report that heavily criticized the 510(k) process. Mr. Hall started first, outlining that the drug and medical device sectors are very different, including because medical device development is an iterative process that builds upon previously created devices, and clinical testing is not necessarily an optimal or feasible method of measuring safety and effectiveness for medical devices compared with drugs. In response to Sen. Harkin's question about 510(k) devices bearing little resemblance to each of its predicate devices that may compromise patient safety, Mr. Hall noted the FDA has resources and regulatory powers at its disposal to satisfy itself for any issues relating to safety and effectiveness. Mr. Hall also stated in response to Sen. Blumenthal's (D-Conn.) question that post-market surveillance should be improved but that currently, FDA does have controls and regulatory systems in place for monitoring. Mr. Hall also emphasized that the 510(k) process does control for safety and effectiveness.

The discussion with Dr. Challoner primarily focused on IoN's report, as he chaired the committee that drafted it. The IoN report concluded that the 510(k) process generally does not evaluate safety and effectiveness, but only evaluates whether it is substantively equivalent to prior devices previously cleared. He stated that the IoN committee concluded that overhauling the 510(k) process was an optimal scenario, but per Sen. Mikulski's (D-Md.) question, Dr. Challoner stated that he did not expect the 510(k) process be eliminated overnight. He considered the IoN report to be a conversation starter. Dr. Challoner also testified that since the 510(k) process will not be immediately overhauled, it may be necessary to evaluate and strengthen the post-market processes and improve quality control. Dr. Curfman provided testimony similar to Dr. Challoner, namely that post-market surveillance controls would be helpful in monitoring the safety and effectiveness of devices. One potential way of doing so would be to institute a uniform device identification system so that a device can be tracked over its lifetime.

Sen. Harkin, the Committee Chair, concluded that this hearing was helpful in illustrating the need to take a more intense look at the approval process and post-surveillance controls, especially for certain higher-risk devices. While Sen. Harkin conceded that user fees may not be the optimal solution to compensate for the FDA's lack of resources, he did not consider that any changes to this would be feasible in light of the current climate. Based on some of the discussion points raised during this hearing, the 510(k) process and the post-market surveillance requirements may see increased scrutiny.

A link to the videotaped hearing is here.

Life Sciences Health Industry China Briefing

This post was written by Jay Yan, Mao Rong, Zack Dong, Zhao Hong, and Gordon Schatz.

Reed Smith’s Life Sciences Health Industry China Briefing provides a summary of the monthly news and legal developments relating to China's Pharmaceutical, Medical Device, and Life Sciences/ Health Care Industries.

Some important developments during September include:

  • SFDA Circulates Guidelines for Monitoring Adverse Events Involving Medical Devices
  • SFDA Issues Letter Soliciting Public Comments on Communication Methods for Responsible Food and Drug Safety
  • Swiss Drugmaker Novartis Expands in China
  • China to Divide Emergency Patients into Four Classes for Medical Treatment
  • China’s Biopharmaceutical Industry to Accelerate Internationalization
  • MOH surveys Clinical Application of Antimicrobials
  • Medtronic Opens Orthopedic R&D Center with Weigao
  • DHL Establishes Second Life Science and Health Care Logistics Center in Beijing

To read the full briefing by Reed Smith China team members, click here.

CMS and FDA Announce Parallel Review Pilot Program

This post was written by Susan Edwards, Elizabeth Carder-Thompson, Gail Daubert, Celeste Letourneau, and Debra McCurdy.

On Friday, October 7, 2011, the Centers for Medicare & Medicaid Services ("CMS") and the Food and Drug Administration ("FDA") (collectively, the "Agencies") announced they were soliciting nominations from sponsors of medical devices to participate in the Agencies’ parallel review pilot program. The Agencies officially published a Federal Register notice announcing the program October 11, 2011 (the "Notice"), with an effective date of November 10, 2011, although the Agencies began accepting nomination submissions October 7.

To read the full alert, which summarizes the Notice and discusses potential implications for manufacturers that may be considering participation in the pilot program, click here.

Prospects Unclear for CMS/FDA Proposed Parallel Review of Medical Products

This post was written by Susan A. Edwards, Elizabeth B. Carder-Thompson, Gail L. Daubert and Celeste A. Letourneau.

Notably absent from last month’s Department of Health and Human Services Semiannual Regulatory Agenda was any indication of where the Centers for Medicare and Medicaid Services ("CMS") and the Food and Drug Administration ("FDA") stand with respect to their notice with request for comments, issued last fall, on the proposed parallel review process for medical products. While CMS and FDA officials confirmed that they are currently reviewing comments submitted during the review period, they declined to speculate on when they intend to act. The comments submitted, however, provide insight into industry views on this important issue, including widespread discontent with the approval mechanisms currently available. We have undertaken a review of all of the comments submitted and extracted the eight main concerns cited in the following analysis.

Senate Finance Committee Report Inquires into Physician-Owned Distributors

This post was written by Joseph W. Metro, Gina M. Cavalier and Jouya Rastegar.

On June 9, 2011, Senator Orrin Hatch released a report by the Senate Finance Committee Minority Staff that outlines key concerns about Physician-Owned Distributors (“PODs”), specifically regarding the lack of regulatory oversight and clear guidance from the Department of Health and Human Services Office of Inspector General (“OIG”). The Committee Minority’s report, Physician Owned Distributors (PODs): An Overview of Key Issues and Potential Areas for Congressional Oversight, set forth findings of committee staff who spoke to over fifty people and reviewed thousands of pages of documents. In addition to the report, the Chairman and Ranking Members of the Senate Financial Committee, Special Committee on Aging, and Judiciary Committee sent letters on the same day to the Administrator for Centers for Medicare & Medicaid Services (“CMS”)and the Inspector General of Health and Human Services (“HHS”) requesting further inquiry into the concerns set out in the Senator Hatch’s report.

The crux of the Committee’s concern with PODs is the potential for fraud and abuse the Committee believes to be inherently found in PODs. Historically, implantable medical devices (these are what the report focuses on) have been sold to hospitals and surgery centers directly from the device manufacturers or through independent distributors. More recently, PODs have come into existence to buy the devices from manufacturers and sell them to hospitals or surgery centers. PODs are mostly comprised of small groups of physicians who create companies to distribute, and in some cases manufacture, medical devices for implantation in surgeries. The large majority of products sold by PODs are sold to hospitals where their own physician investors practice. This is where the concern stems from—physicians’ potential ability to profit through distribution markups on products they are selling through the PODs in which they are owners or investors, particularly where the PODs likewise solicit discounts from manufacturers based on preferred positioning or other “captive” volume.

