PTO Seeking Comment on AI as Patent Owner, Inventor

The U.S. Patent and Trademark Office still has its hands full over the question of the Supreme Court’s views on life science patents, but the agency must now begin to grapple with an entirely new set of dilemmas. PTO recently announced it is seeking feedback on the status of artificial intelligence (AI) as an inventor and as a patent owner, two questions that may defy answer in the near term.

U.K. Researchers Argue for Change

Researchers at the University of Surrey in Surrey, U.K., announced at the beginning of August that they had filed for patent protection for two inventions autonomously created by an algorithm known as DABUS. The inventions are for relatively simple products – one is a beverage container with a design based on fractal geometry, while the other is a device for attracting the attention of would-be rescuers – but the team at Surrey has applied for patents for these items in the patent offices for the U.K., the U.S., and the European Union.

According to the statement, the U.K. Intellectual Property Office has already concluded that the inventions pass the preliminary test for inventiveness, although the agency has not yet taken up the question of whether non-human entities can be cited as an inventor. So far, this is as much as the researchers at Surrey are asking the agency to consider.

Ryan Abbott of the University of Surrey School of Law said in the statement, “there would be no question the AI was the only inventor if it was a natural person,” and argued that DABUS should be listed as an inventor. Abbott said developers of an algorithm should be designated the assignee or owner of any patents produced by that algorithm, arguing that such an outcome would reward innovation and “keep the patent system focused on promoting invention by encouraging the development of inventive AI, rather than on creating obstacles.”

The question is not an entirely novel one as indicated by a discussion of the question in a law journal last year, but the difficulty for patent offices is that the statutes under which these agencies work seem to leave them with little leeway. The statute in the U.S. states that a patent can be awarded to “whoever” invents something useful, while the law in the U.K. make reference to “persons” as inventors. Thus much of the debate is likely to center on a need for legislation.

PTO Broaches Ownership Question

The American patent office announced Aug. 27 that it seeks feedback on whether further guidance from the agency is needed to “promote the reliability and predictability” of patent applications filed on behalf of AI. PTO also poses the question of whether new forms of patent protection are needed, adding that some of the issues surrounding software inventions are relevant for the discussion of AI patents.

There is a need for clarity regarding terminology as the PTO noted that the term “AI inventions” is used to denote both inventions that utilize AI and those that are developed by AI. PTO also is inquiring into the circumstances in which humans might be designated co-inventor with the algorithm, as well as whether the laws and regulations are in need of revision to address the question of inventorship.

However, PTO went further, asking whether an algorithm can and should be allowed to be designated the owner of the invention. As intractable as such a problem may be, some of the more prosaic questions are likely to prove challenging as well, such as whether a change is needed in the written description requirement regarding the level of detail provided about the algorithm. PTO noted that this question could prove difficult to answer, given that some deep learning systems may have layers of functions that are obscured, and that some functions may evolve without human assistance or intervention. PTO is taking comment through Oct. 11, but it seems likely that the debate over AI inventorship and ownership has only just begun.

Controversies in Limbo: Paclitaxel and the Lab Rate Reset

Occupants of the med tech industry are all too aware that the issues that affect their livelihoods often take quite a while to play out, a fact of life that can permanently damage a manufacturer’s fortunes. Following are two such episodes, one involving the paclitaxel problem for devices used in the femoropopliteal arteries and the other a scrum arising from a congressionally mandated reset of the Medicare clinical lab fee schedule.

Uncertainty Persists After Latest FDA Update on Paclitaxel

The controversy over the use of paclitaxel in drug-eluting balloons and drug-eluting stents for the lower limbs seems no closer to a resolution after the FDA posted a new update on the matter. The emphasis now is on consent and labeling, the agency said, but the question of whether the presumed mortality signal related to these devices is little closer, if any, to resolution than it was at the beginning of the year.

