Members of Sidley Austin’s Global Life Sciences team recently reviewed litigation, policy, regulatory, and enforcement trends on several continents. We recommend that law and policy departments consider the following actions to manage risks and take advantage of business opportunities in 2014:
- Prepare now for difficult-to-defend challenges to biological patents. Most innovative biological product companies have little experience with the Patent and Trademark Office’s relatively new Inter Partes Review (IPR) proceedings that can now be used by challengers. The proceedings move very quickly and have numerous advantages for challengers. Pioneering companies who anticipate biosimilars challenges should get up to speed now, including by starting the time-consuming process of preparing technical expert testimony and other necessary evidence and analysis.
- Anticipate public disclosure of information in CIA reports. A district court recently held that certain information in company reports to the government of legal violations, required under a corporate integrity agreement (CIA), could be subject to public disclosure under the Freedom of Information Act (FOIA). The case, Public Citizen v. HHS, Docket No. 11-1681 (D.D.C.), underscores the need for companies to preemptively evaluate how they will respond to requests for such information and to anticipate that significant portions of CIA reports could ultimately be disclosed.
- Strengthen substantiation of on-label drug and device promotional claims. Enforcement, litigation, and regulatory scrutiny related to substantiation for “on-label” promotional claims is increasing for many product categories. Examples include recent marketing investigations initiated by the U.S. Department of Justice, which focus on “false or misleading” promotional claims. They could represent the start of a new wave in enforcement that will eventually replace the government’s historical interest in off-label promotion. Additional examples include the Federal Trade Commission’s increasingly rigid demand for two adequate and well-controlled studies to support health-related advertising claims for OTC products, and consumer fraud litigation focused on “natural” claims for foods.
- Incorporate legal review of country-specific requirements into clinical trial site selection and development of global clinical trial agreement templates. Clinical trial-related laws differ among countries in key respects, are rapidly changing, and can have unforeseen consequences. Examples include onerous requirements in India and Brazil relating to subject compensation for trial-related injuries, privacy, and biospecimen retention, which can result in significant costs for unwary companies that initiate trials there. The EU is also overhauling its entire legal framework governing clinical trials, while distinct requirements exist in individual EU Member States such as Belgium, Italy, and the United Kingdom, and in China. Non-compliance with national requirements can lead to penalties or potentially prevent the use of data in marketing authorization applications.
- Address potential concerns about healthcare costs in FDA approval strategies. FDA is focusing on drug prices in a variety of contexts, including by delaying enforcement against manufacturers of cheap, unapproved versions of drug products for which a competitor has sought approval and by modifying its approach to risk evaluation and mitigation strategies (REMSs) to address concerns about “burden” on the healthcare delivery system. Companies should anticipate that FDA’s emphasis on promoting “access” to drugs and medical devices through regulatory action will continue as the U.S. government continues to implement the Patient Protection and Affordable Care Act (PPACA).
- Reinforce compliance procedures to address the proliferation of corruption and pharmacovigilance investigations in the EU and emerging markets. China recently strengthened its anti-corruption requirements and launched several investigations in 2013. Raids and local investigations will likely increase in Asia, especially in Korea, Vietnam, and China where there is intense scrutiny of healthcare costs. Companies operating in the EU should also expect increased regulatory inspections and stricter enforcement of pharmacovigilance obligations (including under the EU Penalties Regulation).
- Reevaluate due diligence checklists for deals in emerging markets. Comprehensive M&A due diligence will be critical as transactions in the pharmaceutical sector reach an all-time high. It will be particularly important in deals involving targets in Asia, India, and the Middle East, where marketing practices adhere to different standards than in the U.S. and EU.
- Manage fraud and abuse risks in your ACA rollout. HHS has made clear that it has authority to audit, investigate, and evaluate Exchanges, and that the False Claims Act applies to Exchange payments involving federal funds. Companies in the U.S. should also expect significant prosecutorial and media attention to accompany public disclosure of Sunshine Act payment information in September 2014. FDA has also initiated efforts to access and review available data relating to promotional expenditures, sampling, and messaging, for purposes of supporting healthcare fraud investigations.
- Adjust China product development strategies in light of changes to marketing authorization requirements. The Chinese FDA is changing the rules for marketing authorization for a variety of product categories, including drugs, medical devices, dietary supplement products, and functional foods. These changes could ultimately facilitate pre-market licensing agreements, but could also add extra hurdles for innovative products by encouraging generic filings prior to patent expiration. China is also revising its Patent Law and the Drug Administration Law, which will have additional effects on innovative companies.
- Develop clear guidelines for use of social media. Although FDA is finally beginning to publish guidance on manufacturer use of social media for promotional purposes, it will likely leave many practical questions unanswered and also raise new ones. Variations in regulatory policy will also persist outside the U.S., in part because guidance in the EU will continue to be specific to each Member State. Few Member States currently have specific guidance, and others are likely to take differing approaches to things like the extent to which companies are responsible for user-generated content, responsibility for amending Wikipedia entries, and the minimum information to include on websites. These issues, along with pressing privacy, pharmacovigilance, and product liability concerns, create a need for each company involved in digital communications to develop and regularly reevaluate its own well-considered approach.
A separate list of steps focused on EU developments is also available here.
Sidley Global Life Sciences Practice
To receive future copies of this and other Sidley updates via email, please sign up at www.sidley.com/subscribe.
Sidley Austin provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship.
Attorney Advertising - For purposes of compliance with New York State Bar rules, our headquarters are Sidley Austin LLP, 787 Seventh Avenue, New York, NY 10019, 212.839.5300; One South Dearborn, Chicago, IL 60603, 312.853.7000; and 1501 K Street, N.W., Washington, D.C. 20005, 202.736.8000.