The report: (1) explains the history of PODs and their business models; (2) describes the concerns for fraud and abuse; (3) highlights the regulatory environment in which they exist; and (4) concludes by outlining what the should happen to address concerns. The nature of PODs creates financial incentives for physician owners to use devices that yield personal financial return, which may implicate the federal anti-kickback statute’s prohibition on inducements to purchase or order items covered under federal health care programs. The report listed anecdotal and evidence-based reasons for concern, such as instances of surgeons performing eight to ten procedures on elderly patients despite the serious health risks, stories of surgeons redoing previous surgeries to use their own POD products, an analysis from the Quality Implant Coalition, a coalition of manufacturers of implantable medical devices, which showed claims data from one hospital indicating a 300 percent increase in spinal fusion surgery after a spinal product POD moved into the hospital’s area, and an April 2010 Journal of the American Medical Association study that found a fifteen-fold increase in the number of spinal fusion surgeries for Medicare patients from 2002-2007, the period during which PODs became a more prevalent business model. On the other hand, the report mentioned a paper written by a POD, which was presented at the American Association of Orthopedic Surgeons 2009 annual meeting, in which the POD asserted that its business model helped saved the hospital with which it was affiliated thirty-four percent over a two year-period—a total savings of over one million dollars.

The legal implications of the business of PODs have not been entirely clear because the regulatory environment in which they find themselves is murky. As highlighted in the Senate Finance Committee report, the OIG issued written guidance on the issue of PODs and expressed the need to carefully review and closely scrutinize these entities under fraud and abuse laws and its Special Fraud Alert relating to joint venture arrangements. Similarly, CMS has declined to regulate PODs under the Stark law. However, the Senate Finance Committee report indicated that there has been a lack of any recent or more specific guidance on this topic. Further the report noted that POD arrangements might implicate the Sunshine Act’s reporting requirements relating to manufacturer financial arrangements with physicians, for which HHS has not yet issued guidance.

The report, as well as the letters to the HHS Inspector General and CMS Administrator, call for several measures to address concerns: (1) further inquiring into and closely examining PODs and their current structures and activities; (2) providing additional regulatory guidance from OIG and/or Congress; (3) including the distribution model of PODs into CMS’ final definition of “applicable manufacturers,” in order to require PODs to fall under the Sunshine Act financial reporting requirements; (4) accounting for the POD business model when CMS promulgates the final Accountable Care Organization regulation to protect against abuses posed by PODs; and (5) developing recommendations for further actions.
 

Vermont Modifies Manufacturer Gift Ban and Reporting Law, Effective July 1, 2011

This post was written by Elizabeth B. Carder-Thompson and Katie C. Pawlitz.

On May 26, 2011, Vermont Governor Peter Shumlin signed into law Senate Bill 104 (“S.104”), significantly modifying Vermont law banning the provision by manufacturers of gifts to health care providers and requiring disclosure of certain allowable expenditures and gifts to health care providers (18 V.S.A. § 4631a and 18 V.S.A. § 4632). S.104 follows amendments made to the Vermont gift ban and disclosure law enacted just last year. This Client Alert includes a summary of the modifications pursuant to S.104. Except as otherwise noted, the changes are effective July 1, 2011. To read the full Alert, click here.

This is a follow-up to our previous Client Alert "Update on Medical Device Manufacturer Marketing Activities: State and Federal Restrictions and Reporting Requirements," which provides a brief overview of the existing state marketing laws that apply to device manufacturers, including recent changes to those laws, as well as federal reporting requirements under the ACA.

Food and Drug Law Institute's Upcoming US-China Food and Drug Law Conference in Beijing, China

The Food and Drug Law Institute (FDLI) has an interesting upcoming conference on June 13-14 in Beijing, China that will address current legal, regulatory and economic issues regarding food, cosmetics, dietary supplements, pharmaceuticals and medical devices in China and the United States. Speakers are top government officials and internationally renowned experts who will discuss the issues in both countries.  They include Dr. Margaret A. Hamburg (Commissioner of Food and Drugs, US Food and Drug Administration), Wu Zhen (Deputy Commissioner of China's State Food and Drug Administration), Ralph Tyler (Chief Counsel, US Food and Drug Administration), Rosemary Gallant (Principal Commercial Officer Beijing, US Embassy Beijing, Commercial Section), Ding Jianhua (Deputy Director-General, Department of International Cooperation, SFDA), Wang Lanming (Supervisor-General, Department of Medical Devices Supervision, SFDA), Lin Wei (Deputy Director-General, Bureau of Import-Export Food Safety, AQSIQ) and Jinjing Zhang (Deputy Director General, Department of Food Licensing, SFDA).  Reed Smith partner Gordon Schatz will be speaking on the panel "Innovation and Access: Key Success Factors in China."

Update on Medical Device Manufacturer Marketing Activities: State and Federal Restrictions and Reporting Requirements

This post was written by Elizabeth B. Carder-Thompson and Katie C. Pawlitz.

States are increasingly imposing marketing restrictions on device manufacturers through laws that previously focused more specifically on pharmaceutical manufacturers. These laws affect compliance activities and relationships with providers, and create new reporting obligations. The impact is significant in that these state laws directly influence how companies conduct business and interact with customers, but implementation is complicated by the variations that exist between states.

Most significantly, under the federal Patient Protection and Affordable Care Act (“ACA”), beginning March 31, 2013, and annually thereafter, device manufacturers must report payments to physicians and teaching hospitals during the preceding calendar year. This means manufacturers must be prepared to track payments in a comprehensive manner as of January 1, 2012. The Centers for Medicare & Medicaid Services (“CMS”) is now in the early stages of developing specific provisions to implement the new ACA provisions, with publication of proposed regulations to occur not later than October 1, 2011.

This Client Alert provides a brief overview of the existing state marketing laws that apply to device manufacturers, including recent changes to those laws, as well as federal reporting requirements under the ACA. Although the laws discussed may apply broadly to other entities, we refer in our Client Alert specifically to medical device manufacturers. To read the full Alert, click here.

Sunshine in Litigation Act to Senate Judiciary

In February we noted that the perennial "Sunshine in Litigation" bill had been introduced again. The Senate version in S. 623  and the House version is H.R. 592 but there is no real difference.  It now is scheduled for consideration in Senate Judiciary on May 5 at 10:00 a.m.  A link to the webcast should be available then from the relevant Senate Judiciary Committee hearing and meeting page.

Three Years Later, FDA Finalizes Medical Device Data Systems Rule

This post was written by Catherine A. Hurley and Areta L. Kupchyk.

