Government Regulation of Commercial Speech: is Amarin Pharma’s Breakout Moment?

By Ryan Abbott

Government regulation of off-label promotion by pharmaceutical companies is now an important First Amendment issue. The Food and Drug Administration (FDA) has historically restricted truthful and non-misleading speech by pharmaceutical companies under the Food, Drug and Cosmetic Act (FDCA). The FDCA prohibits introducing “misbranded” products into interstate commerce. The FDA has interpreted this to prohibit pharmaceutical companies recommending uses not already approved by the agency (these uses appear in a drug’s labeling). Drugs promoted for unapproved uses may also be considered “new” drugs which require FDA approval. Pharmaceutical companies can also face liability under the False Claims Act for off-label promotion.

United States v. Caronia was the first time the FDCA’s misbranding provisions were successfully challenged under the First Amendment. In 2012, the Second Circuit held that the FDA’s regulations failed the test for commercial speech announced in Central Hudson. Namely, the Court held that restricting truthful speech did not directly advance a government interest (rather, the regulations paternalistically prevented dissemination of truthful information), and the Court held that the FDA’s regulations were more extensive than necessary. The Court did not even analyze the regulations under the test announced in Sorrell v. IMS Health, decided by the Supreme Court in 2011, which held that heightened scrutiny was warranted where restrictions are content- and speaker-based. The FDA did not seek en banc review or writ of certiorari.

Almost immediately, the case was heralded as a landmark decision that would have a profound impact on drug regulation. However, that has yet to occur. Since the case was decided the FDA has already generated large settlements with companies like Amgen for violating agency regulations on off-label promotion. That may be because of uncertainty regarding Caronia’s reach, and because for large companies a relatively cheap settlement makes more sense than risking felony indictments and exclusion from government programs. For the agency’s part, it has tried to avoid fully vetting constitutional issues surrounding its regulations. The FDA stated after Caronia that the ruling would not alter its enforcement policy. Although, the agency has stated it is developing new guidances concerning off-label promotion.

The newest development in this story came last month in Amarin vs. United States. Read More

The People of the State of New York v. Actavis: Making a Hard-Switch Procompetitive

By Ryan Abbott

Actavis is back in the spotlight regarding its allegedly anticompetitive behavior. Last month, the U.S. District Court for the Southern District of New York issued an injunction against Actavis and its subsidiary, Forest Laboratories LLC based on the New York Attorney General’s “product hopping” suit.

The suit concerns Actavis’ attempt to extend monopoly protection for its drug Namenda. Namenda is one of only a few FDA approved drugs to treat Alzheimer’s disease, and the only approved drug in a class of medications that act on the glutamatergic system by blocking NMDA receptors. Namenda is also Actavis’ largest revenue generating drug; it brought in $1.5 billion in sales last year. Unfortunately for Actavis, Namenda’s patent protection is due to expire in 2015. Once the patent protection for Namenda has expired, Actavis should ordinarily expect to see a dramatic reduction in sales revenue, as much as 90% in the first year, as consumers switch to a lower-cost generic version.

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Video Debate: Richard Epstein and Ryan Abbott on FDA Involvement in Off-Label Drug Use

By Ryan Abbott

Video: Here.

On January 13, 2014 the Southwestern Law School Federalist Society student chapter hosted a debate about the FDA’s role in regulating off-label drug use featuring Professor Richard Epstein, the Laurence A. Tisch Professor of Law at NYU and the Kirsten Bedford Senior Fellow at the Hoover Institution, and Ryan Abbott, Associate Professor of Law at Southwestern Law School and Visiting Assistant Professor of Medicine at the David Geffen School of Medicine at UCLA.

Before a drug can be sold legally in the United States, the Food and Drug Administration (FDA) must approve it as safe and effective for a particular indication or use — the use then appears on the drug’s label. Federal law, however, allows doctors to prescribe drugs that the FDA has approved for one indication for any other indication, even though the FDA never evaluated the safety or efficacy of the drug for that use.

Off-label prescribing is an integral part of modern-day medicine. Patients may benefit when they receive drugs or devices in contexts not approved by the FDA. In fact, in some instances an off-label use may be the standard of care for a particular health problem. However, off-label prescribing can also harm patients, especially when an off-label use lacks a solid evidentiary basis.

