If the budgets released by the two major U.S. telecommunications regulators are any indication, 2015 promises major reform of the $8.7 billion Universal Service Fund (“USF”) and an even greater focus on making more spectrum available for broadband use.
The largest requests by both the Federal Communications Commission (“FCC”) and National Telecommunications and Information Administration (“NTIA”) in their proposed 2015 budgets are for funding to support broadband deployment. The FCC has sought a $35 million increase over last year’s budget, the bulk of which is allocated for salaries for 45 new attorneys, economists, IT specialists, program managers and technologists to participate in heightened oversight of the USF and support its transition from a telephony-subsidy program to one focused primarily on the expansion of broadband availability. The restructuring of the USF, which is funded from fees collected from wireline and wireless telecommunications carriers and VoIP providers, has been an agency priority since 2011. In that year, the agency approved significant reforms of USF, including the creation of a Connect America Fund to support the expansion of broadband service to previously unserved areas. Once hired, the new FCC staff will likely be charged with helping address the ongoing need to increase oversight and management of the various USF programs. Continue Reading
On January 24, 2014, the Federal Trade Commission (FTC), along with the Idaho Attorney General and two local hospitals, prevailed in Idaho District Court in their challenge to the St. Luke’s Health System’s acquisition of a group of physicians in Nampa, Idaho. As the first litigated FTC challenge to a hospital acquisition of a physician practice, the outcome was highly anticipated.
The 4-week trial was litigated by experienced lawyers on all sides and involved extensive testimony from both fact witnesses and experts on everything from market definitions to the efficiencies from forming a more tightly integrated healthcare system.
The case raises a number of important questions about the competitive analysis of hospital-physician consolidations, including: the appropriate geographic market for physician services; whether competitive effects in adjacent product markets were properly considered; and whether claimed efficiencies were “merger specific.”
In the attached article, Bob Leibenluft and Leigh Oliver discuss Judge B. Lynn Winmill’s decision in the case and its implications for further efforts by hospitals to acquire physician practices.
Implementing a promise from his State of the Union Address, President Obama issued Executive Order (“E.O.”) 13658 on February 12, 2014, imposing a mandatory minimum wage of $10.10 per hour for some Federal prime contracts and subcontracts. 79 Fed. Reg. 9849 (Feb. 20, 2014). The current Federal minimum wage is $7.25 per hour for all covered, non-exempt employees under the Fair Labor Standards Act (“FLSA”), although many states impose a higher minimum wage.
The new E.O. applies to the following types of procurement contracts and subcontracts (at any tier) signed after January 1, 2015:
- Procurement contracts for services or construction;
- Contracts or contract-like instruments for services covered by the Service Contract Act (“SCA”);
- Contracts or contract-like instruments for concessions; and
- Contracts or contract-like instruments with the Federal government in connection with Federal property or lands, and related to offering services for Federal employees, their dependents, or the general public.
Berkley Life Sciences, Hogan Lovells, and Bowman and Brooke would like to invite you to a 60-minute webinar on Generic Drug Labeling, Product Liability, and the Changing FDA Regulatory Landscape.
The webinar will take place Tuesday, March 11, 2014 at 2:00 p.m. ET.
To register, please click here. Continue Reading
For several years now current good manufacturing practice (cGMP) violations have been viewed as “the next hot thing” in False Claims Act (FCA) litigation. The $750 million settlement involving SB Pharmaco (a GlaxoSmithKline subsidiary) and the $500 million settlement involving Ranbaxy USA Inc. (a Ranbaxy Laboratories Limited subsidiary) support this view. But we’ve always understood that cGMP noncompliance does not necessarily make a FCA case. And now a circuit court decision confirms that view.
On February 21, 2014, the United States Court of Appeals for the Fourth Circuit ruled in United States ex rel. Barry Rostholder v. Omnicare, Inc., that cGMP violations alone are not enough to establish the elements of a FCA claim. The case involved a former employee of Omnicare alleging that the company violated cGMP requirements when packaging drugs. These violations, the former employee alleged, caused Omnicare to present false claims to the government for adulterated drugs ineligible for reimbursement. The Fourth Circuit, however, held that the Medicare and Medicaid “statutes do not expressly prohibit reimbursement for drugs that have been adulterated” and “do not require compliance with the cGMPs or any other FDA safety regulations as a precondition to reimbursement.” Because the relator did not identify any false statements or other fraudulent misrepresentations that were made, the Fourth Circuit held that there was no valid FCA claim. This was true even though FDA had cited Omnicare for multiple cGMP deficiencies, including a 2007 Warning Letter.