The FDA’s Jan. 17, 2019, letter to physicians made reference to the medical journal article alleging that a higher mortality rate was seen in DCB and DES devices using paclitaxel as an antiproliferative, an association that began to emerge in some data sets at about two years. The agency held a two-day advisory hearing on the question during which several prominent cardiologists said the purported connection between paclitaxel and mortality compared to uncoated balloons and stents was poorly backed by the evidence. One clinician, Renu Virmani of the CVPath Institute in Gaithersburg, Md., said she had conducted more than 100 autopsies of patients who had been treated with paclitaxel-bearing devices in the coronary arteries and that none of those deaths were due to the antiproliferative. Virmani, whose remarks can be seen in the FDA transcript for the second day of the hearing, said those fatalities were instead caused by the patient’s underlying coronary artery disease.

The agency’s latest update, posted Aug. 7, is aimed at health care professionals, but the agency stated it is working with device makers and researchers on adding to the evidence base. At present, that evidence includes three randomized trials which enrolled slightly fewer than 1,100 patients, and the agency said the crude mortality rate at five years for these studies was nearly 20 percent for paclitaxel-coated devices and 12.7 percent with uncoated devices. This translates into a 57 percent increase in mortality risk, but the FDA also noted that a meta-analysis performed by Vascular InterVentional Advances Physicians on patient-level data arrived at a hazard ratio of 1.38. This analysis, the FDA said, was based on data provided by manufacturers.

The effect on device makers has been noticeable, with one device maker stating on an investor conference call that sales of their DCB device were cut by 50 percent, while another company lost out on a Medicare new technology add-on payment because of the association between paclitaxel and mortality. Despite the impact on utilization and thus sales, the FDA has acknowledged that there is no apparent connection between dose and mortality, and that there is as yet no demonstrated mechanism of causation.

The FDA announcement advised clinicians that the benefits of these devices may outweigh the risks for patients at “particularly high risk” of restenosis and repeat procedures to deal with the underlying disease. Sponsors of ongoing studies will likely have to amend their informed consent documents, which along with the media coverage could hamper trial enrollment and completion.

Appeals Court Sides with ACLA in Lab Rate Lawsuit

The Protecting Access to Medicare Act of 2014 called on the Centers for Medicare & Medicaid Services to reset the rates paid for lab tests by surveying labs for the rates paid by private payers, but the agency’s efforts to comply with that mandate were mired in controversy nearly from the outset. The American Clinical Laboratory Association filed a lawsuit against the agency in the U.S. District Court for the District of Columbia, but lost in that suit, although an appeals court recently overturned that dismissal.

The D.C. District Court dismissed the lawsuit in September 2018 due to a purported lack of subject matter jurisdiction, but the U.S. Court of Appeals for the District of Columbia reversed that finding in part. The appeals court said that while the rates provided by Medicare under the clinical lab fee schedule are not subject to judicial review, PAMA did not clearly provide that insulation from legal challenge to the methods used by CMS to collect the private payer data.

There is legislation in the House of Representatives that would suspend the rate reset effort another year, and would require that the National Academy of Medicine advise CMS on the question of sampling. The Laboratory Access for Beneficiaries Act of 2019 (H.R. 3584) was introduced to the House Ways and Means and Energy and Commerce Committees in June, but has the support of only 13 sponsors as of Aug. 11. There does not appear to be a companion bill in the Senate, either, according to the bill’s listing at Congress.gov. ACLA said in a July 30 statement that the D.C. District Court should “act quickly” to respond to the appeals court decision, but also that Congress should “immediately halt the data reporting process.”

Custom Devices, Combo Product Surveillance in the News

Manufacturing a medical device is one thing, but doing so without crossing swords with the multiple regulatory jurisdictions now in operation is no mean feat, either. Custom devices are suddenly of interest for two regulatory entities so far in 2019, but the FDA’s final guidance for combination product postmarket safety reporting is another consideration on which device makers dare not sleep.

Custom Devices Topical for IMDRF, Anvisa

There are certainly more complicated regulatory requirements than those pertaining to custom medical devices, but Brazil’s regulatory agency, the National Sanitary Surveillance Agency (Anvisa) and the International Medical Device Regulators Forum both posted draft guidances for custom devices recently, making compliance rather complicated for companies doing business in multiple markets. Anvisa and the IMDRF are only the latest entries in this space because the American FDA and its counterparts in the U.K., Australia and Canada have each already put their own stakes in this regulatory ground.

