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Focus on Regulation

Medical Device Contractor Settles FCA Allegations Based on TAA Violations

On Thursday, August 8, 2019, the Department of Justice (“DoJ”) announced that Danish medical device company Ambu, Inc. (“Ambu”) will pay $3.3 million to settle False Claims Act (“FCA”) allegations that it violated the Trade Agreements Act (“TAA”) (19 U.S.C. § 2518) by selling products to the Defense Logistics Agency (“DLA”) and the Department of Veterans Affairs (“VA”) that were made in China and Malaysia.  The TAA restricts the Federal government’s purchase of “end products” to only those (1) manufactured in the United States or wholly manufactured in a “designated country,” or (2) ‘‘substantially transformed’’ in the United States or a designated country.  China and Malaysia are not designated countries.

According to the DoJ press release, Ambu executives certified that its products came from TAA compliant countries despite allegedly knowing that most of the products were manufactured in noncompliant locations.  Between December 2011 and March 2015, more than 80% of the product sold by Ambu to the Federal government came from noncompliant countries.

FCA settlements are not new to the healthcare industry.  Nearly 90% of recoveries during 2017 and 2018 under the FCA came from the healthcare industry, according to an analysis by Bloomberg Law.  The TAA focus of the allegations, however, is notable.

In recent years, there have been policy changes that have arguably increased the ability of the government to purchase products that do not meet the TAA standard.  In 2016, the VA adopted a blanket non-availability determination for its Federal Supply Schedule contract that applies to innovator pharmaceutical products that are considered “covered drugs” under the Veterans Health Care Act of 1992.  In addition, a 2018 decision by the Court of Federal Claims broadened the definition of “U.S.-made end product,” under the Federal Acquisition Regulation TAA clause to include products subject to partial manufacture in the U.S.  that do not otherwise meet the TAA “substantial transformation” test.  See Acetris Health, LLC v. United States, No. 18-433C (Fed. Cl. July 10, 2018).  However, this interpretation is pending appeal and may not survive.

Despite these changes, the Ambu settlement demonstrates that the government is still focused on and enforcing TAA compliance.  In addition, private whistleblowers can initiate FCA complaints.  (It is unclear whether or not a whistleblower was involved in the Ambu case.)  To avoid FCA liability, it is important for companies to understand the evolving landscape and ensure that all certifications under Federal contracts are current and accurate.

Should you have any questions about this alert or otherwise, please do not hesitate to contact our Federal contracts team.

European Commission draft implementing regulation on the reprocessing of single-use medical devices: public consultation is open

On 23 July 2019, the European Commission published the draft Commission Implementing Regulation (hereafter “Draft”) regarding Common Specifications for the reprocessing of single-use medical devices.

The Draft is to implement the requirements of Article 17(3) of the Medical Devices Regulation 2017/943 (hereafter “MDR”). Article 17 MDR provides that under certain conditions, health institutions can reprocess single-use medical devices.

One of the requirements is that the European Commission adopts “Common Specifications” (hereafter “CS”). The Draft provides for the CS.

The European Commission has published the Draft and intends to collect input from stakeholders as part of a public consultation running until 20 August 2019.

1.            Background information

Article 2 (39) MDR provides that ‘health institution’ is to be understood as an organisation with the care or treatment of patients or the promotion of public health as its primary purpose . This notion does not cover organisations promoting health interest or healthy lifestyles, such as gyms or wellness and fitness centres. Article 17 (1) MDR provides that entities can only reprocess single-use medical devices if permitted by national EU Member State law.

Article 17 (2) MDR provides that the natural or legal person who reprocesses a single use medical device is considered to be the legal manufacturer of the reprocessed medical devices. The reprocessor of the single use medical device has to assume the responsibility and obligations of a legal manufacturer of the medical device.

Article 17 (3) MDR provides for an exemption to the abovementioned rule. EU Member States can exempt reprocessors of single-use medical devices that are reprocessed within a health institution, from some of the obligations of a legal manufacturer of a medical device. It is up to the EU Member State to adopt rules concerning the exemptions to the obligations of a legal manufacturer.

