'Country of Origin' Compliance: The Top 10 Things Pharmaceutical Companies Need to Know

This post was written by Jeffrey Orenstein

What is the “country of origin” for the drugs you manufacture? This question arises every time a pharmaceutical company labels a drug, imports it, exports it, markets it, or sells it to the U.S. government. Unfortunately, the answer to this question is more complicated than many think. In fact, the correct answer often changes, depending on which government agency is asking.

For a Reed Smith-authored white paper on the Top 10 things pharmaceutical companies need to know before determining their products’ country of origin, click here.

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.

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.

Supreme Court Decision on Reverse Payments has Significant Implications for Pharmaceutical Manufacturers

Reed Smith’s Global Regulatory Enforcement Law Blog recently featured a detailed analysis of the Supreme Court’s decision in FTC v. Actavis, where the court ruled five-to-three that reverse payments, also called pay-for-delay settlements, can violate antitrust laws and are subject to antitrust review under the rule-of-reason. As reverse payments are commonly used by branded drug manufacturers to settle patent litigation related to generic drug manufacturers’ market entry, this decision will change the approaches courts, drug company litigants, and lawmakers take to the issue of generic entry into a patented brand drug’s market. To learn more about the implications for both branded and generic drug manufacturers, particularly in their approach to resolving patent litigation, read the full alert.

"Illegal" Off-Label Promotion

Over at the Drug and Device Law Blog, there are several posts analyzing the meaning of the Second Circuit’s opinion in United States v. Caronia, 703 F.3d 149, 160 (2d Cir. 2012), including this one and this one.  Most Caronia commentary has focused on the court’s First Amendment holding, that the FDCA does not ban truthful off-label speech. But today’s Drug and Device Law Blog post zeroes in on the Second Circuit’s recognition that “[t]he FDCA and its accompanying regulations do not expressly prohibit the ‘promotion’ or ‘marketing’ of drugs for off-label use” (id. (emphasis added)), and what that may mean for regulation and for ancillary issues, like medical device preemption under 21 U.S.C. Section 360k(a).

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.
 

China Life Sciences and Health Industry Client Briefing - October 2012 (November 16, 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 October include:

  • China Becoming a Healthcare R&D Hub
  • Imported Drugs to Go on China's Electronic Monitoring Network
  • Guangxi to Build Pharmaceuticals as a Pillar Industry
  • China to Set Up Database for Organ Transplants
  • Private Medical Care Gets Boost
  • State Council Issues the 12th FYP for Public Health Services Development

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

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.
 

Life Sciences Health Industry China Briefing - June 2012 (July 20, 2012)

This post was written by John Tan, Jay J. Yan, Mao Rong, Katherine Yang, 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.

Pharmaceuticals, Medical Devices, Health Care & Life Sciences 

News

  • China's Compulsory License Rule Has Drug Companies On Edge (Law360 2012-06 12) — June 14, 2012

China's new patent regulations allowing the government to force drug companies to grant compulsory licenses for generic versions of their products if it is deemed to be in the "public interest" has the pharmaceutical industry worried about where China will draw the line, attorneys said. The new regulations issued by China's State Intellectual Property Office last month say the government can order compulsory licenses for generic drugs when there is a "national emergency or any extraordinary circumstances, or for public interest purposes." What constitutes the public interest is very much open to interpretation and appears to give the Chinese government broad leeway to order drug companies to allow generic versions of drugs that are still covered by patents.

