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Pharma Law and Business – A Monthly Roundup December 2012

Written by: Ed Silverman
Founder and Editor of Pharmalot
Posted: December 13, 2012 @ 12:05 pm
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Litigation always factors into the pharmaceutical world, but the US Supreme Court commanded a special place in recent days. The high court figured in no fewer than four contentious issues that, not surprisingly, play a vital role in how drug makers can and will operate.

Let’s start with a case that is not yet before the court, but many predict will be headed there thanks to one of its earlier rulings. Earlier this month, a three-judge panel of the US Court of Appeals for the Second Circuit overturned the conviction of a former sales representative, who argued that prosecuting him for remarks made about off-label use violated his free speech rights.

In their decision, the 2-to-1 majority cited a US Supreme Court ruling early last year that struck down a highly controversial Vermont law, which restricted the sale of prescription drug data identifying prescribers and patients for commercial marketing purposes. Specifically, the court ruled that “speech in aid of pharmaceutical marketing… is a form of expression protected by… the First Amendment.”

Since then, the pharmaceutical industry has used that ruling to argue off-label promotion is a form of protected speech. In fact, Par Pharmaceutical made the same essential argument in its own lawsuit that was filed shortly after the Supreme Court issued its decision about the Vermont law, which was known formally as Sorrell vs. IMS Health.



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For the moment, it is unlikely that decision in this latest case, United States v. Caronia, is going to open the floodgates for off-label marketing. For one thing, an appeal is likely. Moreover, the panel noted a key distinction, which is that off-label promotion that is false and misleading is not protected speech. Of course, such distinctions are bound to become triggers for debate.

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Meanwhile, the Supreme Court did agree to review pay-to-delay deals, a description for patent settlements between brand-name drug makers and their generic counterparts. Whichever way the court goes, the decision is likely to influence the cost of medicines for millions of Americans for years to come, because the ruling is expected to determine the pace at which lower-cost generic drugs become available.

Drug makers have struck dozens of these deals over the past decade or more, partly in response to expiring patents on blockbuster drugs. But the settlements prompted increasing scrutiny at a time of rising health care costs, fueling arguments made by the US Federal Trade Commission, in particular, which says these deals cost consumers some $3.5 billion annually.

The fact that the court decided to review these contentious deals – which the pharmaceutical industry maintains speeds lower-cost generics to market, but opponents argue is harmful antitrust activity – was not a surprise. The issue has divided lower courts for years and, in fact, both Merck and the FTC filed petitions asking the court to review separate cases.

As a side show, the outcome make a goat or a hero – depending upon one’s point of view – of FTC chairman Jon Leibowitz, who has undertaken a Quixotic campaign over the past few years to convince the courts and Congress – and anyone who would listen – that pay-to-delay deals are bad deals. Now, he will finally have his own day in court.

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Separately, the Supreme Court also agreed to consider whether personal injury lawsuits can be filed for alleged flaws in the design of their medications. At issue is whether federal law preempts such claims from proceeding in state courts and if generic drug makers can be held liable if they decline to withdraw their medicines.

The case at hand is an appeal by Mutual Pharmaceutical to overturn a $21 million jury award to Karen Bartlett, a New Hampshire woman who in December 2004 had taken its generic non-steroidal anti-inflammatory called sulindac for shoulder pain. But a few months later, she developed Stevens-Johnson Syndrome and toxic epidermal necrolysis.

As a result, she is nearly blind and suffered burn-like lesions on 65 percent of her body due to a hypersensitivity reaction. She spent 70 days at Massachusetts General Hospital, including 50 days in its burn unit; suffered two septic shock episodes and 12 major eye surgeries;, she is unable to read, drive or work, and must use a feeding tube, according to court documents.

Barlett sued Mutual for alleged design defects under New Hampshire state law, and last May, a federal appeals court upheld the award (read here). Mutual, however, continues to argue that federal law preempts this type of claim because the FDA had already approved sulindac and federal law requires a generic drug to have the same design as the brand-name medication.