For this reason, the FDA forbids drug companies from promoting their own products for off-label use, except for certain activities such as disseminating research literature and sponsoring educational programs. In recent years, civil and criminal actions against drug companies for illegal promotion for off-label use have proliferated, leading to many large settlements. For example, in July 2012, GlaxoSmithKline pled guilty and paid $3 billion to resolve criminal and civil liability arising from the company’s unlawful prescription drug promotion, failure to report safety data, and false price reporting practices.

As a result of this recent litigation, many have questioned the FDA’s current role in regulation of off-label use and whether more or less intervention is needed. This debate sought to address these very issues.

Both Professors have written about FDA regulations. For example, Professor Epstein in his book, Overdose: How Excessive Government Regulation Stifles Pharmaceutical Innovation, and in an article in the Minnesota Law Review, “Against Permititis: Why Voluntary Organizations Should Regulate the Use of Cancer Drugs.” Professor Abbott has written about FDA regulations in the Iowa Law Review, Big Data and Pharmacovigilance: Using Health Information Exchanges to Revolutionize Drug Safety, and he has an article forthcoming with Ian Ayres at Yale Law School on Mechanisms for Regulating Off-Label Drug Use.

Antitrust Implications of Reverse Patent Settlements

By Ryan Abbott

Last month the US Supreme Court rendered its decision on the reverse payments question.  The Court held in Federal Trade Commission v. Actavis, Inc. that reverse payment settlements in patent infringement litigation may violate antitrust laws, and therefore, these settlements are not immune from antitrust attack.  Actavis, a generic drug manufacturer, settled its patent challenge against Solvay Pharmaceuticals in exchange for a share in the originator drug manufacturer’s monopoly profits. The Court found that a substantial reverse payment suggested that Solvay had serious doubts about the validity of its patent, and that by the settlement the parties intended to suppress competition. Read More

An Odd Opinion in Myriad

By Ryan Abbott

Justice Scalia filed an opinion concurring in part and concurring in the judgment of the Myriad decision.

“I join the judgment of the Court, and all of its opinion except Part I–A and some portions of the rest of the opinion going into fine details of molecular biology. I am unable to affirm those details on my own knowledge or even my own belief. It suffices for me to affirm, having studied the opinions below and the expert briefs presented here, that the portion of DNA isolated from its natural state sought to be patented is identical to that portion of the DNA in its natural state; and that complementary DNA (cDNA) is a synthetic creation not normally present in nature.”

In particular, the following line caught my attention: “I am unable to affirm those details on my own knowledge or even my own belief.”

The purpose of this concurrence escapes me. Surely he’s heard any number of cases related to highly technical issues in areas such as telecommunications or oil exploration where most people lack personal knowledge. What is it about the Court’s very conventional review of molecular biology that defies belief? Is Justice Scalia denying the existence of science? What do you think?

Thoughts on Myriad

By Ryan Abbott

While awaiting the torrent of academic commentary on this case that is no doubt forthcoming, for now I thought I’d highlight a few interesting aspects of today’s unanimous Supreme Court decision in Association for Molecular Pathology v. Myriad Genetics, 569 U. S. ____ (2013).

Briefly, this case concerned whether genes can be patented. The company Myriad Genetics held several patents related to two genes: BRCA1 and BRCA2. When mutations of these genes are present, it may indicate that a woman is at a high risk for getting breast or ovarian cancer. Myriad also held patents on a proprietary test to evaluate for the presence of BRCA gene mutations that costs over $3,000. This screening has been in the news recently due to Angelina Jolie’s decision to undergo preventive double mastectomy after testing positive for BRCA mutations.

In today’s case, Myriad’s patents were being challenged because they limited competition from other companies and researchers that could have independently tested for the same gene mutations. The outcome of this case has been critically anticipated for years because of its impact on patient access to medicines and funding medical research and development. Thousands of human genes have been patented in the U.S. over the past 30 years.

Before reaching the Supreme Court, a U.S. District judge in New York invalidated Myriad’s patents in 2010, ruling that genes were ineligible for patent protection as “products of nature.” However, the Court of Appeals for the Federal Circuit disagreed, holding that genes were eligible for patent protection because DNA isolated from the body is “markedly different” in chemical structure than DNA as it exists inside the body. The Supreme Court remanded the decision back to the Federal Circuit in light of its decision in Prometheus, and the Federal Circuit affirmed its decision that DNA was patent eligible.