  • Beijing to Carry out Pilot Project of Separation of Dispensing from Prescription: Medical Service Fee up to 100 Yuan (Caixin Media 2012-05-19) — June 20, 2012
Following Shenzhen and Shanghai, Beijing will initiate the pilot project to cut off the relationship between the income of hospitals and drug sales. Beijing plans to cancel the price addition to lower drug price, and to cancel the registration fee and diagnosis fee, which will be replaced by the medical service fee. The medical service fee will be divided into four levels:  42 yuan for ordinary physicians, 60 yuan for deputy chief physicians, 80 yuan for chief physicians and 100 yuan for expert physicians. The medical insurance will reimburse 40 yuan for the medical service fee. In addition, Beijing Friendship Hospital, Beijing Chaoyang Hospital, and Beijing Children's Hospital will carry out the legal person governance mechanism in order to provide experiences for the further reform of public hospitals in Beijing.
  • Drug Company to Acquire Controlling Stake (China Daily 2012-06-28) — June 29, 2012
China Pharmaceutical Group Ltd, which derives almost half of its sales from antibiotics, will buy a maker of finished drugs from its controlling shareholder for HK$8.98 billion ($1.2 billion) worth of new stock and convertible bonds. The purchase of Robust Sun Holdings Ltd will reduce the company's reliance on drug intermediaries, bulk antibiotics, and vitamin C, which now account for 66 percent of its sales.
  • Investors Eye Chances in High-End Healthcare (Shanghai Daily  2012-06-19) — June 19, 2012
As demand for high-quality health care rises in China, venture capital and private equity companies are taking advantage of ample investment opportunities in the nation's private and specialized hospitals. There were 158 investment deals in the medical and health care sector last year, worth $4.14 billion, around the same amount as the total deals in the sector from 2006 to 2010, according to a report from the Zero2IPO research center. The report said 28 medical and health care companies were listed last year, raising $5.33 billion, and 12 of them were backed with VC or PE investment.  The State Council passed a medical reform plan in 2009 that promised to spend 850 billion yuan ($123 billion) by last year to provide universal medical services to the country's 1.3 billion people. "We treat private medical institutions equally (with public ones), and they can be included in the scope of basic medical insurance under certain conditions," said Li Jinghu, deputy director of the Institute of Social Security at the Ministry of Human Resources and Social Security. In April, the State Council issued a statement on deepening the medical system reform, which states that local governments are required to issue detailed regulations to encourage private capital into this industry, and to guide the restructuring of certain public hospitals. A total of 300 county-level hospitals will take part in a pilot program that will see them undergo reforms in finance, management and human resources, according to guidelines published on the central government's website in June.
  • CIRC Encourages Insurance Companies to Establish Medical Institutions to Expand Business (Caijing 2012-06-20) — June 21, 2012
China Insurance Regulatory Commission (CIRC) issued a Notice concerning Fulfillment of the Programs on Deepening the Medical Reform during the 12th Five-Year Period. According to the Notice, CIRC will conduct research on the feasibility and the effective way for insurance companies to establish medical institutions and become involved in the restructuring of public hospitals. In fact, the encouragement on insurance companies to invest in hospitals has been mentioned in the Opinions of State Council on Reform and Development in the Insurance Industry in 2006. Accordingly, China PingAn Insurance signed an agreement with the Longgang District Government of Shenzhen to establish a Chinese medicine hospital in Longgang last year as a pilot.
  • MOH and Medical Reform Office under State Council Respond to Questions on Opinions of Comprehensive Reform Pilot Project of Public Hospitals at County Level (National Development and Reform Commission 2012-06-15) — June 15, 2012
The State Council recently issued the Opinions concerning the Comprehensive Reform Pilot Project of Public Hospitals at County Level. The Opinions aim to ease the difficulties and the problems of expensive medical charges in the medical treatment for rural residents. The comprehensive system for the medical cost through drug-selling profits shall be eradicated. The pilot public hospitals at county level will be compensated through service charges and government subsidy. Each county (city) shall have one to two hospitals (including Chinese medicine hospital) at county level. The county (city) with more than 300,000 population shall have at least one Grade 2A hospital. Remote consultation, remote diagnosis, and distance education will be realized among hospitals at county level. In addition, excellent professionals will practice at county level hospitals through nurturing and offering preferential treatment.
  • 311 Counties to Pilot China's Hospital Reform (Xinhua News Agency 2012-06-27) — June 27, 2012
China has nominated 311 counties or county-level cities in a program to pilot reform of the country's public health care facilities, the Ministry of Health announced Tuesday. The national initiative includes 83 counties or county-level cities in East China, 136 in Central China, and 92 in West China, according to the ministry. The 311 counties or county-level cities are expected to undergo reforms in finance, management and human resources by 2015 to enhance their capacity.
  • First Wholly Taiwan-funded Hospital Opens (Shanghai Daily 2012-06-27) — June 27, 2012
The Chinese mainland's first wholly Taiwan-funded hospital opened in Shanghai yesterday. It is the first solely invested Taiwan hospital to receive the green light on the mainland after the Economic Cooperation Framework Agreement, or ECFA, was signed between the mainland and Taiwan authorities in 2010. Established by the Taipei-based Landseed International Medical Group, the Shanghai Landseed International Hospital, with a 150 million yuan (US$23.81 million) investment, is mainly aimed at Taiwanese, expatriates living in Shanghai, and locals with high-end health demands, hospital officials said.
  • Smiling Angel Children's Hospital To Go into Operation (Caixin Media 2012-06-24) — June 25, 2012
Beijing Smiling Angel Children's Hospital, the first private charity children’s hospital run by film star Li Yapeng, will go into operation July 1. The hospital will operate in nonprofit mode based on the Smile Angel Foundation. Given the current shortage of pediatricians, the hospital will provide medical services through the multi-site practice of the pediatricians from the public hospitals. Apart from the children from poor families, the hospital will also be opened to ordinary families. Some high-quality services will be charged highly accordingly. All the income will be used to develop the hospital in sectors including R&D and medical assistance, and there will not be dividends to the shareholders. The operation cost will be mainly from the social donations through charity dinners, small donations and other manners. 
  • China Medical Services Market to Hit $500B (Agencies 2012-06-25) — June 25, 2012
China needs to bolster its medical services and investors are ready to help, Bloomberg reported. The latest is Carlyle Group LP-backed Concord Medical Services Holdings Ltd, which last week completed a deal for a 52 percent stake in Chang'an Hospital, a 1,000-bed facility at the eastern end of the Silk Road, according to Bloomberg. China's medical services market is growing 18 percent annually and is projected to reach 3.16 trillion yuan ($500 billion) in 2015, Bloomberg reported, citing accountancy firm Deloitte China.