On February 15, 2011, the Food and Drug Administration (“FDA”) published a final rule reclassifying Medical Device Data Systems (“MDDS”) as Class I medical devices exempt from 510(k) premarket notification requirements. FDA defined MDDS as medical devices that are intended to transfer, store, convert from one format to another according to preset specifications, or display “medical device data.” FDA explicitly excluded electronic health record (“EHR”) and computerized physician order entry (“CPOE”) systems from the MDDS Final Rule. Because MDDS do not “provide new or unique algorithms or functions,” FDA concluded that general controls, such as the Quality System Regulations are sufficient to mitigate any risks associated with MDDS.

The final MDDS rule will become effective April 18, 2011. By May 18, 2011, all manufacturers of MDDS must register their establishments and list their MDDS products with FDA. No later than April 18, 2012, all manufacturers of MDDS must develop and implement procedures to ensure compliance with the QSRs and the Medical Device Reporting requirements. FDA does not intend to enforce design control requirements retroactively to any currently marketed device that is classified as “MDDS” under the final rule. However, FDA stated that it will enforce design control requirements for design changes made after the April 18, 2011 effective date to currently-marketed MDDS.

For more information, read our full alert.

"Sunshine in Litigation" Bill Introduced Again

Law360 is reporting that Rep. Jerrold Nadler (D-NY) is seeking to revive the 2009 "Sunshine in Litigation Act," a bill we covered previously.  H.R. 592 would turn around the Supreme Court's Seattle Times Co. v. Rhinehart, 467 U.S. 20, 33 (1984), which concluded that discovery materials are not public components of a civil trial.  As a result, litigation protective orders are permissible to protect the confidential and proprietary information of parties to civil litigation, at least until information produced in discovery is filed with the court or introduced into evidence for determination of a merits issue (such as on a motion for summary judgment or at trial.  These bills are introduced regularly, even though in 1996 the Federal Judicial Center confirmed there was no basis for the primary justification articulated by proponents of such measures, reporting that its "empirical study showed that the orders did not impact public safety or health. . . . The empirical data showed no evidence that protective orders create any significant problem of concealing information about public hazards."

FDA Announces Plans to Reform 510(k) Process

This post was written by Jennifer A. Goldstein and Areta L. Kupchyk.

On January 19, 2011, FDA announced its long-awaited plans for revising the premarket notification (510(k)) process for medical devices to address the concerns that have been raised about the process by industry, consumers and Center for Devices and Radiological Health (CDRH) staff regarding the lack of predictability, consistency, transparency of the process, the inadequacy of the process to ensure the safety and effectiveness of products, and the lack of flexibility of the process to address changing technology and complexity. In 2009, CDRH established working groups to address these concerns. In August 2010, these working groups issued recommendations, which FDA analyzed and addressed as part of the announcement. FDA also sought public input and comments.

FDA’s Plan of Action for 510(k)s includes 25 action items for 2011, which include the majority of the working group recommendations that received overall support from the comments submitted to FDA. FDA states that it will focus first on implementing steps that will significantly impact fostering medical device innovation, enhancing regulatory predictability and improving patient safety. These steps include streamlining the review process for innovative, lower risk products (the “de novo” process), improving training for CDRH staff and industry, increase reliance on external experts, as well as addressing and improving CDRH processes. The Plan of Action includes an ambitious agenda to publish eight specific draft guidance documents between June – December 2011, on topics including:

  1. What changes do or do not warrant submission of a new 510(k) and which modifications are eligible for a Special 510(k);
  2. Clinical trials;
  3. Class III designation (de novo);
  4. Appropriate use of consensus standards;
  5. Appealing CDRH decisions;
  6. The 510(k) paradigm, to provide clarity on when clinical data should be submitted, submission of photographs or schematics, appropriate use of multiple predicates, criteria for identifying “different questions of safety and effectiveness,” resolving discrepancies between the 510(k) flowchart and the Federal Food, Drug, and Cosmetic Act, “intended use,” and 510(k) summaries;
  7. Pre-submission interactions with CDRH; and
  8. Product codes.

FDA announced that it intends to implement other recommendations, but only after stakeholder input. These recommendations include developing an online repository of medical device labeling and a public database of cleared devices that includes a photograph of each cleared device, while avoiding the disclosure of proprietary information.  FDA also stated that it will further explore some of the other working group recommendations.

Finally, FDA identified some of the working group recommendations that were more controversial, such as consolidating the terms “indication for use” and “intended use,” expanding FDA statutory authority to consider off-label use when determining the intended use of a device and to require postmarket surveillance studies as a condition of clearance for certain devices, among others. FDA stated it will wait to decide whether to implement these recommendations until it receives feedback from the Institute of Medicine (IOM) as part of the IOM independent review of the 510(k) program that is currently underway. 

Click here to view a copy of the Plan of Action for Implementation of 510(k) and Science Recommendations, which includes a description of the action item and date of completion.

510(k) Medical Device Review Process Reforms

FDA has issued a press release on its plan to reform the 510(k) medical device review process, outlining changes it intends to implement during 2011 including streamlining the “de novo” review process for certain innovative, lower-risk medical devices; clarifying when clinical data should be submitted in a premarket submission; and "establishing a new Center Science Council of senior FDA experts to assure timely and consistent science-based decision making." Undoubtedly there will be much more on this in the coming weeks and months.

IRS Issues Guidance on Calculation of the Annual Fee Imposed on Manufacturers and Importers of Branded Prescription Drugs Under the Affordable Care Act

This post was written by Ruth Holzman, Angelo Ciavarella, Joe Metro, Jeffrey Kaylor, and Vicky Gormanly.

On November 29, 2010, the Internal Revenue Service (the “IRS”) issued Notice 2010-71, 2010-50 IRB (the “Notice”), which provides guidance on the calculation of the annual fee imposed on certain manufacturers and importers of branded prescription drugs for calendar years beginning after December 31, 2010, pursuant to the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the Affordable Care Act or the “ACA”). Reed Smith Tax and LSHI attorneys have prepared an analysis of the guidance which provides background on the annual fee and a summary of the information contained in the Notice. While the Notice provides a solid starting point for IRS guidance, there are nevertheless areas of ambiguity that companies will need to evaluate. Please click here to view our full alert.

Ninth Circuit Court of Appeals Holds that the FDCA Precludes Plaintiff's Claim Under the Lanham Act

This post was written by Christopher C. Foster.

The Ninth Circuit recently confronted an issue of first impression: whether a plaintiff could maintain an action under the false advertising prong of the Lanham Act, where a determination of the alleged falsity would require the court to impinge on the exclusive purview of the Food and Drug Administration (FDA) in deciding whether there has been a violation of the Food, Drug, and Cosmetic Act (FDCA). Although limited to the particular circumstances presented, the opinion reaffirmed the exclusive authority of the FDA to enforce the provisions of the FDCA, and indicates that a plaintiff may not maintain a lawsuit premised on the allegation of a violation of the FDCA, where the FDA itself has not acted. 

