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Pharma Law and Business: A Month Roundup for February 2013

Written by: Ed Silverman
Founder and Editor of Pharmalot
Posted: February 19, 2013 @ 9:45 am
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Since we last met, there was yet another development in one of the more fascinating stories to grip the pharmaceutical world. The FDA decided not to pursue a re-hearing before a federal appeals court that recently ruled the federal government could not prosecute a sales rep who promoted off-label uses of a medicine because his speech was not false and misleading. The agency let a January 16 deadline pass without filing a motion.

At issue was a decision by the US Court of Appeals for the Second Circuit to overturn the 2008 conviction of a former sales rep for allegedly encouraging doctors to prescribe a drug on an off-label basis. A panel ruled 2-to-1 that his conviction violated his First Amendment rights and that the federal government did not attempt to prove that his remarks were false and misleading.

Since then, the decision has raised questions about a fundamental premise long asserted by the FDA and the US Department of Justice that off-label promotion is prohibited by law, which has been the basis for numerous settlements with drug makers over the past decade. Consequently, the court ruling prompted speculation about the strategic approach the FDA would take in response.

But wags noted that requests for re-hearings are rarely granted by the Second Circuit court, and since the decision only pertains to the Second Circuit, which covers New York, Connecticut, and Vermont, the FDA is free to pursue marketing violations in other parts of the country. Some have suggested the agency could also seek a hearing before the US Supreme Court. The deadline for doing so is not until March and the FDA could also seek a 60-day filing extension, but this appears unlikely.



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For now, this is the FDA reasoning: “FDA does not believe that the decision will significantly affect the agency’s enforcement of the drug misbranding provisions of the Food, Drug & Cosmetic Act. The decision does not strike down any provision of the FD&C Act or its implementing regulations, nor does it find a conflict between the act’s misbranding provisions and the First Amendment or call into question the validity of the act’s drug approval framework,” a spokeswoman writes us.

A key point is that the Second Circuit panel noted that free speech, in the context of off-label marketing, does not extend to activities that include false or misleading statements. This leaves the door open to continued prosecution of drug makers that engage in this activity and to see if other cases bubble up to different circuits.

But perhaps one reason to avoid a Supreme Court review is a 2011 ruling in which free speech was also an issue. The Supreme Court ruled that a Vermont law that was designed to restrict gathering or prescription information and protect patient privacy violated free speech.

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At a time when rising health care costs cause considerable concern, the so-called fiscal cliff bill recently passed by Congress prompted an uproar over business-as-usual, backroom deadlines in Washington DC. Specifically, the bill delays Medicare price restraints on a group of medications that will benefit Amgen while costing taxpayers up to $500 million over two years.

The bill gives the biotech an extra two years to sell Sensipar, a pill that is used for kidney dialysis and generated $808 million in sales in 2011. But Amgen also contributed generously to several US Senators who had direct influence over the final language, generating outrage over the old-fashioned political horse trading.

The pols who backed the delay explained it was necessary to allow regulators to prepare for a pricing change. They included Senate Minority Leader Mitch McConnell, a Kentucky Republican; Montana Democrat Max Baucus and Utah Republican Orrin Hatch, who lead the Senate Finance Committee. But Amgen has contributed substantially to their coffers.

According to published reports, since 2007, Amgen employee and political action committee gave $67,750 to Baucus, $59,000 to Hatch and $73,000 to McConnell, some of which was contributed at a fund-raising event that the biotech co-sponsored last month while the debate over the legislation was under way. Amgen has also contributed generously to political action committees controlled or sponsored by Hatch and Baucus.

In response, a Vermont congressman introduced his own piece of legislation designed to reverse the Congressional largesse. “This eleventh-hour, backroom deal confirms the American public’s worst suspicions of how Congress operates,” said Democrat Peter Welch. This special interest provision should have stood on its own merits with an up or down vote. It’s no wonder cockroaches and root canals are more popular than Congress.”

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In a little-noticed maneuver, two drug makers almost simultaneously took the rare step of challenging the FDA over its decision making for marketing exclusivity. Both Gilead Sciences and Ferring Pharmaceuticals filed citizen’s petitions asking the agency to change its approach for granting exclusivity for combination medications.

At stake is the opportunity to generate more revenue. Ferring hopes to boost sales of its Prepopik solution for colonoscopy preparation, which was approved last July, and Gilead has the same hope for its Stribild AIDS treatment, a fixed-dose combination drug that was also approved last summer. Both drug makers argue that five years of exclusivity is warranted because their drugs contain one or more active ingredients that have never before been a component of an approved new drug application.

The FDA, however, has regularly interpreted the law to say that drug makers do not receive five years of exclusivity unless all ingredients are new. Currently, the FDA awards only three years of exclusivity if a combination treatment contains a previously approved ingredient, and if a drug maker conducted new clinical studies that were essential to approval.