Life Sciences Health Industry China Briefing - May 2012 (June 14, 2012)

This post was written by John Tan, Jay J. Yan, Mao Rong, Katherine Yang, 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 May include:

  • Introduction of Administrative Measures on Clinical Application of Antimicrobial Drugs
  • Two Agencies Crack Down on Violent Crime Against Medical Personnel
  • Medical Insurance Reimbursement for Hospitalization to Reach 75% of Total Expenses During 12th Five-Year Plan
  • Foreign Medical Workers to Receive TCM Training in Shanxi 
  • MOH Requires Class B and Higher Hospitals to Establish Security Offices
  • China to Expand Medical Payment Reform
  • SFDA Campaign to Regulate TCM Raw Material Market
To read the full briefing by Reed Smith China team members, click here.

 

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.

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.
 

The Legal Duties of Clinical Trial Sponsors

In an article entitled, "The Legal Duties Of Clinical Trial Sponsors," published by Law360.com on July 11, 2011, Reed Smith attorney Kevin Lohman addresses the risks involved in human clinical trials and the responsibilities between the clinical study investigator and the manufacturer/sponsor.  Although the unique roles and responsibilities of entities involved with clinical trials are clearly defined, plaintiffs oftentimes attempt to assign legal duties to the wrong entity — sometimes suing the clinical trial sponsor as if it were directly providing medical services to the participant — or attempt to create novel legal duties. Case law that has addressed this issue has consistently held that this is not appropriate. When faced with this scenario, it is important to clearly identify the role that the manufacturer/sponsor played in the clinical trial to determine whether they owed any legal duty to the plaintiff.