PhotoMedex v. Irwin

In PhotoMedex v. Irwin, No. 07-56672, 2010 U.S. App. LEXIS 7640 (9th Cir. Apr. 14, 2010), the Ninth Circuit held that the FDCA, which prohibits private enforcement of its provisions, bars a medical device manufacturer’s claim under the Lanham Act. PhotoMedex involved a Lanham Act claim based upon the allegation that plaintiff PhotoMedex, Inc’s (“PhotoMedex”) competitor made false and misleading statements regarding FDA approval of a medical device marketed by the competitor. The Ninth Circuit concluded that PhotoMedex could not maintain its Lanham Act claim, because resolution of the question of whether the defendant made false statements required litigation of an underlying FDCA violation, a determination reserved to the FDA. 

Background

PhotoMedex – a direct competitor of defendants Ra Medical Systems, Inc. and Dean Stewart Irwin (collectively, “Ra Medical”) – alleged that Ra Medical engaged in misleading advertising in violation of the Lanham Act by representing that its dermatological laser product had been approved by the FDA. The device at issue – the Pharos EX-308 Excimer Laser System (“Pharos”) – is considered to be a Class II medical device under the Medical Device Amendments of 1976 (MDA) to the FDCA. The regulatory scheme provided by the FDCA and MDA, which governs FDA approval of the laser, was therefore central to the court’s decision. 

A manufacturer of a Class II medical device must obtain “clearance” from the FDA under what is known as the “510(k)” process under the MDA, before it markets the product. Alternatively, a Class II device deemed “substantially equivalent” to a pre-existing FDA-approved device, may be marketed without further regulatory analysis. A device manufacturer, however, must submit a new 510(k) application if a Class II device is about to be “significantly changed or modified in design, components, method of manufacture, or intended use.” It is the responsibility of the manufacturer of a Class II device to pursue a new 510(k) application. 

Ra Medical – which had previously obtained a licensing agreement to sell a third company’s “EX-308” laser (“SurgiLight”) – did not submit a new 510(k) application for the Pharos device. Rather, Ra Medical took the position that the Pharos was “substantially equivalent” to the SurgiLight, which had previously received FDA clearance under 510(k). Ra Medical argued that, because the Pharos was “substantially equivalent” to the SurgiLight, its representation that the Pharos had FDA approval was not false or misleading.

Legal Analysis

The Ninth Circuit, focusing on the regulatory scheme governing the “clearance” process for the medical device at issue, held that PhotoMedex could not maintain its cause of action for a violation of the Lanham Act. Specifically, the court explained that litigation of PhotoMedex’s Lanham Act cause of action would require the trial court to determine whether the Pharos was in fact “substantially equivalent” to the SurgiLight. Such a determination was prohibited because it would conflict with the statute prohibiting private enforcement of the FDCA, which provides that “all such proceedings for the enforcement, or to restrain violations, of [the FDCA] shall be by and in the name of the United States.” 

The court’s reasoning suggests that the opinion may not be as broad as it would appear at first blush, and is properly read as limited to the facts presented. The court stated that its opinion did “not suggest that the Lanham Act can never support private party claims involving FDA approval or clearance of drugs or medical devices.” Rather, a plaintiff may not pursue such a claim where the FDA “ha[d] not itself concluded there was such a violation.” 

In the case of the Pharos, the court explained that although PhotoMedex had complained on different occasions to the FDA that the Pharos had been promoted without 510(k) clearance, the FDA never reached such a conclusion. At one point in 2005, the FDA inspected the Pharos manufacturing plant , specifically discussing the clearance issue with Ra Medical. The FDA, however, never took further action. Additionally, in 2007, the FDA responded to a 510(k) notification from Ra Medical regarding additional indications for use of the laser by finding the laser “could proceed to market” for the new indications. In sum, although the FDA had the opportunity to take enforcement action against Ra Medical for the alleged violations, it never opted to do so.  

Of additional significance to the court was the fact that FDA approval itself never depended upon an affirmative statement from the FDA to the effect that the product had clearance under 501(k). Rather, the approval itself depended in the first instance on the manufacturer’s decision that the product was “substantially equivalent” to an already approved device. The mere fact that the FDA had not affirmatively approved the Pharos, therefore, did not mean the device did not have clearance under the approval of the SurgiLight. 

Accordingly, PhotoMedex was not permitted to “circumvent the FDA’s exclusive enforcement authority” by attempting to prove that Ra Medical violated the FDCA, where the FDA had not reached that conclusion, and where the regulatory scheme permitted marketing the device without an affirmative statement of approval from the FDA. To rule otherwise would “permit PhotoMedex to assume enforcement power which the statute does not allow and require the finder of fact to make a decision that the FDA itself did not make.”

FDA Discusses Social Media Advertising Regulation for the Life Sciences Industry

This post was written by Dana Blanton.

On November 12 and 13, 2009, the FDA hosted public hearings to vet the potential need for regulation of prescription pharmaceutical and medical device marketing on social media outlets such as YouTube, Wikipedia, Facebook, and Twitter. The FDA specifically sought input on these five questions: (1) For what online communications are manufacturers, packers or distributors accountable? (2) How can manufacturers, packers, or distributors fulfill regulatory requirements in their Internet and social media promotion, particularly when using tools that are associated with space limitations and tools that allow for real-time communications? (3) What parameters should apply to the posting of corrective information on Web sites controlled by third parties? (4) When is the use of links appropriate? and (5) Questions specific to Internet adverse event reporting.

The hearings attracted both internet and ethical drug and device industry giants, as well as nonprofit organizations seeking to gain a better understanding of what will certainly be a new frontier for advertising these regulated products. The FDA's existing regulations for print and television advertising are widely considered unsuitable for social media outlets, some of which allow for no more than 140 characters per post--far too few to include FDA-mandated safety information--and most of which allow for uncensored layperson commentary sometimes indistinguishable from manufacturer content. As a result, pharma and medical device representatives reported, drug and device companies have been reluctant to venture into the social media advertising field. Meanwhile, media and marketing firms offered pre-packaged advertising solutions and industry critics suggested that the FDA and pharmaceutical and device companies should bear the burden of correcting misinformation on third party websites and blogs. The FDA will consider the commentary and determine whether guidelines should be promulgated.

Information on the hearing, including background, further information regarding the five issues presented, a link to transcripts of the FDA's 1996 hearing on internet advertising and other information may be found in the Federal Register Notice for the hearing and transcripts of the November 12 and 13, 2009 hearings will be available by approximately December 13, 2009.

Chinese Regulations on Medical Device Advertisements

This post was written by Hugh Scogin, Gordon Schatz, Amanda Tao and Amanda Yang.