Anvisa announced the draft guidance for custom devices in September 2018, which according to a consultant’s analysis will require registration for custom-made, adaptable, and patient-matched devices. Makers of class III and IV custom devices will have to undergo inspections, but this requirement will not be extended to class I and II devices. There has been a backlog of Anvisa inspections of all types for several years, but the agency said the backlog will soon be a thing of the past.

The IMDRF draft guidelines, with a consultation period that closed July 24, deal with regulatory pathways for custom devices and offer definitions for custom devices and related terms. The document also provides language for additive manufacturing and devices customized at the point of care, but the IMDRF said a number of regulatory bodies “are noticing questionable use of custom-made device exemptions,” including a growing volume of custom devices that fall into higher risk classifications.

The IMDRF’s discussion of additive manufacturing is brief, but it promotes the concept of a medical device production system (MDPS) when that equipment is used outside of a traditional manufacturing site. The draft said that regulation of such a system might be determined by the type of device that system is intended to produce, although the manufacturer of the system would still be liable for validating the use of that MDPS for a given device. There is seemingly the prospect of split and/or overlapping regulatory liability as well, however, as suggested by a passage in which the IMDRF said that responsibility for the medical device’s safety and performance is “with the manufacturer of the MDPS, along with the other responsibilities placed on a manufacturer in the jurisdiction where the MDPS is used.”

Inspections a Concern for Combo Postmarket Surveillance

The FDA needed three years to convert a 2016 rule governing postmarket surveillance of combination products into a working final guidance, but there was some language in the 2018 draft that carried over to the final guidance despite industry opposition. Another issue for some, however, was whether the Office of Combination Products at the FDA would ensure that FDA field investigators are on the same page where the guidance’s key principals are concerned.

The Combination Products Coalition gave voice to a number of concerns, but the group’s regulatory attorney, Bradley Merrill Thompson of Epstein, Becker & Green, also requested that the FDA clarify a few questions regarding the reporting timelines for combination products. Thompson suggested at one point that the FDA provide additional clarity as to when certain of the draft’s provisions are directed toward cross-labeled combination products. Thompson said the FDA is should take steps to provide field investigators understand the implications of the final guidance’s most important provisions.

In contrast, the Advanced Medical Technology Association made note of reservations regarding a sponsor’s liability for reporting when the device component of a combination product has malfunctioned. AdvaMed’s Steve Silverman suggested that the draft had crossed the unduly burdensome line by requiring the sponsor of a drug- or biologic-led combination device to evaluate the possibility that a malfunctioning device component would malfunction when used with other drugs or biologics.

Silverman said one problem with this approach is that the use of a given device with different drug or biotech products means there are differences in storage conditions, just one example of the complications arising from responding to a malfunction. Silverman also said that the requirement as spelled out in the draft removes the device maker – which is fairly certain to be in a better position to handle such a task – from the task of determining the risk of device failure when paired with other therapeutic agents. Despite the feedback from Silverman, a former director of the Office of Compliance at the FDA’s device center, this provision appears in the final guidance as well.

DC District Court Sides With Pharma Over WAC Rule

The U.S. federal government’s pressure on drug makers has ratcheted up considerably over the past few years and included a rule that would have forced pharmaceutical manufacturers to list the wholesale acquisition cost of their products in any direct-to-consumer ads. That effort on the part of the Trump administration came up short in a lawsuit heard recently in the U.S. District Court for the District of Columbia in a decision that went against the administration before the question of compelled commercial speech was even considered.

The Department of Health and Human Services and the Centers for Medicare & Medicaid Services said in the pricing disclosure final rule that the intent of the rule was to give Medicare beneficiaries “relevant information” about the cost of drugs so as to enable beneficiaries to minimize their out-of-pocket spending. The scope of the final rule included prescription drugs and biotech products as covered by both the Medicare and Medicaid programs, although the rule also acknowledged that manufacturers were at liberty to advise viewers that their final costs might differ from the wholesale acquisition cost (WAC).

Conversely, the litigants, which included the Association of National Advertisers and three pharmaceutical companies, argued that listing WACs in ads would not only confuse the drug price question for beneficiaries of both programs, but indeed that HHS had anticipated that the rule would actually mislead beneficiaries.