The Fourth Circuit’s decision reaffirms that the FCA is not meant to promote regulatory compliance; it is meant to protect the government’s financial resources from fraudulent conduct. The Court stated that allowing FCA claims to promote regulatory compliance would undermine FDA’s enforcement powers – which in this case were exercised through inspections, warning letters, and the threat of seizure or injunction. Specifically, the Court stated that:
- “Were we to accept relator’s theory of liability based merely on a regulatory violation, we would sanction use of the FCA as a sweeping mechanism to promote regulatory compliance, rather than a set of statutes aimed at protecting the financial resources of the government from the consequences of fraudulent conduct. When an agency has broad powers to enforce its own regulations, as the FDA does in this case, allowing FCA liability based on regulatory non-compliance could ‘short-circuit the very remedial process the Government has established to address non-compliance with those regulations.”
- “Congress did not intend that the FCA be used as a regulatory compliance mechanism.”
- “We are confident that the FDA’s use of its regulatory enforcement powers may be exercised fully to ensure further compliance with applicable safety standards.”
It is important to note that the government did not intervene in this case. So a big question that remains is whether this decision weakens the government’s position in pursuing FCA cases for cGMP violations when the violations are significant enough, as was alleged in SB Pharmaco and Ranbaxy, to result in drugs that were so different in strength, purity or quality from that approved by FDA that they are worthless products or not the products for which reimbursement is being sought. The Fourth Circuit did not feel that it needed to address the “worthless services” theory “[b]ecause adulterated drugs are subject to reimbursement by Medicare and Medicaid and therefore any claim for payment cannot be ‘false’ . . . .”
Over the years, the number of chemistry, manufacturing, and controls (CMC) postapproval drug manufacturing supplements for NDAs and ANDAs submitted to FDA has continued to increase. These are required for “major” or “moderate” manufacturing changes:
- Major. If a manufacturing change is considered to be major, an applicant must submit and receive FDA approval of a prior-approval supplement (PAS) before the drug product made with the change is distributed.
- Moderate. If a manufacturing change is considered to be moderate, an applicant must submit a supplement at least 30 days before the drug product is distributed (a CBE-30 supplement) or, in some cases, submit a supplement at the time of distribution (a CBE-0 supplement). “CBE” means “changes-being-effected”.
The increasing number of supplements – combined with FDA’s goal of implementing a more cooperative, efficient, and risk-based approach for regulating pharmaceutical manufacturing – has resulted in the agency examining the types of changes that historically have been submitted as CMC postapproval manufacturing supplements (PAS, CBE-30, and CBE-0). As a result, FDA concluded that many of the changes being reported present low risk to the quality of the product and can therefore be documented in a company’s annual report (i.e., notification of a change after implementation) rather than in a supplement.
FDA began to address this issue in June 2010, when the agency issued a draft guidance for industry entitled CMC Postapproval Manufacturing Changes To Be Documented in Annual Reports (the Annual Report guidance). The finalized version was issued on March 4, 2014, and details the agency’s current thinking on what manufacturing changes can be submitted in an annual report, and it also adds to/revises recommendations previously published in FDA’s Changes to an Approved NDA or ANDA guidance, the Scale-up and Postapproval Changes (SUPAC) guidances, and other related guidances.
If a recommendation in the Annual Report guidance is found to be inconsistent with previously published FDA guidances, the Annual Report guidance would apply, assuming that the applicant’s proposed manufacturing change would present a minimal potential to have an adverse effect on product quality. For changes not addressed in the Annual Report guidance, applicants should still refer to other CDER guidances, as well as Appendix B of the Annual Report guidance, to determine the appropriate reporting categories (i.e., PAS, CBE, or annual report).