On May 20, 2009, China's State Administration of Industry and Commerce, the Ministry of Health, and the State Food & Drug Administration together issued new regulations for medical device manufacturers and distributors who advertise medical devices and diagnostic products, entitled, "Measures for the Examination of Medical Device Advertisements" and "Standards for the Examination and Release of Medical Device Advertisements." To read a summary of key points contained in the regulations, click here.

Senate Committee Meets To Hear From Witnesses Regarding "The Medical Device Safety Act of 2009"

On Tuesday, August 4, 2009, the Senate Committee on Health, Education, Labor and Pensions met for a hearing called "Protecting Patients from Defective Medical Devices" regarding Senate Bill 540, a companion bill to the House bill, H.R. 1346, the "Medical Device Safety Act of 2009." The House Subcommittee on Health, of the Committee on Energy and Commerce also met earlier this year on this issue, with some of the same speakers. 

S. 150 and H.R. 1346 seek to overturn the Supreme Court's important ruling in Riegel v. Medtronic, Inc., 128 S.Ct. 999 (2008), which held that the PMA approval process for Class III devices imposes federal requirements that preempt state tort claims which would impose additional or different "requirements" regarding the safety and efficacy of the device, pursuant to the express preemption clause found in the Medical Devices Amendment of 1976.

Speaking in support of the bill were William Maisel, Director of the Medical Device Safety Institute, Thomas McGarity, Professor at the University of Texas School of Law, and Michael Mulvihill, a patient who was formerly implanted with a medical device. The arguments they presented echoed those of preemption opponents.

Dr. Maisel's testimony came from the perspective of a medical practitioner, and while he praised the work of the FDA as a "preeminent medical regulatory system," it was his opinion that the FDA nevertheless could not regulate all safety and effectiveness issues that arise regarding PMA approved devices. Dr. Maisel also was of the opinion that medical device manufacturers fail to properly report medical device adverse events that in turn allegedly restricted the FDA's ability to properly regulate the industry, and in his view tort liability was an additional safeguard that Congress should restore. Professor McGarity echoed this perspective from a legal standpoint and suggested that innovation would not suffer (although he did not offer any objective support for this theory). Patient Mulvihil provided his thoughts about an allegedly defective lead he received. 

Speaking in opposition to the bill were former Chief Counsel for the FDA, Peter Barton Hutt, and medical device patient Michael G. Roman. Mr. Hutt gave a historical account of how the Medical Devices Amendments of 1976, which included the express preemption clause in question, came to fruition. As Chief Counsel during 1971-1975, he came before the House Subcommittee on Public Health and Environment of the Committee on Interstate and Foreign Commerce at that time to support national uniform standards for medical devices in order to "strengthen[] the integrity, credibility, and primary jurisdiction of the agency." From this sub-committee hearing, "all medical device legislation considered in the House and Senate included some form of national uniformity requirement." Mr. Hutt warned that if the current Senate reverses the standards put in place through the 1976 Medical Device Amendments, judges and juries in product liability cases would make decisions inconsistent with FDA decisions to approve devices for market. Mr. Hutt also went on to describe the rigor of the PMA approval process that is applicable only for less than 1/2 of 1% of medical devices on the market.

The last witness of the day was patient Michael Roman, who testified about the importance of medical device innovation and availability from his personal experience. After multiple surgeries to repair a torn knee ligament that resulted in a staph infection and later progressive amputations of his right leg, Mr. Roam testified that prior to his medical device, he was under so much pain that he could not remember ten years of his children's' lives. Mr. Roman also testified that he was only able to live with large amounts of pain medication, radiation and injections to no avail. It was only after the implantation of a spinal cord stimulator (which delivers certain electrical impulses through leads to his spinal cord) that his pain has been managed effectively. He currently works with Boston Scientific in speaking out about the debilitating nature of pain and how medical technologies could assist patients in living full lives. His focus was that safe, innovative products should be approved through a more robust FDA, not through the vagaries of litigation that would result from the passage of the bill.

The limited time available during these hearings means that the witnesses often can only scratch the surface, and there is so much more to be said about why the Medical Device Safety Act of 2009 is a bad idea. For a more detailed perspective, it is worth reading “The Economic Impact of Eliminating Federal Preemption for Medical Devices on Patients, Innovation and Jobs” by Ernst Berndt, PhD, and Mark Trusheim of the Massachusetts Institute of Technology’s Sloan School of Management.

Next Congressional Hearing About Medical Device Safety Announced

On August 4, 2009 at 2:30 p.m., it will be the Senate's HELP Committee's turn to hold a hearing entitled "Protecting Patients from Defective Medical Devices". No witness list is yet posted.

For our coverage on past hearings on this issue, click here.

Courts Continue To Get Express Preemption Right In Medical Device Cases

Since last year, a number of courts have interpreted and applied the express preemption holdings of Riegel v. Medtronic, Inc., 128 S.Ct. 999 (2008). Miller v. DePuy Spine, Inc., 07-cv-01639, 2009 US Dist LEXIS 49602 (D. Nev. May 1, 2009), is another example and, although it was decided on May 1, has just recently been picked up by LEXIS.

In Miller, the Nevada District Court granted summary judgment for the manufacturer of a PMA approved spinal implant disc called the Charite Artificial Disc. While many courts, including this one, correctly follow Riegel and hold that the state law claims challenging the design, manufacture and labeling claims are expressly preempted, this court also entered judgment for the defendant on warranty and misrepresentation claims that have a received a more mixed reception in some courts.

As to express warranty, Miller concluded that the plaintiff failed to establish the receipt of any express warranties, and that such warranty claims directly challenged the safety and effectiveness established through PMA approval of the device. The Court further held that even when couched as a warranty claim , claims are preempted when they would "impose liability for the defendant's use of labeling approved and required by the FDA." 

The plaintiff also claimed to assert "parallel claims" contending  that the implanted device was "out of conformity with the materials or manufacturing specifications approved by the FDA," but the court dismissed these as well because plaintiff failed to meet his burden in demonstrating that there was a genuine issue of fact. As the Court succinctly noted: "Only a departure from such FDA-approved specifications could conceivably escape preemption, and absence of any evidence of such departure justifies summary judgment." 

Plaintiff's claims that the manufacturer allegedly made misrepresentations or omissions of material information to the FDA in order to "secure or maintain the PMA" were also dismissed. Not only had the plaintiff offered only "argument about this hypothesis" rather than admissible evidence, under 21 U.S.C. Section 337(a), any attempt to enforce the FDCA and its regulations were preempted; and any contention that the manufacturer provided inaccurate or incomplete information to the FDA was impliedly preempted under Buckman v. Plaintiffs' Legal Committee, 531 U.S. 341 (2001). 