The court said in its decision that the plaintiffs put forth two arguments, the first of which was that the federal government had exceeded its authority in that the statute neither expressly nor implicitly granted the federal government the power to mandate such disclosures under the Social Security Act. Judge Amit Mehta said that given that the federal government had failed to pass this first hurdle, there was no need to review the question of the First Amendment challenge posed by the plaintiffs, which they had said revolved around the HHS’s failure to demonstrate that it could not achieve its ultimate objective by other means. The rule was set to go into force July 9, but the decision was published July 8, thus foreclosing any chance to enforce the rule.

Mehta indicated that attorneys for the federal government declined to cite Chevron U.S.A., Inc. v. Natural Defenses Resource Council, Inc., a defense that revolves around the proposition that when Congress speaks lucidly to the executive branch, some deference is owed to the executive branch’s efforts to act on that legislative imperative. Instead, attorneys for the federal government are said to have cited Mourning v. Family Publications Services, Inc., which provides a rather broader mechanism that is said to support the validity of regulatory actions so long as those actions can be construed to be “reasonably related” to the directing portion of the statute. Mehta would have none of it, however, indicating that Mourning is at best secondary to Chevron and ultimately insufficient to carry the government’s argument.

One of the problems with the executive branch’s argument in Mehta’s view was that the rule would have regulated the conduct of parties that are not direct participants in either the Medicare or the Medicaid programs. He stated further that the government’s argument that the statute allows the government to act in effort to “minimize unreasonable expenditures” falls flat because the statute does not empower the federal government to regulate the health care market itself or any actors therein as a means of reducing costs.

The predicament faced by CMS and HHS here is somewhat reminiscent of the fate of the least costly alternative policy under the twin cases of Hays v. Leavitt and Hays v. Sebelius, neither of which went the way the federal government had hoped. In that conflict, the Chevron defense was raised, albeit to little useful effect. Precisely where this latest outcome leaves the administration in its effort to tamp down on drug prices is difficult to forecast, but it might be noted that the FDA was for a number of years presumed to be the federal government agency in the best position to act on drug prices. Indeed, members of FDA advisory panels have proposed that costs should factor into their votes in support of or against an applicant product, but the FDA has never explicitly demonstrated any appetite for such authority, with or without the support of federal advisory committees.

Innovation on Tap at FDA, HHS

Few major U.S. federal government initiatives move as quickly as hoped, but those initiatives are nonetheless crucial for stakeholders in the life sciences intent on bringing innovative products to the clinical setting. The Department of Health and Human Services recently unveiled a program that could bring new drugs and devices to the market more rapidly than has been the case up to now, while the FDA provided an update on its digital health plan that reinforced the notion that the plan will indeed take time to put into place, even as the agency makes changes with the intent of streamlining the plan.

HHS Eyes Faster Medical Product Access

The Department of Health and Human Services said in a recent announcement that it will hold a two-day meeting June 20-21 to obtain stakeholder feedback on how to decrease the time needed for drugs and devices to make their way into clinical use. This is one of the programmatic areas under the ReImagine HHS initiative, and among the topics to be discussed is whether the department should play a role in connecting medical product developers with private payers and Medicaid managed care plans.

HHS said this portion of the proceedings is in response to complaints from both developers and payers that the process of communication between the two sides is inefficient. The FDA’s device center already has an office to facilitate communications with private payers during the device development process, so this move on the part of HHS would presumably scale up the CDRH version and expand it to include pharmaceuticals and biotech therapeutics. Another subject for discussion is “knowledge sharing,” which again is intended to bolster the rate of transmission of medical product innovation to the marketplace, in this case by giving the public more access to both confidential and already publicly available HHS information.

Device makers have complained over the years that public health programs have stifled access to therapies and diagnostics that could represent a meaningful improvement over the current state of the art, and among the initiatives already underway to fix those problems are some changes to the Medicare local coverage determination process. The Centers for Medicare & Medicaid Services also proposed in the draft inpatient prospective payment system for fiscal 2020 to provide coverage to any products that are accepted into the FDA breakthrough devices program. The breakthrough devices coverage concept seen in the 2020 inpatient draft reflects an industry proposal designed to aid small device makers in developing the evidence needed to meet the reasonable and necessary standard for Medicare coverage. The combination of these developments suggests that HHS Secretary Alex Azar has determined that healthcare innovation is hindered by the size of government and the complexity of its regulatory instruments, and that patients are suffering as a consequence.

