Pharmaspective

FTC Takes Another Bite at the Generics Anti-Trust Litigation Apple

  

 Last week, the Federal Trade Commission (“FTC”) filed an amicus brief with the U.S. Court of Appeals for the Third Circuit in the In Re K-Dur Antitrust Litigation.  A class of direct purchasers initiated this case challenging the settlement between Schering-Plough, owner of key patent for high blood pressure medication K-Dur 20, and generic drug makers, Upsher-Smith and ESI (formerly a division of Wyeth) to delay the market entry of the generic version of K-Dur 20. The plaintiffs in this case alleged that the settlement between Schering-Plough and the generic drug makers violated the Sherman Act.  In the lower court, the U.S. District Court for the District of New Jersey granted a summary judgment motion filed by Merck (formerly Schering-Plough).  The FTC’s amicus brief requests that the Third Circuit reverse the District Court’s ruling. 

 This is not the FTC’s first bite at the apple regarding Schering-Plough’s “pay-to-delay” settlement agreement.  The FTC previously initiated an action against Schering-Plough challenging the very same settlement with the generic drug makers alleging the settlement violated Section 5 of the FTC Act.  That case was also dismissed by a district court.  On appeal in 2005, the U.S. Court of Appeals for the Eleventh Circuit upheld the dismissal by the district court.  The FTC also submitted an amicus brief in that case.

 In its amicus brief to the Third Circuit, the FTC relies on the “Hatch-Waxman Act” to support its request for reversal.  Specifically, the FTC argues that the Hatch-Waxman Act provides the ability to challenge patents “that are invalid or too narrow to legitimately prevent the entry of generic drugs.”  The FTC asserts that settlements similar to that reached between Schering-Plough and the generic drug makers are costing consumers about $3.5 billion per year by preventing the market entry of low-cost generic drugs.

 While this is an issue of first-impression for the Third Circuit, other federal courts have weighed in on the legality of exclusion-payment settlement agreements, taking varied approaches.  The Second and Federal Circuits have upheld such settlements, while the Sixth and D.C. Circuits suggested that these settlements may violate anti-trust laws.  In its amicus brief, the FTC urges that:

 "[p]atent settlement agreements should be assessed under the antitrust rule of reason – a rule that, as recent Supreme Court teachings make clear, is flexible enough both to take into account the patent context and to recognize a presumption of illegality for types of agreements whose likely anticompetitive impact is clear.  Parties may settle patent disputes in a variety of ways, and many settlements – e.g., those in which the parties compromise on an entry date, without payment by a patent holder – pose little competitive problem.  On the other hand, where a settlement includes a substantial payment, that payment must be a quid pro quo for something; if the challenger is offering a commitment to stay out of the market for a specified time, it follows that the payment is to secure exclusion of a potential competitor.  Because such an agreement closely parallels market allocation arrangements universally recognized as unlawful, a presumption of antitrust illegality is justified.  Such a presumption is bolstered by the polices of Hatch-Waxman and by experience that shows the vulnerability of many pharmaceutical patents, the weakest of which will be most likely to result in exclusion-payment settlements."

 How will the Third Circuit handle this appeal against the backdrop of a circuit split?  Will the Third Circuit take the path of the Second and Federal Circuits and uphold the lower court’s ruling?  Or, will the Third Circuit reverse and remand for consideration pursuant to the “rule of reason” suggested by the FTC or pursuant to an entirely different framework?

YouTube: The New “Homemade Bread”

 
     In prior post, “Bad Ads, Beware!,” we queried if we should expect to see a rise in Bad Ad complaints.  It looks like the answer to our query may be “yes.”  On May 5, 2011, DDMAC issued  an Untitled Letter to Warner Chilcott (US), LLC, resulting from a complaint submitted to the DDMAC Bad Ad program.  The complaint was made to FDA in response to a video posted on YouTube by members of the Warner Chilcott sales force.  According to the DDMAC Untitled Letter, the YouTube video was approximately 60-seconds long and included a sales representative describing the product and presenting claims about the drug’s dosing benefits to a staff member in a physician’s office.  The video did not include any risk information related to the use of the drug.  The video allegedly was also not submitted to FDA under cover of Form FDA-2253 at the time of initial dissemination of the video. 