To read this article, you may download a .PDF or view on Law360.com (subscription required).

Latest Post-Levine Case Holds That Conflict Preemption Bars Plaintiff's Failure-To-Warn Claims

This post was written by Michelle L. Cheng.

One of the strongest defenses against product liability claims, including a failure to warn claim, is federal preemption. For cases against prescription drug manufacturers, defense lawyers have specifically asserted conflict preemption to argue that failure to warn claims are preempted by the FDA's regulations governing the content of labels for prescription drugs. Essentially, defense lawyers argue that the labeling's warnings cannot be altered in a manner sought by the plaintiff when the manufacturer is faced with conflicting directives from the FDA regarding that very content.

In ruling on this very issue, Wyeth v. Levine, 555 U.S. 555, 129 S.Ct. 1187 (2009) ("Levine"), the Supreme Court held that a "clear evidence" standard of proof was required to support a manufacturer's claim of conflict preemption defense. The Supreme Court held that unless the manufacturer presents "clear evidence that the FDA would not have approved a change" to the drug's label, which would make compliance with both the federal standard and the state standard espoused by the plaintiff "impossible," conflict preemption could not apply.

Post-Levine cases have grappled with this standard, with defendant manufacturers commonly failing to meet this "clear evidence" standard in asserting the defense of conflict preemption. Except recently. The latest decision from the Western District Court of Oklahoma demonstrates how the "clear evidence" of conflict standard provided (but not defined) in Levine could be met. Dobbs v. Wyeth Pharmaceuticals, No. 5:04-cv-01762 (W.D. Okla. June 13, 2011). In doing so, the District Court distinguished or rejected as unpersuasive five other decisions where courts applied the Levine evidentiary standard in failure to warn claims involving the same class of anti-depressant prescription drugs. Id. at p.21.

Dobbs is a case brought by the widow of a depressed patient who took several days' worth of a prescribed antidepressant called Effexor, before committing suicide. Among her claims, the widow plaintiff contended that Effexor's FDA-approved statements regarding suicidality in patients diagnosed with depression was inadequate in its failure to fully warn of the risk. Id. at p. 2. Wyeth, the manufacturer of Effexor, contested this assertion by pointing to a variety of the factors that the District Court found persuasive: 1) the FDA is statutorily responsible for continually monitoring the safety of approved drugs, and proposed changes to the labeling "must be 'based on 'reasonable evidence of' an association between a hazard and the drug at issue…." [id. at p.10-11]; 2) the FDA had repeatedly considered the "proper scope and content of suicidality warnings for the class of drugs that are used to treat depression [id. at p. 12]; 3) in addition to such consideration, the FDA had "consistently expressed concern that an enhanced suicidality warning [was] not supported by scientific evidence" which could create the adverse consequence of a "potential reduction" in the use of drugs for the treatment of depression [id.]; 4) in 2002, the same year the decedent committed suicide, the FDA concluded that a more extensive suicidiality warning was not supported by scientific evidence (and thus, would not have approved of the warning that the plaintiff argued should have been used) [id. at *16]; and 5) in 2004 and 2006, the FDA concluded that increased suicidal thinking or behavior in pediatric patients and patients under the age of 25 years using these class of drugs was supported by sufficient scientific evidence, but the decedent in this case was 53 years old when he committed suicide [id. at 17]. In sum, the District Court found that the "FDA's ongoing study and analyses" regarding these warnings, and the FDA's lack of any findings regarding scientific evidence to support the addition of suicidality warnings for patients in the decedent's age pool, compelled a finding of conflict preemption. Id. at p. 18-9; see also p. 21.

The District Court's extensive and careful recitation of the facts, along with its review and treatment of the other post-Levine decisions, provides a useful framework in which to advocate and win on the defense of conflict preemption for failure to warn claims.

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."