The Annual Report guidance further reminds companies that in addition to properly reporting postapproval manufacturing changes, such changes must be made in compliance with current good manufacturing practice (cGMP) requirements, including:
- establishing and following appropriate written procedures;
- qualifying equipment as suitable for its intended use;
- using validated test methods;
- scientifically establishing the commercial manufacturing process; and
- ensuring the manufacturing process’s ongoing state of control (which may include additional process validation and stability studies depending on the nature of the change).
The now final Annual Report guidance is available here
The European Union (EU) and the United States have now both taken targeted action to address the evolving situation in Ukraine. These measures do not impose restrictions on the country or government as a whole. On 6 March 2014, the EU implemented sanctions that target designated persons in Ukraine but these EU measures do not currently affect overall trade with the country. On the same day, President Obama issued a formal statement and an Executive Order (the Order) giving the administration broad authority to also designate persons who are, among other things, engaging in activities undermining democratic processes or institutions in Ukraine; threatening the peace, security, stability, sovereignty, or territorial integrity of Ukraine; contributing to the misappropriation of state assets of Ukraine; or purporting to assert governmental authority over any part of Ukraine without authorization from the Ukrainian government in Kyiv. To date, the president has not designated any persons or entities under this Order. The U.S. sanctions also do not currently affect overall trade with Ukraine. We have set forth below key elements of these restrictions as well as additional measures under these sanctions.
Based on these new measures, companies should assess their business operations and relationships in Ukraine. In reviewing these activities, companies should determine whether they are engaging in activities or have relationships with these designated persons, including companies owned or controlled by them. For companies with automated screening software solutions, any such persons should be added to your systems and screening filters.
To read the full alert please click here.
The last two weeks have seen significant developments in building the blocks for what could eventually form the base of U.S. tax reform. Most significant is the 979-page “Tax Reform Act of 2014” discussion draft from House Ways and Means Chairman Dave Camp (R-MI) — a sweeping, comprehensive reform package that would reduce U.S. corporate and individual rates, reform U.S. international tax rules, and significantly alter the existing landscape of industry tax preferences. The Obama Administration also released its tax proposals this week as part of the FY15 Budget.
To read the full alert please click here.
Last fall, the Federal Acquisition Regulation (FAR) Council and Department of Defense (DoD) published proposed rules to implement requirements in President Obama’s Executive Order 13627 and the National Defense Authorization Act (NDAA) of FY 2013 intended to combat human trafficking in the Government’s supply chain. These implementing rules, which have drawn extensive comments from a broad array of stakeholders, likely will take effect in 2014, and for the reasons discussed below, the interim or final rules, whichever form they take next, are likely to align closely with the proposal rules. Now, therefore, is a good time to take stock of the proposals and to assess what the regulations are likely to entail once they take effect. This update highlights the salient aspects of the proposed rules and the requirements that are likely to be of most interest to contractors, especially those with extensive overseas supply chains supporting the U.S. Government.
Read More: Contractors and Companies in the Federal Supply Chain Have an Opportunity to Prepare for the Impending, Significant Expansion of the Government’s Anti-Human Trafficking Rules
Last week Actelion settled a lawsuit against two generic drug manufacturers regarding whether Actelion is required to supply those generic firms with samples of its drug Tracleer for use in the bioequivalence testing required as part of abbreviated new drug applications (ANDAs). Tracleer is subject to various distribution restrictions as part of its Risk Evaluation and Mitigation Strategy (REMS) filed with the FDA, and therefore the generic manufacturers were not able to obtain these samples through a wholesaler as would ordinarily be the case. In the lawsuit, Actelion asserted that it was under no obligation to do business with rivals and that, moreover, there were legitimate safety concerns associated with distributing Tracleer outside the terms of the REMS program. The generic manufacturers in turn argued that Actelion was using the presence of the REMS to delay generic entry.
This settlement follows an October 2013 decision in the case by U.S. District Judge Noel Hillman denying Actelion’s motion for judgment on the pleadings and allowing the case to proceed to discovery. However that ruling did not address the merits of the issues at the core of the lawsuit, and with this settlement it appears that these questions will remain unresolved for now.