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 2015:
- Protect trade secrets in clinical data submissions. As transparency laws in Europe and the U.S. call for greater disclosure of clinical trial data through registries and other sources, global companies face increasing risk that such disclosure can include trade secrets and other confidential commercial information. To mitigate the risk, companies must have systems in place for identifying valuable information in registry and other submissions, properly invoking relevant protections, and ensuring pre-disclosure redaction.
- Re-evaluate marketing of cosmetics and functional foods in China. The China Food and Drug Administration (CFDA) is planning several changes that could prohibit some products currently marketed as cosmetics or functional foods and that could result in higher market entry requirements for others. This includes initiatives that could result in reclassification of some products as drugs and new requirements for pre-market clinical trials.
- Prepare for global GMP/QSR compliance crackdowns. Improving the state of global manufacturing quality is a top Food and Drug Administration (FDA) priority. Inspections of ex-U.S. facilities will continue to increase in frequency and intensity as FDA, the European Medicines Agency (EMA) and CFDA are devoting considerable resources to this initiative and also strengthening alliances aimed at more effective policing of the global supply chain. Companies should prepare now by conducting thorough compliance assessments — especially of contract manufacturers — and developing robust inspection readiness programs.
- Audit pharmaceutical coupon and co-pay programs. The U.S. Office of Inspector General (OIG) has made it clear that it is concerned about federal healthcare program beneficiary usage of industry-sponsored coupon and co-payment programs. Companies should expect heavy scrutiny of such programs and must evaluate their programs against the OIG’s recent report on these programs, address gaps and develop new solutions to limit federal healthcare program usage.
- Implement controls for development of gainsharing, risk-sharing and bundling arrangements. The healthcare industry continues to face a number of legal and business challenges in structuring gainsharing, risk-sharing and bundled arrangements designed to improve outcomes and reduce costs, despite the accelerated shift to value-based purchasing for the Medicare program by the Centers for Medicare & Medicaid Services’ (CMS). As the OIG considers narrowing its broad prohibition specific to hospital gainsharing arrangements, healthcare industry stakeholders should consider whether and how to move forward on proposals that bring value and savings to the system, but also carry legal risk under the Federal Anti-Kickback Statute. For start-up companies in particular, business and legal teams should understand the government’s desire to base payments for products on outcomes.
- Assess the impacts of pro-generic regulatory developments on your large-molecule product portfolio. Although follow-on applications for many large-molecule products will now be routed through the biosimilars pathway established by statute in 2010, FDA has also indicated its strong commitment to approving many of these products through the traditional generic drug pathway. Policy engagement is critical, along with legal strategic planning.
- Respond to the “reverse” off-label promotion trend in the EU. Several member states in the EU have recently responded to the introduction of new products for unmet medical needs by actively encouraging “off-label” use of cheaper alternatives and scrutinizing arrangements aimed at preventing off-label marketing of older drugs.
- Consider global, not just U.S., antitrust implications of intellectual property protection and product pricing strategies. Antitrust enforcement and litigation is increasing significantly in the U.S., Europe and China, particularly for medical device manufacturers. Against this backdrop, many disputes will focus on the question of when the assertion of intellectual property rights constitutes a misuse of those rights under antitrust laws. Government authorities also are likely to use antitrust enforcement powers to regulate the prices of drugs and medical devices, particularly in China.
- Develop a cybersecurity plan and prepare for a breach. Cyber-intrusions are rapidly on the rise and the potential consequences now include loss of IP and trade secrets, government investigations, civil penalties, class actions and allegations of failed board governance. To address these issues, every life sciences company needs to develop a practical, risk-based cybersecurity plan that takes into account a variety of considerations, including technical cybersecurity safeguards, data classification and vulnerability assessments, incident response and reporting protocols, insurance coverage and protections in service provider arrangements.
- Control class action risk by implementing robust recall preparedness and refund/warranty programs. The lack of well-designed recall, refund and warranty procedures continues unnecessarily to increase the class action litigation risk for life sciences companies when product safety issues arise. Many courts consider such programs in determining whether a class action is necessary or “superior” as a method of providing compensation to the class. Moreover, well-designed programs can effectively moot the claims of prospective plaintiffs, thereby reducing the number of dissatisfied customers that could potentially serve as proposed class representatives.
If you have any questions regarding this update, please contact the Sidley lawyer with whom you usually work, or
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Torrey Cope
Partner
+1.202.736.8803
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Sidley Global Life Sciences Practice
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