Upcoming Hearing on Draft Dingell/Waxman Drug Safety Legislation

On September 30, the House Energy and Commerce Committee is holding a hearing on draft drug safety legislation (per energycommerce.house.gov, witness list not yet available). The legislation, which was drafted by Reps. John Dingell, Henry Waxman, Frank Pallone, and Bart Stupak, requires parity between foreign and domestic drug facility inspections, increases the number of pre-approval drug inspections, prohibits the entry of drugs into the United States lacking documentation of safety, requires manufacturers to ensure the safety of their supply chain, and grants FDA authority to mandate recalls of unsafe drugs. For background information on the draft legislation (including the text), see energycommerce.house.gov.

UPDATE:  This hearing has been postponed, and no new date has yet been announced.

VA Seeks to Regulate Promotional Activities by Pharmaceutical Sales Representatives

This post was written by Lorraine Campos and Joelle Laszlo.

The Department of Veterans Affairs ("VA") has issued a Notice of Proposed Rulemaking on pharmaceutical sales representatives' access to and activities in VA medical facilities.  Drug and Drug-Related Supply Promotion by Pharmaceutical Company Sales Representatives at VA Facilities, 75 Fed. Reg. 24,510 (May 5, 2010).

The proposed rule is designed to "reduce or eliminate any potential for disruption in the patient care environment, manage activities and promotions at VA facilities, and provide sales representatives with a consistent standard of permissible business activities at VA facilities."  One way the proposed rule endeavors to meet those aims is by requiring that any drug or drug-related promotion at a VA medical facility (broadly defined to include any VA-run source of medical services or benefits) is consistent with the published "criteria-for-use" of the subject drug or drug-related supply, which itself must not have been classified as "non-promotable."  The proposed rule also requires: (1) that any corporate-furnished educational program or materials be approved in advance by the target VA facility's Chief of Pharmacy (or equivalent official); (2) that sales representatives make appointments in advance of VA facility visits; and (3) that gifts (of anything but drugs and food) and donations of drugs and drug-related supplies comply with current restrictions, and, with respect to the latter, be approved for acceptance and subject to proper storage, documentation, and dispensing.  Potential penalties for non-compliance will include limitations on VA facility access, though the VA notes that since most sales representatives are generally well-behaved, it "do[es] not envision that the proposed paragraph [on penalties for non-compliance] will be invoked with regularity." 

The VA asserts that the proposed rule will largely formalize what are currently informal practices and therefore, if anything, the rule will make it easier for pharmaceutical representatives to act, knowing that they will not be subject to some unwritten code.  This may be true insofar in many respects.  But the proposed rule's pre-approval requirements for “educational programs and materials,” may create confusion. For example, it is unclear whether the VA would (or could) apply the VA’s distinction between promotional programs and “educational” (non-promotional) programs. Moreover, the requirement for prior content approval might create FDA compliance concerns or even raise First Amendment issues. 

Comments on the proposed rule must be received by the VA on or before July 6, 2010.  Click here to read the full text of the notice.

FDLI Publishes New Guide to International Prescription Product Recalls

Recent events highlight the importance of having a plan for product recalls. The Food and Drug Law Institute's recent monograph entitled, "International Prescription Product Recalls: A Practical Guide, Volume 1, Number 4," provides comprehensive guidance and practical recommendations on dealing with recalls internationally as well as a checklist and valuable "dos and don'ts" for manufacturers facing product recalls. Written by Reed Smith partners James M. Wood and Areta L. Kupchyk, the publication is available for download by series and individual issue subscribers.

For more information or to order, see www.fdli.org.

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.

Third Circuit Holds That MDL Judges Can't Reverse Pre-Transfer Orders Absent Extraordinary Circumstances

This post written by Eric Buhr.