 As life sciences companies navigate how to comply with FDA regulations when formally  promoting their products using digital technology and social networking websites, it looks like now they may also need to address the “informal”  activities of their sales teams and other employees to avoid scrutiny.  Is YouTube, and even Facebook and LinkedIn, becoming the digital version of “Homemade Bread?”  How far do companies need to go to monitor and regulate their employees’ personal use of social networking websites? 

 This Untitled Letter reflects FDA’s continuing commitment to address social media communications  and its expectation that  life science companies get ahead of these issues and address their employees’ activities both in and out of the office, and online.   With large sales teams and global employees, maintaining control in this area may be difficult.  Perhaps now is the time to beef up the external communications policies, the disciplinary policies and the training for company employees in an effort to reduce the risk of an untitled letter or worse.

The Solomon Story Continued: The OIG’s Decision to Flaunt its Authority Rather than Its Judgment

Yesterday marked yet another peculiar move by the OIG in the Solomon saga. Following on the heels of its decision to potentially exclude Howard Solomon from federal healthcare programs, the OIG released on its website the “OIG Fact Sheet on Forest Laboratories, Inc., and the Inspector General's Exclusion Authorities.” The fact sheet focused on its authority for excluding Forest’s CEO. Noticeably absent from the release, however, was an explanation as to why the OIG specifically chose to exclude Solomon and not other executives who have gone before him, especially those who may have been more personally engaged in egregious activities. The release provided two unsatisfying responses to my query. First, we have the authority to do so. Second, we released the “Guidance for Implementing Permissive Exclusion Authority Under Section 1128(b)(15) of the Social Security Act” in October stating we were going to exclude officers and managing employees based solely on their position within the company. The first response is perhaps a necessary retort to those who contest the OIG’s authority. While this truth may justify its actions, it does not explain the choice. Just because the OIG has the authority to exclude, it doesn’t mean it is an appropriate remedy to exercise it in all circumstances. The second response and the dearth of detail about Solomon’s personal knowledge and/or actions related to the misconduct demonstrate that Solomon was chosen because the OIG is going to implement its October guidance ruthlessly. Solomon was no worse than other executives, and in many respects probably better, but he is an executive of a company criminally indicted after the October guidance was issued. Using the Solomon case, the OIG is making its position known. An executive may be excluded from federal healthcare programs, regardless of their exact knowledge and intent if they are in control when a company commits criminal misconduct and the factors in the October OIG Guidance lean in favor of exclusion. It does not matter that the personal exclusion was never discussed during the lengthy investigation of the company. It does not matter that the OIG has entered into a settlement agreement with the company and the company has not been excluded from federal programs. This stance, however, begs the following question, particularly in the Forest situation: Why would you exclude an executive, who was never found guilty of criminal misconduct, from federal healthcare programs for crimes committed by a company, when the company itself can continue to do business with federal healthcare programs?

Whistleblower Study Provides Insight into Which Marketing Actions are Most Likely to Result in Government Action

Many articles focus solely on the new features of the most recent government settlement. An April 5, 2011 article entitled, "Strategies and Practices in Off-Label Marketing of Pharmaceuticals: A Retrospective Analysis of Whistleblower Complaints", however, sheds light on exactly what kind of alleged off-label practices by pharmaceutical companies resulted in government intervention and large settlements between 1996 and 2010. By systematically dividing the purpose of various companies’ off-label campaigns into three different areas, the article found that 85% of the alleged off-label promotion was for unapproved diseases, 54% was for unapproved disease sub-types, and 34% was for an unapproved dosing strategy. The marketing practices which subjected companies to fines and scrutiny can also be broken down into four different strategies (e.g. prescriber, company, payer and consumer-related practices. ) After classifying the practices within the complaints in this manner, it was found that all of the complaints alleged that the off-label promotion involved some prescriber-related practices (including self-serving presentations of literature, free samples, direct financial incentives, and teaching and research activities). Ninety percent of the complaints mentioned company practices, such as unrealistic sales quotas; 56% concerned payer-related strategies; while 44% included some consumer-related practices.