Precert Test Plan May

The FDA is inching along with its precertification program for software as a medical device, announcing recently that it will accept applications for the precert test plan that will unfold over the balance of the current year and possibly into next year. However, the agency said it will accept applications for the precert program that run dual tracks with either the 510(k) or the de novo program, the former of which was not an explicit part of the precert concept until recently.

The FDA had previously appended the de novo petition process to the precert program in a move some argued was prompted by a desire to avoid accusations that the precert concept was entirely extralegal. The addition of the 510(k) pathway seems to offer no additional benefit in that regard, however, although it would bring on some test cases that reflect the majority of class II device applications, those that are based on a predicate rather than those that represent a technological novelty.

The announcement reiterates that companies involved in the testing phase will not actually obtain precertification merely by virtue of participation in the test phase, although applicants need not subject themselves to the full gamut of precertification evaluation modules. However, the FDA said that participants in the test phase may be limited to companies that have a track record in developing software products, seemingly leaving software start-ups out in the cold. Also of note is that this test plan may run beyond 2019, a sign that regulatory innovation is no less a feat than innovation in medical technology.

Supreme Court, DOJ Revisit False Claims Act

The False Claims Act might be the most widely known tool in the Department of Justice’s enforcement toolkit, and the FCA was in the news twice in the month of May. As the saying goes, there is some good news and some bad news, but these are both developments to which those in the life sciences should pay close attention.

Statute of Limitations Expanded

Starting with the bad news, the U.S. Supreme Court handed down a 9-0 decision in Cochise Consultancy Inc. v. United States, ex rel. Hunt, the net effect of which was to give relators an additional three years to file a qui tam action before the statute of limitations closes the door. Cochise revolved around a contract with the U.S. Department of Defense, and the interpretation of the statute of limitations had varied among the U.S. circuit courts, thus the Supreme Court’s interest in the case.

The statute was generally interpreted as giving relators six years to file a whistleblower lawsuit, or within three years of the time that a federal government official knew or should have known about the alleged wrongdoing. That additional three-year window for relators was widely assumed to be predicated on the federal government’s intervention in the case, however. A district court dismissed the relator’s case, but the Eleventh Circuit reversed the lower court’s findings. The relator, Billy Joe Hunt, filed his action more than six years after the alleged wrongdoing, but within three years of his disclosure of the events in question to the FBI, although the U.S. federal government never intervened.

The U.S. Solicitor General supported the relator with an amicus brief stating that the text of the statute makes no distinction between qui tam suits in which the federal government does or does not intervene, a view affirmed by Justice Clarence Thomas, who penned the May 13 opinion. There are some potentially far-reaching implications for the life sciences, given that some FCA actions involve recurring claims filed with Medicare. A question Justice Thomas did not answer hinges on the statute’s language pointing to the scope of the FCA, which cites federal officials who are “charged with responsibility to act in the circumstances.” This would seem to be a pertinent question for Cochise, given that the relator in this case, Billy Joe Hunt, had discussed his findings with the FBI, not the Department of Defense, which presumably would have had oversight of defense contracts. These and other questions have been left for another day.

New DOJ policy Overwrites Yates Memo

Earlier in the month of May, DOJ announced a new policy regarding credit for cooperation for corporate defendants in FCA cases, a question that has been very topical for the department at least since 2003, the year of the Thompson memo. The tone of this latest announcement is much less stringent than might have been issued in connection with the now-famed Yates memo, but one of the more interesting passages suggests the department might be willing to eliminate a relator lawsuit in order to clear out an FCA case.

The new policy, credited to assistant attorney general Jody Hunt, provides corporate defendants with partial credit for any of three actions, including the implementation of remedial measures designed to prevent illicit conduct in the future. Hunt also said defendants can earn cooperation credit by preserving relevant documents beyond that which would be required by conventional business practices or legal requirements, which suggests companies in the life sciences may already be revisiting their record retention policies.