Article 17 (3) provides that EU Member States can provide for the exemption if the EU Member States ensure:

  • that there is an equivalence of safety and performance between the original and the reprocessed device; and
  • that the reprocessing is performed in accordance with CS.“A set of technical and/or clinical requirements, other than a standard, that provides a means of complying with the legal obligations applicable to a device, process or system.”The Draft will provide for the CS that must be complied with by Member States when they choose to apply article 17(3) MDR.

Article 2 (71) MDR provides that common specifications (CS) are:

“A set of technical and/or clinical requirements, other than a standard, that provides a means of complying with the legal obligations applicable to a device, process or system.”

These CS include requirements concerning risk management, validation of procedures for the entire (re)process, a quality management system, reporting of incidents and traceability.

The Draft will provide for the CS that must be complied with by Member States when they choose to apply article 17(3) MDR.

2.            The draft commission implementing Regulation

The Draft provides CS for the reprocessing within a health institution. The Draft distinguishes between two types of reprocessors of single-use medical devices within a health institution:

  • health institutions reprocessing a single-use medical device themselves; and
  • external entities reprocessing the single-use medical device at the request of the health institution.

This difference made by the Regulation is then structured around four main requirements of the CS: (1) risk management, (2) reprocessing procedures, (3) quality management system and (4) traceability.

2.1         Risk management

In order to ensure the quality of the reprocessing activities, the draft regulation proposes minimum requirements for staff, premises and equipment. Characteristics of single-use devices can be taken into account to determine the minimum requirements.

Article 3 of the Draft provides that the health institution and the external reprocessor have to conclude a written agreement. Article 4 of the Draft lays down minimum requirements regarding the personnel involved in the reprocessing of the single-use medical device, the premises where the reprocessing takes place and the equipment used in the process. Article 5 of the Draft provides for a preliminary assessment of the suitability and article 6 of the Draft for necessity to keep the original intended purpose of the single-use device.

Regarding the reprocessing process itself, article 7 of the Draft provides that health institutions shall determine this process using information and documentation gathered in accordance with Article 5. Article 8 provides for a limitation of the maximum number of reprocessing cycles. Finally, article 9 lists the technical documentation required regarding the reprocessing activities.

2.2         Reprocessing procedures

Articles 10 to 20 of the Draft focus on reprocessing procedures as they are at the heart of the reprocessing of single-use devices. These articles cover the entire process of the procedures from the validation of the procedures to the supply of single-use medical devices. Visual, physical and hygienic checks of single-use devices are envisaged in the prior phase of validation of procedures. Steps of the process include inter alia the treatment at the point of use prior to reprocessing, cleaning, disinfection, packaging and labelling.

2.3         Quality management system

The health institutions and external reprocessors are responsible for the general safety and performance requirements set out in the MDR. To comply with the General Safety and Performance Requirements of the MDR, articles 21 to 23 of the Draft provide that the health institutions and external reprocessors need to have a quality management system (QMS) including procedures on the reporting of adverse events.

2.4         Traceability

Single-use medical devices may be reprocessed several times. The draft Regulation provides that health institutions and external reprocessors must operate a traceability system to keep track of reprocessing cycles of the single-use devices.

Importantly, reprocessors shall store all records regarding all steps of the reprocessing process, for a period of at least five years after the last reprocessing of a single-use device.

3.            The public consultation

The draft implementing Regulation on reprocessing of single-use medical devices is open for feedback until the 20 August 2019 (midnight Brussels time).

Should you have any question please do not hesitate to contact our team.

FDA and EMA Address Quality and Manufacturing Challenges for Breakthrough Therapies Undergoing Expedited Approval

On July 31, 2019, the U.S. Food and Drug Administration (FDA) and the European Medicines Agency (EMA) published a joint report on their efforts to support the development of and expedite access to breakthrough therapies that address unmet medical needs.  In addition to outlining the tools currently available to manufacturers seeking expedited approval of breakthrough therapies, the report recognizes the need for further regulatory innovation to advance emerging scientific knowledge and support timely access to new medicines without compromising established quality and manufacturing standards.