In a precedential decision issued Thursday, In Re: Pharmacy Benefit Managers Antitrust Litigation (MDL 1782), the U.S. Court of Appeals for the Third Circuit reinstated a district court order compelling arbitration of antitrust claims, an order which another district court judge vacated after the case was transferred to a federal Multi-District Litigation (MDL)s. Based on the law of the case doctrine, the Court of Appeals held that MDL judges may not overturn an order of the transferor court absent a finding of extraordinary circumstances - a conclusion that has broad ramifications for MDL proceedings in general.

The In Re Pharmacy Benefit Managers Antitrust Litigation case began in 2003, when Bellevue Drug Co. and several other pharmacies and associations sued AdvancePCS, a pharmacy benefits manager now known as CaremarkPCS, Inc for antitrust violations. In 2004, AdvancePCS moved to compel arbitration of all of the Plaintiffs' claims based on a contractual arbitration clause, and the district judge, Judge Eduardo Robreno of the U.S. District Court for the Eastern District of Pennsylvania, granted the motion to compel arbitration and stayed the district court action. 

Two years later, though, the case was transferred to an MDL pending in the Eastern District of Pennsylvania before Judge John P. Fullam. There, Judge Fullam lifted the stay and vacated the order for arbitration. Although Judge Fullam admitted the orders compelling arbitration were "clearly appropriate under the Federal Arbitration Act," he felt that an order vacating the arbitration order would help expedite the case. In support of his ruling, he explained his belief that a transferee judge under the multidistrict litigation statute had the power to vacate or modify any order of a transferor court bearing on pretrial matters.

The Court of Appeals clearly disagreed, stating that "there is nothing in the rules adopted by the Joint Panel on Multidistrict Litigation that authorized a transferee judge to vacate or modify the order of a transferor judge."   Although Judge Fullam relied, in part, on portions of the Manual for Complex Litigation suggesting that a transferee judge may vacate or modify orders of the transferor court, the Third Circuit dismissed that argument. The Court explained that "if Judge Fullam's interpretation of the statute were accurate, litigation could begin anew with each MDL transfer…Moreover, we do not believe that Congress intended that a 'Return to Go' card would be dealt to parties involved in MDL transfers." 

Ultimately, the Third Circuit agreed that the transfer of a case to an MDL does not confer more power on a transferee court; its powers are commensurate with those the transferor court has absent the transfer. Therefore, under ordinary application of the law of the case doctrine, an MDL court may only revisit past orders upon a finding of "extraordinary circumstances". Some recognized examples justifying exceptions and revisiting old orders anew include: (1) when new evidence becomes available; (2) when a supervening new law has been announced; (3) when there is a need to clarify or correct an earlier ambiguous ruling; and (4) when the order might lead to an unjust result. Since the MDL judge had not relied on on any such exception to the law of the case doctrine, the Third Circuit reinstated the original order by the transferor court.  

New Developments in Nanotechnology

A recent study suggests that exposure to nanoparticles may have caused the death of two female workers and the illnesses of five others in China. Life science health industry companies that manufacture, integrate, sell or buy products that contain nanomaterials may want to monitor reaction to this report, which may garner attention from media outlets, scientists, regulators and the plaintiffs' bar. For a full discussion of these issues, review the full Client Alert written by Reed Smith attorneys Antony Klapper, Jesse Ash and David Wagner.

The New Consumer Product Safety Improvements Act -- Implications for Pharmaceutical Manufacturers

This post was written by Stephen P. Murphy.

On Aug. 14, 2008, the President signed the Consumer Product Safety Improvements Act (the Act) into law. By an unfortunate and possibly unintended consequence of poor drafting by the Congress, all of the statutes enforced by the U.S. Consumer Products Safety Commission were brought within the coverage of the new Act. One of those statutes is the Poison Prevention Packaging Act, which requires a wide range of pharmaceuticals to be packaged in child-resistant packaging. Under the new Act, all such pharmaceuticals manufactured after Nov. 12, 2008 are now required to have general conformity certificates by which either the importer or the domestic manufacturer, on the basis of a reasonable testing program, attests that the products comply with the PPPA. These certificates are required to "accompany" each lot or batch of products manufactured. The CPSC has construed that an electronic certificate readily available to the CPSC or to the Customs and Border Patrol complies with the new Act. But the products must have on the shipping documents or the shipping package, a unique identifier and a URL to the website in order to facilitate review. The certificates are intended to be available through the chain of distribution, but not to patients. There are some exceptions to this statute. These rules become effective Feb. 19, 2009.