Congressional Hearings On Medical Device Regulation, Litigation Protective Orders

Congress has been busy and there is no sign it intends to slow down just because it is summer.

In two weeks, the House Energy and Commerce Health Subcommittee will hold a hearing entitled, "Medical Devices: Are Current Regulations Doing Enough for Patients." The hearing will be on June 18th at 9:30 a.m. in 2322 Rayburn House Office Building and access to the webcast and witness list should be available from this page once available. Information about this subcommittee's May 12th hearing about medical device preemption is in this prior post.

Earlier this week, the House Judiciary Committee held a hearing on a bill to curtail the discretion of federal judges in issuing litigation protective orders under Federal Rule of Civil Procedure 26(c ) and limiting the use of confideniality provisions in litigation settlement agreements subject to court approval or filed with the court. Proponents of this bill, the "Sunshine in Litigation Act of 2009", H.R. 1508, suggest that it is needed to help keep defendants in civil litigation from "hiding" health and safety hazards.

As the Supreme Court recognized in Seattle Times Co. v. Rhinehart, 467 U.S. 20, 33 (1984), discovery materials are not public components of a civil trial. Until information produced in discovery is filed with the court or introduced into evidence for determination of a merits issue (such as on a motion for summary judgment or at trial), protective orders routinely protect the confidential and proprietary information of parties to civil litigation.

Testimony by the Hon. Mark R. Kravitz of the District of Connecticut, on behalf of the Conference’s Committee on Rules of Practice and Procedure and its Advisory Committee on Civil Rules, opposed the bill on the ground that it effectively amends the Federal Rules of Civil Procedure outside the rulemaking process, contrary to the Rules Enabling Act (28 U.S.C. §§ 2071-2077). He testified that the bill is not needed (emphasis added):

In 1994, the Rules Committees asked the Federal Judicial Center (FJC) to do an empirical study on whether discovery protective orders were operating to keep information about public safety or health hazards from the public. The FJC completed the study in April 1996. . . . The FJC study showed that discovery protective orders were requested in only about 6% of the approximately 220,000 civil cases filed in federal courts in that time period. Most of the requests are made by motion. Courts carefully review these motions and deny or modify them in a substantial proportion. Less than one-quarter of the requests are made by party stipulations and the courts usually accept them. In most civil cases in which discovery protective orders were entered, the empirical study showed that the orders did not impact public safety or health. . . . The empirical data showed no evidence that protective orders create any significant problem of concealing information about public hazards.
* * * *
Even when a protective order is entered, it usually does not result in the sealing of all, or even many, documents or information submitted to the court. Case law shows that courts are rightly protective of the public’s right to gain access to information and documents submitted to the courts.
* * * *
Requiring courts to review discovery information to make public health and safety determinations in every request for a protective order, no matter how irrelevant to public health or safety, will burden judges, further delay pretrial discovery and inevitably increase the cost of civil litigation in federal courts.

We've attached a copy of the Federal Judicial Center's Report.  Additional testimony on the bill is available here.

New Proposed DTC Advertising Guidelines

On May 27, 2009, the Food and Drug Administration (FDA) published a notice soliciting comments on a draft guidance document entitled “Presenting Risk Information in Prescription Drug and Medical Device Promotion.” The draft guidance proposes to use a “reasonable consumer” standard, similar to the Federal Trade Commission's standard, for assessing whether advertisements are misleading, a standard FDA already applies to labels on food and dietary supplements. In the draft guidance, FDA discusses the factors the agency would consider when evaluating prescription drug and restricted device promotional materials directed at healthcare professionals and consumers. The factors include: consistent and appropriate use of language, use of signals, framing of risk information, and the hierarchy of risk information. FDA also states that the agency will review content for both quantity of risk information, as well as materiality and comprehensiveness. Finally, FDA provides extensive factors it considers when evaluating the format of promotional materials. Comments should be submitted by August 25, 2009; for information on submitting comments, click here.

House Subcommittee Holds Hearing To Overturn Riegel: H.R. 1346, the "Medical Device Safety Act of 2009"

On May 12, 2009 the Subcommittee on Health, of the Committee on Energy and Commerce, House of Representatives, held a hearing on H.R. 1346, the "Medical Device Safety Act of 2009".  If passed, it would overturn the Supreme Court decision, Riegel v. Medtronic, Inc., 128 S.Ct. 999 (2008), which held that under the express preemption clause of the Medical Devices Amendment of 1976 (MDA), the federal requirements created by the premarket approval process for Class III devices preempted state law tort claims that added or differed from the federal requirements.  This hearing comes at the heels of public and media scrutiny of this decision, including last year's House Committee on Oversight and Government Reform preemption hearing held May 14, 2008 and the Senate Judiciary Committee's preemption hearing held June 11, 2008.

Before the invited panel of witnesses spoke, numerous members of the subcommittee provided opening remarks, which reflected the division among those who argued that the Supreme Court's analysis in Riegel departed from the legislative intent of the MDA, and those who agreed that the pending legislation would prevent innovation and access to medical devices that are life-saving. Arguments against the bill also noted that moving against preemption would otherwise place safety concerns in the hands of juries across the country, instead of on the FDA's safety and efficacy evaluations. Some focus was also placed on the FDA's effectiveness in policing the manufacturers, with several congress members such as Representative John Dingell, MI and Henry Waxman, CA arguing that the FDA has not been able to identify and take action on defective products, therefore calling into question their effectiveness in ensuring safety, while other congress members such as Representatives Steve Buyer, IN and Michael Burgess, TX argued that if the FDA is underfunded and without resources, the Committee should focus on the FDA, not on tort reform.

Most of the invited witnesses were repeat appearances from last year's hearing. David Vladeck, J.D., Professor of Law, Georgetown University Law Center presented his case in support of the bill, and repeated his concerns about the Riegel court's alleged deviation from congressional intent as reflected in legislative history. He also argued that manufacturers brought the express preemption defense to fore and that it was a more recent phenomena since the mid 1990s, after the Cipollone v. Liggett Group, Inc., 505 U.S. 504, 517, 112 S.Ct. 2608, 2618 (1992) decision.

William H. Maisel, M.D., M.P.H., Director, Medical Device Safety Institute, Department of Medicine, Beth Israel Deaconess Medical Center, Boston also testified, as both a practicing cardiologist and as a consultant and advisory committee member for the FDA. He provided anecdotal background with what he represented as an example of a man who was implanted with a St. Jude pacemaker that allegedly was subjected to a recall and resulted in additional surgical procedures.  In making this example, Dr. Maisel argued that the self-interest of companies are at odds with the congressional goal of ensuring public safety. Gregory Curfman, M.D., Executive Editor, New England Journal of Medicine also echoed similar sentiments, and discounted the arguments made about innovation and safety for consumers being mutually exclusive.