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Finally, the Supreme Court agreed to review an even thornier matter – whether Myriad Genetics has the right to patent two human genes that form the basis of a widely used genetic test for breast and ovarian cancers. A recent appeals court decision gave Myriad the right to patent two so-called isolated human genes – BRCA1 and BRCA2 – that account for most inherited forms of the cancers.

The case began three years ago, when the American Civil Liberties Union and the Public Patent Foundation sued Myriad, the University of Utah Research Foundation and the US Patent & Trademark Office. They charged that Myriad’s refusal to license its patents broadly meant women who fear they may be at risk of having cancer are prevented from having anyone but Myriad look at the genes in question.

Many women with a familial history of breast cancer undergo genetic tests to determine if they have mutations on their BRCA genes. The data helps decide on treatment or prevention, such as increased surveillance, preventive mastectomies or ovary removal. Women who test positive using the Myriad BRACAnalysis test have an 82 percent higher risk of breast cancer and a 44 percent higher risk of ovarian cancer. However, each test may cost about $4,000 and the patents prevent Myriad competitors from offering such a test without paying a fee.

The appeals panel had also affirmed a lower court ruling that claims directed to “comparing” or “analyzing” DNA sequences are not eligible for patent. Last year, the same federal appeals court reasoned that the Myriad test looks for distinctive chemical forms of the genes, and not as they appear naturally in the body, which would not be subject to patent.

The Supreme Court is being asked, therefore, to decide whether genes can be patented and whether the appeals court mistakenly interpreted a recent Supreme Court ruling that a Nestle unit called Prometheus Laboratories cannot patent a diagnostic method for tracking patient changes. In that case, the justices decided the Prometheus patents in question effectively claimed “the underlying laws of nature themselves.”

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In other news, the trade groups representing drug makers and biotechs have filed suit against a California county that recently voted unanimously to require the pharmaceutical industry to pay for the disposal of unused and expired prescription medicines. Their beef? The ordinance is unconstitutional.

The ordinance passed by Alameda County is being closely watched by other local governments around the country, because it is the first of its kind in the US and comes after the pharmaceutical industry lobbied to defeat the effort over concerns that the costs of compliance would be prohibitively expensive.

In arguing their case, PhRMA, the Generic Pharmaceutical Association and the Biotechnology Industry Organization maintain that safe disposal of unwanted medicines is a shared responsibility and the ordinance unfairly requires drug makers to develop, manage and fund disposal operations. In their view, local government should foot the bill and, instead, pill-popping patients elsewhere will subsidize the program in the form of higher costs spread around.

But Alameda County officials say they are unable to pay for such a program. County residents currently can drop off medications at 28 different locations at a cost of about $330,000 annually. As they see it, the pharmaceutical industry profits off consumption and should be required to help pay for disposal of medicines that would otherwise contribute to groundwater pollution or drug addiction, since unused meds may be left accessible in medicine cabinets.

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The recent recall of more three dozen lots of generic Lipitor due to glass particles has tremendously eroded confidence in Ranbaxy Laboratories. And now, a New Jersey man has filed a lawsuit in hopes of forcing the troubled drug maker to provide better information, as well as a refund for consumers.

The recall was only made at the pharmacy level, which means that consumers were not directly notified of the problem or how to respond if they became aware. Although pharmacies were alerted, Ranbaxy did not make any public statement until a brief notice was placed on its web site on November 23, prompting media coverage. The ensuing publicity then spurred the drug maker to place a more traditional press release on its web site on November 28.

For its part, Ranbaxy has insisted it worked closely with the FDA in responding to the problem. In general, the FDA says its officials work with drug makers to determine recall steps to be taken and, in this case, the agency has indicated there is a “remote possibility” of patients experiencing adverse events.

An FDA spokeswoman explained that, after November 9, the agency received and reviewed additional information about the recall, which led on November 30 to classify the recall as Class II, which means the risk to patients is extremely low. She added that Class II recalls are conducted at the pharmacy level, not the consumer level. A Class II recall may cause temporary or medically reversible health problems, or the probability of serious health problems is remote.