Not only is the breakdown of these whistleblower complaints fascinating, the report’s findings highlight those trends and marketing areas, which expose pharmaceutical companies to the greatest risk. Although its lessons are most apparent to those companies that disregard and/or flagrantly breach the law, they should also be useful to those companies that strive to be compliant. For instance, the report found that 71% of the whistleblowers were sales representatives, 20% were sales and accounting managers, and 9% were unaffiliated physicians. As a result, companies should ensure that their compliance programs include clear and identifiable ways for representatives, managers and outside physicians to report instances of off-label promotion. Hopefully, if these avenues are well-publicized, individuals would alert the company to the illegal promotion before they resort to other remedies. The report also indicated that off-label marketing practices directed to physicians were omnipresent in the sample group, and sales representatives routinely reviewed confidential medical files for potential customers. This demonstrates that every company must implement policies and procedures regarding their interactions with healthcare professionals. Ideally, these guides should identify appropriate and inappropriate behavior, and would specifically prohibit any practice where company representatives receive or review confidential patient information. Lastly, the analysis showed that some companies had policies and procedures, but they were either un-enforced or in some cases, purposefully ignored. This finding suggests that audits are a key component of any working compliance program. In conclusion, by identifying the business areas and practices which are subject to heightened scrutiny and will ultimately become the fodder for future prosecutions, the analysis tells companies what areas and practices they need to carefully monitor to avoid prosecution.

Sinner or Saint: Should Solomon, Forest’s CEO, be excluded from federal healthcare programs?

    Howard Solomon, the CEO of Forest Laboratories (“Forest”), may be one of the most polarizing figures in the pharmaceutical industry today.  Recognized as the driving force behind Forest’s success story, he is seen by many as visionary leader. In the course of seeking an appropriate medication for his mentally ill son, Howard learned of the antidepressant now known as Celexa, and he had the foresight to purchase the license to it in the United States.  Because of Celexa’s popularity, Forest was catapulted from a relatively small pharmaceutical company to a powerhouse during his tenure as Chief Executive and Chairman.  Howard Solomon has also functioned as a strong voice for the mentally ill and as a devoted advocate for his son.

    To his critics, Solomon is seen as the man responsible for Forest’s illegal activities.  With Solomon at the corporation’s helm, Forest allegedly failed to comply with the required distribution “phase-down” of its levothyroxine sodium drug product, and according to the allegations submitted inaccurate information to the FDA as part of its NDA submission for Levothroid.   In addition, Forest allegedly marketed Celexa and Lexapro to pediatric patients, although they were not approved for this use.  As a result, the company entered into a settlement agreement for $313 million and an onerous corporate integrity agreement.  In addition to these corporate actions, Solomon is seen as a man who has profited handsomely from this behavior.  According to BusinessWeek’s 2001 annual survey, Solomon was the third-highest-paid  U.S. executive.

    Regardless of whether you consider Solomon a role model, his potential exclusion from federal healthcare programs is peculiar and unwarranted.  According to Forest’s website, Solomon was notified on April 12, 2011, of potential exclusion from federal healthcare programs in a letter from the Office of the Inspector General, Department of Health and Human Services (“HHS-OIG”).  Although the company entered into a settlement and corporate integrity agreement last September, Mr. Solomon was never accused of wrongdoing in connection with these matters.  This stands in stark contrast to prior exclusions, which occurred after the executive in question  was personally charged and pled guilty.  According to the Forest website, “the only basis given in the letter notifying Mr. Solomon of the potential action is that he is ‘associated with’ Forest.”   One can only wonder why the HHS-OIG decided to make an example of an executive with such a positive image and one who was neither charged nor found guilty of a crime.  Many believe HHS-OIG is trying to assert its strength, specifically its ability to wield the sword of exclusion, but its actions are likely to have the opposite effect and cause individuals to question whether it should have such power, if it’s used so indiscriminately.