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India Aggressively Expanding Access to Medicines

By Ryan Abbott

The Indian Federal Department of Pharmaceuticals has released a new Drugs (Prices Control) Order that expands the list of “essential” drugs subject to government price control. Currently, a 1995 order restricts prices on 74 bulk drugs and their formulations; the new order would control prices on a total of 348 medicines that make up 60 percent of domestic drug sales. The price for these drugs will be based on a simple average of all brands with a market share of at least one percent.

The Indian Pharmaceutical Alliance (IPA), which represents major Indian pharmaceutical manufacturers, estimates that prices could fall between 20 and 90 percent. Price controls are certain to improve access to medicines in a country where two-thirds of the citizens have no health insurance and pay health care costs out-of-pocket. India spends less than 1.5 percent of its GDP on public health, ranking among the lowest spenders from developing countries.

Coming soon after India issued compulsory licenses for on-patent medicines, and the recent high-profile Glivec patent case I blogged about in April, expanded price controls reflect a growing willingness to challenge multinational corporations (MNCs). Whether this will result in backlash from MNCs remains to be seen—but they have not historically failed to respond to such challenges.

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The High Cost of Profiting from Student Loans

By Ryan Abbott

I read an article recently which stated that the federal government is making a 51 billion dollar profit this year from student loan borrowers. That’s more annual profit than any private American business makes. Profit margins are up thanks to record interest rates and aggressive collection policies.

Having the government make money off of students like this strikes me as bad policy—particularly with regards to student health professionals. Medical school is an expensive proposition; the cost of attending medical school has been rising for the past 13 years, and the average medical school graduate leaves school with $166,750 in debt. That doesn’t take into account undergraduate or other debt, and a significant portion of graduates end up owing far in excess of that amount. Ben Bernake testified before Congress last year that his son was on track to leave med school with $400,000 in loans!

Systematically burdening medical school graduates with debt seems almost calculated to drive doctors away from primary care and into higher paying specialties. That’s unfortunate because research demonstrates that a greater availability of primary care physicians results in better public health outcomes. The U.S. already has a surplus of specialists but not primary care physicians. Read More

The High Price of Drugs – and Why Doctors Should Care

By Ryan Abbott

A few days ago, a group of more than 100 experts in chronic myeloid leukemia (CML) published an article in the medical journal Blood to draw attention to the prices of anti-cancer drugs and the effects of these prices on individual patients.

The authors note that three new drugs were approved by the FDA for CML in 2012, all of which were priced at “astronomical levels.” Of the 12 anti-cancer drugs approved by the FDA last year, 11 were priced above $100,000. This represents a doubling of prices from a decade ago. The authors claim that these prices “are too high, unsustainable, may compromise access of needy patients to highly effective therapy, and are harmful to the sustainability of our national healthcare systems.”

The cost of medicines is a controversial issue. Proponents of allowing the pharmaceutical industry to set its own prices argue that high prices are needed to incentivize new drug development. According to PhRMA, the cost of new drug approval is around $1.2 billion, although some independent experts put that price as low as $75 million. Yet, whatever the benefits of high prices, it is clear that high prices create a barrier to patient access to medicines.

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Beyond the Patents-Prizes Debate

By Ryan Abbott

In Beyond the Patents-Prizes Debate (forthcoming in the Texas Law Review), Daniel Hemel and Lisa Larrimore Ouellette articulate a new theoretical framework for thinking about R&D funding mechanisms. They note that patents, prizes, government grants, and tax credits for research all play an important role in facilitating innovation, although academic literature has disproportionately focused on the role of patents and prizes—this is the first detailed analysis of how tax credits compare as an incentive mechanism.

The Orphan Drug Act (ODA) illustrates how patents, grants, and tax credits can all be used to achieve similar goals. The ODA was passed in 1982 to incentivize R&D on rare diseases. It incorporates several different types of incentives, including direct government grants for research, a patent-like market exclusivity period for approved drugs, and tax credits for half of the cost of clinical research. The ODA has been widely acknowledged as successful. From 1973–1983, U.S. pharmaceutical companies only brought 10 orphan drugs to market. In the twenty-five years since the Act’s passage, 326 new drugs were approved for rare diseases. The ODA was also the model I proposed in an article last year for a new system to boost R&D for evidence-based complementary and alternative medicine (CAM).

Given that all these mechanisms can accomplish the same goal, possibly even with the same costs, and no single mechanism is always more efficient than the others, a framework is needed for determining which incentive is most appropriate for a given goal. The authors do this by providing a structure for balancing the benefits and detriments of each incentive on the basis of who should determine the reward size, when the reward should be provided, and who should pay.

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