Beyond all this, the DOJ statement indicates that cooperation credit will “most frequently” be expressed as reduction in civil penalties and damages multipliers. However, the most interesting part of this development is seen only in the amended version of the Justice Manual, which now includes the statement that cooperation credit might avail the defendant of the DOJ’s assistance “in resolving qui tam litigation with a relator or relators.”

As is widely known, the Granston memo suggested the DOJ would be more likely to dismiss relator litigation when that litigation would interfere with other federal agencies’ efforts to fulfill their policies, but this change to the Justice Manual seems to take the Granston memo a step further in an effort to reward certain behaviors. How frequently the department would see fit to dismiss a qui tam in order to create inducements for other defendants to be more forthcoming is impossible to predict, but the frequency with which the FCA is invoked suggests observers might not have to wait very long at all to see this policy in action.

FDA Revisits Combination Product Controversies

The FDA’s efforts to regulate combination products have run across some legal challenges, but more often the agency finds it difficult to implement regulations for combo products because of the complexities inherent to such products. In a recent notification, the FDA said it would continue to exercise enforcement discretion for some postmarket safety reporting requirements, but the agency ran afoul of the primary mode of action question yet again in a new draft guidance that takes up the product designation problem.

Another Day, Another Reporting Delay

The agency announced in April that it would continue to exercise enforcement discretion for a number of the postmarket reporting requirements for combo products, but the policy has been lingering for at least a year. The question arose in March 2018, when the agency posted a draft guidance that attempted to provide some direction for the December 2016 final rule for the same subject. This subject ranges back at least as far as 2009, however, the year of a proposed rule for combination product postmarket reporting, demonstrating that this topic has perplexed the agency for a decade.

Much of the difficulty revolves of course around the fact that there is no single combination product type, and there are differences in how each type makes itself felt upon the regulatory burden of the makers of each constituent part. The 2018 draft’s treatment of postmarket reporting for an approved component of an investigational combination product varies from the use of that component in an already-approved combination as well, and the net effect is to present stakeholders with three very different scenarios within a single document. Thus, some have called for a separate guidance for cross-labeled combination products at the very least, a proposal the agency may be unwilling to adopt.

One of the difficulties for the FDA is that stakeholders are not entirely united as to how the agency should approach these questions, but the deadlines for adverse event reporting requirements are already different for drugs and devices. These differences have fed calls for a pan-agency approach to the question of postmarket reporting requirements, a proposition that may strike some as only slightly less ambitious than a pan-agency approach to good manufacturing practices. Either way, the latest document is an immediately-in-effect policy statement that provides enforcement discretion through July 31, 2020, for combination products that fall under Medical Device Reporting requirements, and through Jan. 31, 2021 for products that employ the Vaccine Adverse Event Reporting System.

No Cure for the Cures Act

The FDA took another stab at the combination product designation question in a February draft guidance dealing with the principles of combo product premarket pathways, but as is often the case, the agency’s effort failed to win any converts among drug and device makers, due in large part to the question of a combination product’s primary mode of action (PMOA). That particular discussion has an interesting legal history, mostly involving France’s Prevor, which fought the agency to at least a draw in two visits to the U.S. District Court for the District of Columbia.

One of the notable features of the February draft guidance is that it stipulates that applicants provide enough data in an application to allow the centers of jurisdiction to review each component as though it were a separate application. The draft seemed largely mum on the cross-labeled combination product category, however, so much so that at least one observer questioned whether the FDA had intended to exclude cross-labeled products from the scope of the draft.

More than one trade group questioned the draft’s provisions that would seem to give the FDA wide discretion in assigning a combination product to a center that would ordinarily be inappropriate for the product’s PMOA. This question has roiled relations between the agency and industry at least as far back as 2004, the year the FDA opened a docket to deal with the PMOA question. A decade and a half of further consideration does not seem to have answered some of the underlying issues despite that the 21st Century Cures Act called on the FDA to resolve these problems.

The Cures Act directed the agency to assign primary jurisdiction for a combination product to the center that would be most appropriate for the component deemed to present the PMOA. Critics of the February 2019 draft guidance seem to have determined that the agency is resisting this legislative directive with all the regulatory muscle it can muster. The view of stakeholders may be that this draft guidance is unworkable in its present form, leaving industry with the prospect of another of those lingering draft guidances that is ultimately neither finalized nor withdrawn.