Just the same, the lawsuit argues that Ranbaxy should have taken the initiative to alert consumers directly and promptly, and also maintains that the drug maker should have provided instructions on how to respond to the recall and information on obtaining a refund. Ranbaxy spokesman declined to comment on the litigation.

The episode occurs at a difficult time for Ranbaxy. In January, a consent decree was signed for a permanent injunction that prevents the drug maker from making medicines for the US market until certain facilities meet US standards. Ranbaxy set aside $500 million to cover all potential civil and criminal liability, but the final amount of any settlement has not yet been decided. Ranbaxy says the active pharmaceutical ingredient was made in India and the finished product was assembled in both India and the US.

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Earlier this year, the US Senate Finance Committee opened an investigation into several drug makers, including Endo Pharmaceuticals, which sell prescription painkillers and their ties to patient advocacy groups and physicians due to “an epidemic” of accidental deaths and addiction resulting from ballooning sales.

The move was made in reaction to promotional efforts that fueled increased use and a rise in overdose deaths. Since then, Endo executives have gotten religion, of sorts. The drug maker is squabbling with the FDA over looming generic versions of its Opana ER pill, which was voluntarily removed from the market just before the Senate probe began.

But earlier this month, Endo filed a lawsuit against the FDA, claiming the agency failed to officially note its pill was withdrawn for safety reasons and seeks a preliminary injunction to prevent generic versions from being approved for marketing as of next month . This follows two Citizen’s Petitions asking the FDA not to use its original Opana ER as the basis for approving generics.

The legal maneuvering comes now that Endo sells a tamper-resistant version of Opana ER and the drug maker wants the FDA to approve abbreviated new drug applications that contain data and information demonstrating any proposed ANDA is “similarly crush-resistant as the reformulated OPANA ER designed to be crush-resistant.”

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The economy may be slow to recover, but that has not stopped drug makers from raising prices on some medicines. In fact, the prices for a so-called basket of the most widely used brand-name drugs rose 13.3 percent from September 2011 to September 2012, far exceeding the 2 percent inflation rate, according to the latest drug trend report from Express Scripts, the pharmacy benefits manager.

During the same 12-month period, prices on generic drugs fell 21.9 percent. The 35.2 percentage point net inflationary effect is the largest widening of brand and generic prices since the PBM began calculating its Prescription Price Index in 2008, the report states. This was the second consecutive year in which brand-name prices rose about 13 percent, but generic prices fell just 2.9 percent during the previous 12-month period.

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In a bid to simplify increasing demands to report conflicts of interest held by physicians and researchers, a leading group of academics, policymakers and ethics experts are proposing the creation of a centralized data repository to house all disclosures and increase transparency in medical research and practice.

The sort of information that would be gathered in this new entity, which would have non-profit status, would include fees for services, intellectual property rights, grants from industry, investment and ownership stakes in businesses, and other items such as travel, food, lodging, and gifts, according to a new proposal that was disclosed in a paper from the Institutes of Medicine.

By creating a centralized repository, physicians and researchers could presumably avoid time-consuming and duplicative efforts to provide such information to institutions – medical schools, teaching hospitals, journals, professional societies, continuing education providers, and federal agencies – that require separate disclosure statements.

The proposal was crafted by representatives of several institutions, including the FDA, the National Institutes of Health, the National Library of Medicine, the American Medical Student Association, the Centers for Medicare & Medicaid Services, Partners Healthcare, Pew Charitable Trusts, Cleveland Clinic, Consumers Union, The New England Journal of Medicine, and the Council of Medical Specialty Societies, among others.

About the Author

Ed Silverman is a prize-winning journalist who has covered the pharmaceutical industry for the past 17 years. In addition to editing Pharmalot, he is currently an editor-at-large for Med Ad News. Previously, he was a bureau chief for The Pink Sheet, the venerable industry newsletter, and a contributor to its sister publication, In Vivo magazine. Before that, Silverman worked as a business writer for The Star-Ledger of New Jersey, one of the nation’s largest daily newspapers, where he conceived and launched Pharmalot.

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