The arguments have potentially significant implications if more drug makers first seek approval for combination medications with one or more new active ingredients. Most of the time, drug makers try to win approval of a new single-ingredient drug in order to secure five years of exclusivity and then seek FDA approval of a fixed-dose combination including that drug.

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As if someone had queued up the Etta James classic ‘At Last,’ the Centers for Medicare & Medicaid Services finally released the long-awaited Sunshine Act rule, which establishes procedures for gathering and publishing data containing financial ties between physicians, teaching hospitals and drug and device makers, as well as group purchasing organizations.

The rule was created to address rising concerns that financial relationships may unduly influence medical research and practice. And so, the release of the final versions marks a turning point in the ongoing effort by a wide array of organizations and individuals to force drug and device makers to become more transparent. Even small financial ties have been shown in studies to bias physicians.

The rule, which is part of the Affordable Care Act, requires manufacturers and GPO’s to post payments exceeding $10 to physicians and teaching hospitals on their web sites. This would pertain to consulting fees, food and beverages and research payments for instance. The data to be posted would also include all ownership or investment interests held by a doctor or family member. Penalties for violations can range up to $150,000 annually for failing to report data and $1 million if a company knowingly fails to report the information.

The rule was proposed following a lengthy probe by the US Senate into undisclosed conflicts of interest involving physicians, academics and drug and device makers. The investigation eventually encompassed the National Institute for Mental Health, as well, and eventually prodded the NIH to issue new conflict rules, although critics complained these were insufficient.

The 15-month delay had frustrated not only drug and device makers and GPO’s, but also a wide array of consumer advocacy groups. Moreover, many organizations epxressed concern that the White House Office of Management & Budget’s Office of Information and Regulatory Affairs might water down the rule because the same office gutted a key provision of the NIH conflict of interest rules.

Despite rejoicing over its appearance, there was one notable change that gave some pause. Drug makers will not be required to report payments to speakers at accredited CME events as long as they do not select the speakers or directly pay them. Why? The Obama administration believes that paying CME speakers constitutes an indirect payment that does not need to be reported under specific circumstances.

These are: the program meets accreditation or certification requirements and standards of various groups, such as the Accreditation Council on CME, among others; the drug maker does not select the speaker or give the CME provider a “distinct, identifiable set of individuals to be considered as speakers; and the drug maker does not directly pay the speaker.”

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In one of the more unusual clashes to emerge in the pharmaceutical industry, one day after the Pharmaceutical Research & Manufacturers of America trade group bashed a call to release patient-level data, GlaxoSmithKline came out in support of the notion. The Glaxo move came four months after the drug maker declared a new openness in the wake of a huge scandal over data disclosure that contributed to a $3 billion settlement with the US government last year.

The differing postures center on a petition drive that was recently spearheaded by several organizations, including a charitable trust in the UK, and BMJ, a leading medical journal that recently vowed to no longer publish studies unless relevant patient level data available. Specifically, the AllTrials campaign calls for registering clinical trials, disclosing trial results and clinical study reports.

The PhRMA trade group lambasted the call for releasing patient-level data and singled out BMJ and Ben Goldacre, a physician and industry provocateur who recently wrote a book called ‘Bad Pharma,’ and has been agitating for the AllTrials campaign. There was, however, no mention of Glaxo, which is a member.  “The demands… to release patient-level clinical trial data are irresponsible with potentially harmful consequences for future medicine development,” PhRMA snapped.

For its part, Glaxo did not address the PhRMA criticism specifically, but reiterated a pledge announced last October to open its vaults. The plan is to publish case study reports for all of its drugs once they have been approved or discontinued from development and the results have been published. Glaxo will also publish reports for all approved medicines dating back to its formation, but confidential patient information will be removed, which means this piece of the process will likely take years.

The drug maker is also creating an independent panel of experts who will review requests from outsider researchers who want to examine trial data. The approved requests will then be placed on a secure web site. However, there is no word on exactly when the web site will become functional or when the names of the panel members will be released.

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A new survey of pharmaceutical executives, meanwhile, angered the rank and file, past and present. After tossing thousands of people overboard during the last decade – an estimated 150,000 or so just since 2009 – a slight majority of drug makers complain that it has become increasingly difficult to find the right talent and most worry they will not have access to the people they need to hire, according to a report from PricewaterhouseCoopers.

Specifically, 51 percent of life science execs said that hiring is getting tough and only 28 percent are confident about finding the right candidates. This comes as roughly 60 percent of pharma execs plan to invest more heavily over the next three years to create a more skilled workforce and 72 percent intend to boost their R&D capacity over the next 12 months, PwC Health Research Institute reports.