To obtain marketing approval for breakthrough therapies, sponsors face challenges to obtain clinical, non-clinical, and manufacturing information that meets the standards for regulatory approval on compressed timelines.  FDA/EMA recognize this, and on November 26, 2018 held a workshop on FDA’s Breakthrough Therapy Designation (BTD) and EMA’s Priority Medicines (PRIME) programs.  The aim of the workshop was to facilitate discussion with industry stakeholders on challenges associated with quality, manufacturing, and data requirements during early development, and possible scientific and regulatory approaches to address them.

With regard to challenges related to quality and manufacturing data, the report provides FDA/EMA’s perspectives and outlines follow-up initiatives being considered for process validation and control strategy, current good manufacturing practices (cGMP) compliance, comparability and stability data, and regulatory tools to support early access.  The key takeaways relating to quality and manufacturing data are provided below:

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European commission publishes Additional Guidance regarding the Medical Devices Vigilance System

The three medical devices Directives, the Directive for Active Implantable Medical Devices (AIMD), the Directive for Medical Devices (MDD) and the In Vitro Diagnostic Medical Devices Directive (IVDD), provide for the requirement for a European Medical Devices Vigilance System. The Medical Devices Vigilance System is the European system for the notification and evaluation of incidents and Field Safety Corrective Actions (FSCA) involving medical devices.

The Medical Devices Vigilance System aims at reducing the likelihood of occurrence and reoccurrence of an incident elsewhere. This is done by the implementation of FSCA across the EU Member States where the device is in use, in contrast to actions taken on an individual EU Member State basis.

The European Commission has published new Additional Guidance  (the ‘Guidance’) complementing the 2013 MEDDEV 2.12-1 rev 8 guidelines on the Medical Devices Vigilance System. The Guidance clarifies certain sections of the initial guidelines and introduces new notions.

The Additional Guidance provides for:

    • A new Manufacturer’s Incident Report (MIR) form and a new template for FSN. The MIR will become mandatory in January 2020;
    • An updated definition of Field Safety Corrective Action (FSCA). The definition now provides that a safety related device inspection by the user is also to be considered an FSCA. The definition now clarifies the defining criteria to determine whether an action taken is an FSCA. Those criteria are both the nature of the action taken and the reason giving rise to the need for the action.
    • An updated definition of Field Safety Notice (FSN). The definition now clarifies the target audience of an FSN. FSNs are primarily aimed at the customers and/or users of the medical devices;
    • Additional guidance for the implementation of FSCA by legal manufacturers;
    • Guidance for National Competent Authorities to determine when there is a need for a single coordinating National Competent Authority and a Vigilance Task Force;
    • Guidance on when national competent authorities need to disseminate information through the National Competent Authority Report (NCAR) to other Competent Authorities and the European Commission.

Should you have any questions concerning this new Guidance please do not hesitate to contact our team.

UN Working Group publishes revised draft of business and human rights treaty: commentary on scope, prevention and legal liability

On 16 July, a UN working group published a revised draft of its business and human rights treaty (following the “Zero” Draft published in July last year). Our post looks at some of the key developments, with a particular focus on its scope and the provisions on prevention and legal liability. We conclude by asking what happens next and providing some practical guidance to business. Continue Reading

Will FDA be forced to implement a drug importation program?

Over a year ago, HHS Secretary Alex Azar requested that FDA establish a working group to explore how drug importation “could help address price hikes and supply disruptions.” The FDA working group was not assigned the task of developing a broad drug importation program. Instead, the working group’s remit was specifically limited to considering potential importation of drugs that are (1) off-patent; (2) have no exclusivity remaining; (3) face no generic competition; and (4) can be imported with adequate assurances of safety and effectiveness. Scott Gottlieb’s statement further narrowed the scope of the working group’s task to: “Any policy that involves the importation of drugs would be temporary until adequate competition enters these categories.”