Richard Cooper of the law firm Williams & Connolly LLP provided a big-picture review of what it would mean to have 50 state juries take the place of the FDA and seasoned clinicians when determining what constitutes a "defect" meriting liability. Mr. Cooper also emphasized that innovation would be hampered should preemption be denied to medical device companies, noting how many smaller companies that are focused on under-served areas of practice would be litigated out of their market share.

Bridget Robb of Pennsylvania and Michael Kinsley of Washington both presented anecdotal history with medical devices. Ms. Robb testified about her experience with a cardiac lead that she claimed unnecessarily shocked her and caused grievous subsequent emotional and physical injury, while Mr. Kinsley presented his story of how deep brain stimulation and other implanted medical devices has allowed him to lead a productive life despite a Parkinson's Disease diagnosis. Both presented different takes on the limits of how much risk a patient should face when balanced with the potential benefits offered by their medical devices.

Prior to the hearing, the Energy & Commerce Committee also published a letter asking the FDA to reexamine its decision to approve a medical device called the "collagen scaffold" that is used to reinforce and repair the meniscus, which is a natural cushion in the knee. This letter, as addressed to the FDA Principal Deputy Commissioner, seeks reexamination of the approval decision that the authors argue was made over the objection of FDA scientists.

For more information, please see the previous post "Will The May 12 Hearing On The "Medical Device Safety Act of 2009" Recognize The Costs Of Eliminating Preemption?"

Will The May 12 Hearing On The "Medical Device Safety Act of 2009" Recognize The Costs Of Eliminating Preemption?

The House Committee on Energy and Commerce's Subcommittee on Health will hold a hearing on Tuesday, May 12, 2009, at 2:00 p.m. regarding a bill to overturn medical device preemption (H.R. 1346 /S. 540), called the "The Medical Device Safety Act of 2009.” Although the hearing is not yet listed on the Subcomittee's website, hearing materials should become available here. (If you are interested, video and transcripts also are available from last year's lopsided House Committee on Oversight and Government Reform preemption hearing held May 14, 2008 and the Senate Judiciary Committee's preemption hearing held June 11, 2008.)

Those in the industry will find H.R.1346/ S. 540 ironically named, as patient access to critical new devices and public health would suffer if this bill passes. These ill effects are detailed in a new economics study, “The Economic Impact of Eliminating Federal Preemption for Medical Devices on Patients, Innovation and Jobs” by Ernst Berndt, PhD, and Mark Trusheim of the Massachusetts Institute of Technology’s Sloan School of Management. As the authors state in the executive summary to their article,

"Eliminating preemption protection for medical devices—as some currently advocate—will impact:

1. Patient access and public health
2. Medical technology innovation rates
3. Industry employment
4. Government expenses as a healthcare payer, regulator and judicial funder

The results from eliminating preemption are likely broad and generally negative across this host of categories."

The article is thoughtful and well worth reading.

Commentary: FDA's New Good Reprint Practice Rule

This post was written by Areta L. Kupchyk, James M. Wood and Kevin M. Madagan.

FDA's Good Reprint Practice (GRP) Guidance went into effect in January 2009. The GRP Guidance establishes criteria that FDA will now use to determine whether the distribution of medical or scientific reprints and reference texts about off-label uses of a drug or device would constitute impermissible promotional activity under the Food, Drug and Cosmetic Act.

Read Reed Smith’s full commentary analyzing the GRP Guidance, which includes a Good Reprint Practice Checklist.

Good Reprint Practices

The FDA published a notice on January 13, 2009 announcing a final guidance document entitled “Good Reprint Practices for the Distribution of Medical Journal Articles and Medical or Scientific Reference Publications on Unapproved New Uses of Approved Drugs and Approved or Cleared Medical Devices.” The guidance, which finalizes a February 20, 2008 draft policy, is intended to provide manufacturers with the agency's views on permissible distribution by a company's sales representatives of medical journal articles and scientific or medical reference publications that discuss unapproved new uses for FDA-approved drugs or biologics or FDA-approved or cleared medical devices to healthcare professionals. As with the 2008 draft guidance, the final version notes the need to balance the law’s prohibition on distributing or promoting “unapproved uses of approved drugs and approved or cleared medical devices” with the “important public policy” of providing information that “may even constitute a medically recognized standard of care.” The FDA concludes that the touchstone for lawful dissemination of literature about unapproved uses is that the publications “are truthful and non-misleading.” To meet this standard, the FDA final guidance lists “principles of Good Reprint Practices” that include criteria for determining the type of publication and the manner in which the publication can be distributed. Although the final guidance closely tracks the draft guidance, it has some important clarifications, including revisions to the Good Reprint Practices and a specific reference encouraging manufacturers to seek approvals and clearance for new indications and intended uses for medical products.   A Reed Smith analysis of the final guidance is available here.

Senate Hearing on DTC Advertising for Medical Devices

The United States Senate Special Committee on Aging heard testimony Sept. 17, 2008, to consider recommendations on whether increased regulation of direct-to-consumer (“DTC”) advertising is needed for restricted medical devices regulated by FDA, such as heart stents, replacement hips, and other implanted medical devices. (The Federal Trade Commission regulates advertising for non-restricted medical devices.) 

Describing its inquiry as “Marketing or Medicine: Are Direct-to Consumer Medical Device Ads Playing Doctor?” the hearing was another in the committee’s on-going, 15-month series of oversight hearings on medical device and pharmaceutical marketing practices. Committee Chairman Sen. Herb Kohl (D-Wis.) observed in his opening remarks that the pharmaceutical industry has spent “billions of dollars advertising their products directly to consumers” since the mid-1990s, while the medical device industry is “just beginning to get into the game.” (According to AdvaMed’s President and CEO, Stephen J. Ubl, pharmaceutical companies spent $2.46 billion on DTC ads in 2005 while medical device companies spent $116 million.) 

Whether the Committee is poised to act is unclear. In his opening statement, Sen. Kohl said that, depending upon what his committee learned during the hearing, he was prepared to work with Rep. John Dingell (D-Mich.) to consider legislative measures similar to the American Medical Association (“AMA”) 2006 call for enhanced regulation of DTC advertising by FDA. At the conclusion of the hearing, however, Sen. Kohl said that “we’re not yet of a mind to propose legislative solutions,” although he plainly indicated that he, his committee, and staff members would stay “very, very much on top” of this issue.