The CPSC has publicly stated that it does not have the resources to specifically enforce the new Act now, but will do so in the ordinary course of its regular activity. The CPSC expects to get supplemental funding for enforcement and other activities toward the middle of the second quarter of 2009. However, Customs is authorized by the Act to detain and destroy products that do not have the required general conformity certificate. Along with this new authority, the Act has increased the fines that CPSC can impose from $5,000 per violation to $1.25 million, and for a series of violations from $1.825 million to $15 million. In addition, the new Act introduces criminal penalties for knowing violations of the new Act and of the other statutes enforced by the CPSC.

EPA Moves Towards Possible Regulation of the Disposal of Unused Pharmaceuticals in Sanitary Sewer Systems

This post was written by Louis A. Naugle and Mark A. Mustian.

On Aug. 12, 2008, EPA announced its intention to submit an Information Collection Request (“ICR”) to the Office of Management and Budget, for collection of information from the Health Services Industry. 73 FR 46903 This ICR is the first step by EPA toward possible regulation of the disposal of unused pharmaceuticals, and the implementation of effluent limitations for disposal of unused pharmaceuticals to sanitary sewer systems.

In 2006, EPA identified the Health Services Industry as a candidate for possible effluent guidelines as part of its Clean Water Act (“CWA”) Section 304b Effluent Guidelines Review. 71 FR 76661. The Health Services Industry includes establishments engaged in various aspects of human health (e.g., hospitals, dentists, long-term care facilities) and animal health (e.g., veterinarians). EPA has expressed concerns about the disposal of unused pharmaceuticals and, through the ICR, is seeking to collect information to better understand the current management practices and magnitude of discharges of unused pharmaceuticals to the waters of the United States. Recent studies have indicated the presence of significant concentrations of pharmaceuticals in waters of the United States, particularly downstream of municipal wastewater treatment plants. EPA believes that Health Services Industry facilities may dispose of unused, expired and unwanted medications to the sanitary sewer, where these compounds may pass through the local Publicly Owned Treatment Works (“POTW”) and enter surface waters. The discharges of Health Services facilities are not currently regulated or monitored under the CWA, and EPA has only limited data regarding this practice. Through this ICR, which is a mandatory data collection effort, EPA plans to investigate the following areas:

  • What are the current industry practices for disposing of unused pharmaceuticals?
  • Which pharmaceuticals are being disposed of and at what quantities?
  • What are the options for disposing of unused pharmaceuticals, other than to the local sewer system?
  • What factors influence disposal decisions?
  • Do disposal practices differ within industry sectors?
  • What Best Management Practices (“BMPs”) could facilities implement to reduce the generation of unused pharmaceuticals?
  • What reductions in the quantities of pharmaceuticals discharged to POTWs would be achieved by implementing BMPs or alternative disposal methods?
  • What are the costs of current disposal practices, compared with the costs of implementing BMPs or alternative disposal methods?

If EPA moves forward with implementation of a national, categorical pretreatment standard, there is the potential for significant impacts to the affected parties. Affected parties include the Health Services Industry and the nation’s municipalities, but could also extend to the pharmaceutical industry itself. EPA is encouraging the submission of comments on the proposed ICR. If you have further questions or require advice on preparing comments on EPA’s intention to submit an ICR, please contact one of the attorneys listed below, or the Reed Smith attorney with whom you regularly work.

Louis A. Naugle
+1 412 288 8586
lnaugle@reedsmith.com

Mark A. Mustian
+1 412 288 3292
mmustian@reedsmith.com