Not surprisingly, the Internet was filled with chatter from current and former employees who complained drug makers were too quick to cut many workers and, to use an old saying, have sown what they reaped. Of course, the workplace is not stagnant and demand for certain skills is always evolving. Seen this way, the data suggest that pharma execs may want the sort of talent that is not on the sidelines or simply clamoring for a different opportunity. For instance, 34 percent say that developing and managing outside partnerships is the most important skill being sought among scientists.

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The FDA has floated a trial balloon in hopes of mitigating drug shortages. The agency has decided that one way to avoid manufacturing problems is to reward quality, which accounted for 56 percent of the sterile injectable shortages in 2011. This is no easy task. In an essay, two FDA officials noted various reasons that prevent drug makers from sufficiently investing in their operations – aging facilities, new opportunities to produce other medicines and contract manufacturing, for instance.

However, Janet Woodcock, who heads the FDA Center for Drug Evaluation Research and Marta Wosinka, director of economics staff at CDER, write in the latest issue of Clinical Pharmacology & Therapeutics, wrote in Clinical Pharmacology & Therapeutics that the marketplace does not really recognize or reward quality. The issue is that the people who purchase injectable medicines may discount quality issues and focus more on price.

“This behavior is likely based on a belief that all marketed products are of equivalent quality. The resulting lack of reward for quality may encourage manufacturers to keep costs down by, for example, minimizing quality-related investments in areas such as maintenance of production facilities and equipment, quality control testing and oversight, and timely response to early indicators of quality problems,” they wrote.

So they are proposing the agency “engage the marketplace by providing “meaningful manufacturing quality metrics.” But rather than generate another database filled with numbers to be analyzed, they suggest something much simpler: a scorecard or a seal of approval.

“This general approach has been successfully used in many other settings where quality is difficult to observe or quality signals are difficult to interpret. Restaurant grades, HMO scorecards or even a US Pharmacopeia stamp on vitamins are just a few among many tools that utilize this concept. It would then be up to the marketplace to answer the ultimate question: how much are we willing to pay for quality?” Whether this will work is another matter.

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Don’t look now, but the FDA is considering changing regulations for generic drug makers to revise side-effect warnings on their product labels. Why? Here is the back story: Last year, the US Supreme Court ruled generic drug makers are not required to strengthen labeling even when alerted to side effects.

The decision came in response to lawsuits by two women who claimed changes could have been made under state law and without FDA approval. They argued generic drug makers would create uncertainty about safety if they are not held liable under state laws and update labeling in the face of evidence of serious side effects.

Under current FDA regulations, however, generic drug makers cannot update labeling, even if they become aware of a potential risk not mentioned in the labeling. Brand-name drug makers, though, can update warnings and precautions on product labeling before obtaining FDA approval. In other words, the generic drug maker is required only to match its labeling to brand-name labeling.

As a result, the FDA was petitioned to revise its regulations so generic drug makers can update product labeling to warn patients about risks associated with their drugs. And now, there is an indication the agency may do so. This was disclosed in a footnote in a friend-of-the-court brief that the US Department of Justice filed last month in a somewhat related case concerning the responsibility of generic drug makers and design defects.

The footnote states: “This office has been informed that FDA is considering a regulatory change that would allow generic manufacturers, like brand-name manufacturers, to change their labeling in appropriate circumstances. If such a regulatory change is adopted, it could eliminate preemption of failure-to-warn claims against generic-drug manufacturers.”

if the FDA were to make such a change in regulations, generic drug makers could be sued in state courts if they become aware of evidence of serious side effects but do not take action to update the product labeling.

The Justice Department brief, by the way, was made in response to an upcoming review by the US Supreme Court 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.

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After a federal court judge decided that the Bristol-Myers patent on the Baraclude hepatitis B treatment was invalid, some analysts are saying the ruling may prompt greater scrutiny of so-called composition of matter patents. The judge ruled that this particular patent is obvious, leaving the door open to generic rivals, although the drug maker plans to appeal.

Nonetheless, the ruling appears to raise questions about “the robustness of composition of matter patents on products with only minor modifications from older drugs,” Sanford Bernstein analyst Ronny Gal wrote in a research note. “…The case has the potential to reverse well-accepted drug dogma.”

The courts have “consistently upheld patents covering the drug industry practice of lead optimization,” which refers to patents that emerge from building on a “known backbone and then testing small modifications until a drug is found,” he continued. “This patentability of new compounds has thus become a core asset of the drug industry and most of us in the financial industry model the expiry of CoM patent as the first potential date of generic entry for a given compound.”

Whether the ruling is upheld remains to be seen. For now, though, Gal explained that “if the precedent is upheld, it could mean a host of other cases that previously would not have been given much thought come back into play.” And this, of course, would mean still more patent litigation.

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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