CDRH Overview of Existing Regulation of DTC for Devices

Daniel Schultz, M.D., Director of FDA’s Center for Radiological Health (“CDRH”), provided a comprehensive overview of current medical device DTC regulation for the Committee. FDA’s device regulations do not contain specific requirements regarding the content of advertisements for restricted medical devices, in contrast to regulations for prescription drug advertising. Regulation of restricted device advertising comes directly from the Federal Food, Drug and Cosmetic Act – specifically sections 502(q) and (r). These sections provide that a restricted device is misbranded if its advertising is false or misleading in any particular, and does not contain a brief statement of the device’s intended use and relevant warnings, precautions, side effects, and contraindications. Dr. Schultz explained that the FDA’s February 2004 Guidance Document is intended to help companies comply with the statutory requirements.

CDRH regulates only two of the three different types of DTC device ads – the “product claim” and the “promotional reminder” ads. “Product claim” ads are those that generally include both the name of a product and its indications for use, or make a claim or representation about a medical device. “Promotional reminder” ads may disclose the name of the medical device and certain descriptive information or price information, but they do not give the device’s indications for use or make any claims or representations about the device.

The third type of DTC device ad – “help seeking and disease awareness communications” – does not constitute labeling or advertising and, therefore, is not subject to FDA regulation. Disease-awareness communications discuss a particular disease or health condition and are disseminated to health care practitioners, while help-seeking communications are essentially disease-awareness communications directed to consumers. Neither mentions any specific device or makes any representation or suggestion concerning a particular device.

CDRH’s Office of Compliance (“OC”) is responsible for the surveillance and enforcement of violations contained in the promotional materials of all medical device companies. Dr. Schultz noted that the OC’s primary source of promotional violations by device companies comes from competitors and information obtained by OC personnel who attend various science meetings at which devices are discussed and exhibited. In general, OC’s involvement is limited to circumstances after the materials have appeared in the public domain.

Witness Testimony

Hearing witnesses came from the medical profession, advertising and consumer protection groups, FDA, and AdvaMed. While all agreed that DTC advertising of medical devices is an important issue, there was no agreement about whether device ads should be regulated, or regulated in the same manner and to the same degree as those for prescription drugs. 

For example, Dr. Schultz agreed with Sen. Kohl that regulation of DTC advertising for medical devices is “important,” but declined the senator’s invitation to answer a question in the affirmative about whether there should be the same level of regulation by FDA for prescription drug and medical device DTC ads. Dr. Schultz, who described himself as “a surgeon and a device guy,” said medical devices “need to be regulated to the extent necessary to protect public health,” noting that the real issue is how FDA accomplishes such a mission and whether it does it efficiently. Dr. Schultz said that FDA and CDRH will look at whatever ideas the committee has to offer and provide comments on what it believes will be “effective regulation.” Making a strong statement for the value of the “learned intermediary,” Dr. Schultz said that “[a]t the end of the day, the ultimate decision of what is the best treatment rests with the doctor and the patient.”

The witnesses from the medical profession supported greater FDA oversight of DTC advertising for medical devices, combined with greater restraint by device manufacturers in using DTC advertising. In fact, when asked by Sen. Ken Salazar (D-Colo.) whether Congress ought to consider banning DTC advertising as other countries have done, William E. Boden, M.D., professor of medicine and public health at the University of Buffalo, said that “most would prefer it,” although he did not explain precisely who was included in the term “most,” and acknowledged that such an action would likely trigger court challenges. Dr. Boden concluded his response by saying that “it [the ban] would be worthy of consideration if you could navigate around the First Amendment issue.” Ruth Day, Ph.D., a witness from Duke University, interjected that other countries have not banned DTC advertising; rather, they simply have not approved it.

Kevin J. Bozic, M.D., M.B.A., an orthopaedic surgeon from the University of California at San Francisco, spoke on behalf of the American Association of Orthopaedic Surgeons. He is the co-author of a 2007 study critical of the impact of DTC advertising in orthopaedics (Bozic, K.J., Smith, A.R., Hariri, S., et al. “The Impact of Direct-to-Consumer Advertising in Orthopaedics,” Clin Orthop Relat Res.2007; May: 458:208-19). The study surveyed practicing orthopaedic surgeons who perform hip and knee replacement surgery and patients who were scheduled to undergo such surgery. The study concluded that DTC ads had a substantial influence on both patient and surgeon decision-making. At the same time, Dr. Bozic acknowledged that more studies are necessary to evaluate the effects of DTC advertising on physicians and patients.

In contrast to Dr. Bozic, Dr. Boden emphasized that, given the sophisticated medical understanding required for devices used in interventional cardiology, it is extremely unlikely that a lay person would possess such an understanding on the basis of a 30-second television ad. As Dr. Boden put it in his written testimony, “[i]t seems highly unlikely that an interventional cardiologist would accede to a patient’s request for a particular stent type, based solely on the patient’s very limited information derived from a DTC ad that touts one particular [stent].”

Among his recommendations, Dr. Boden believes that FDA should place drugs and devices on the same regulatory footing with respect to DTC advertising, requiring evidence-based clinical data to demonstrate proved clinical benefits of the device being advertised. In this vein, Dr. Boden alluded to the model developed and used by New Zealand. In that country, all ads making therapeutic claims for advertised products must first be pre-approved by the Association of New Zealand Advertisers, Therapeutic Advertising Pre-Vetting Service, which promotes an industry-based, self-regulatory advertising code of conduct that encourages fair balance of risks and benefits in advertising content. Dr. Boden suggested that the FDA establish a similar panel under the Federal Advisory Committee Act that could either itself recommend standards for DTC device ads, or develop a new set of standards for self-regulation.  Finally, Dr. Boden favors a ban on all DTC device ads for the first two years following FDA approval to assure that an appropriate safety record is established prior to advertising to the public. 

Dr. Day, the Director of the Medical Cognition Laboratory at Duke University and Senior Fellow at the Duke Center for the Study of Aging, testified about research into how people understand and remember information in DTC advertising. She opined that it was important for both benefits and risks to be presented in “cognitively accessible” ways.

Not surprisingly, a witness from Consumers Union urged Congress to require FDA to conduct the same kind of oversight and regulation of DTC ads for implantable medical devices as the agency is now authorized to do for drug ads, and called for Congress to require FDA review of DTC device ads prior to being issued.

The final witness of the day was Mr. Ubl from AdvaMed. He stressed four key points in his testimony. First, AdvaMed’s member companies believe strongly that DTC advertising of medical devices must provide truthful and non-misleading information to consumers. Second, such advertising can benefit the public health by informing patients of important potential therapies that they should discuss with their physicians. Third, FDA and FTC already have ample legal authority to regulate false and misleading advertising for medical devices, and AdvaMed believes that FDA resources in this area should be focused on enforcement issues. And fourth, concerns about DTC advertising in the drug context are in many cases less relevant when applied to restricted devices, which not only are prescribed by doctors but are used or implanted by doctors as well.