Although there has been little visible sign of the working group’s activity, now the HHS Secretary is facing pressure to approve State drug importation plans that will likely be much broader than the original scope of drug importation that the working group had been asked to consider. These State drug importation plans are likely to be contrary to longstanding HHS and FDA positions opposing such programs based on safety concerns and inadequate cost savings. Moreover, HHS certification of the State plans would need to overcome certain legal barriers that exist under current Federal law. Continue Reading

Ill-Suited: Private Rights of Action and Privacy Claims

“For years, the plaintiffs’ bar has conjured multibillion-dollar class action lawsuits out of largely intangible privacy harms. This wave of litigation is increasingly driven by federal and state statutes that include private rights of action and allow for excessive statutory damages. Given the willingness of some courts to let cases proceed despite a lack of allegations or evidence of concrete harm, this litigation trend shows no sign of abating.”

The U.S. Chamber of Commerce Institute for Legal Reform has published “Ill-Suited: Private Rights of Action and Privacy Claims,” a white paper authored by Hogan Lovells’ Mark W. Brennan, Alicia Paller, Adam Cooke, and Joseph Cavanaugh explaining why private litigation is a poor enforcement tool for privacy laws.  As detailed in the paper, when it comes to privacy interests, “harms” are largely inchoate and intangible, and the wrongdoers are often unknown or unidentifiable. Even where class members may have suffered a concrete injury, the data indicates that they are unlikely to receive material compensatory or injunctive relief through private litigation. Meanwhile, plaintiffs’ counsel often walks away with millions of dollars, court dockets are unduly cluttered, and companies are forced to expend resources on baseless litigation.

Whereas a stream of harmful consequences flow from private rights of action for privacy laws, agency enforcement provides the right balance between protection, penalties, deterrence, and progress.

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Practical Pointers: Social Media Guidelines for Public Officials (and the People who Advise Them)

Social media has transformed the ways legislators and their staff interact with constituents. Through social media platforms, our elected officials share insights into the legislative process, communicate with constituents, and even provide life-saving updates during times of crisis. Politicians can also use social media to grow their following and influence public discourse—as when a Texas state senator leveraged social media to turn her filibuster into a national social media event.

Social media use by elected officials isn’t without legal, political, and reputational hazards, however. In part to mitigate against the risks posed by social media gaffes, federal agencies, associations of elected officials, and social media companies themselves have all published model social media policies or addressed specific challenges politicians can face while spreading their message online. At the same time, few resources provide a comprehensive catalogue of the myriad risks elected officials and their staffs may encounter on social media platforms.

Below are best practices to help public officials reap the benefits of social media while guarding against embarrassment or liability for improper online activity. While far from a definitive guide to how legislators and their staff should behave online, these practices can help elected officials and the people who advise them to navigate the diverse legal and ethical quandaries of social media.

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U.S. Department of Education Announces Changes to College Scorecard, Plans for Future Expansion

In late May the U.S. Department of Education (the “Department”) announced several changes to its College Scorecard, a tool that is intended to help students and their families make informed decisions about post-secondary enrollment.  Then, on July – in a final rule in which the Department announced that it would rescind its “gainful employment” regulations effective July 1, 2020 – the Department explained that it plans to expand the program-level and institution-level data available from the College Scorecard in the future.  The purpose of the expansion is to help students “make enrollment choices informed by debt and earnings data, thus enabling a market-based accountability system to function” and to “help taxpayers understand where their investments have generated the highest and lowest returns.”

In addition to updating the College Scorecard with the most recent data on certain existing metrics, as of May 2019 the Department added information about additional types of institutions and new categories of data: Continue Reading

D.C. Circuit Rejects “Academic Deference” Argument In Tenure Denial Discrimination Cases

On June 14, 2019, the United States Court of Appeals for the District of Columbia Circuit rejected the argument that a university should be entitled to special academic deference in employment discrimination claims concerning denial of tenure brought under Title VII of the Civil Rights Act of 1964 (“Title VII”). Mawakana v. Bd. Of Trustees of the Univ. of the Dist. Of Columbia, No. 18-7059 (D.C. Cir. June 14, 2019). Continue Reading