April Showers: SCOTUS, FDA Spring into Action

Temperatures in our nation’s capital are returning to some vague sense of normalcy, which may or may not have anything to do with the normal functions of the Supreme Court and the FDA. Either way, both these entities have delivered some important news in the month of April, although it will be May or later before the related effects will make themselves felt. In the spirit of the vernal renewal of life, we offer the following.

Inter Partes Review Survives Challenge at SCOTUS

One of the most significant developments in the area of intellectual property in recent weeks was the Supreme Court decision in the case of Oil States Energy Services LLC v. Greene’s Energy Group LLC, which challenged the constitutionality of the inter partes review process. Had the Court decided in favor of Oil States, the IPR process would have been declared unconstitutional, thus bringing an end to one of the more controversial aspects of the America Invents Act (AIA).

The 7-2 opinion penned by Justice Clarence Thomas said that trials and other procedures addressing patent validity need not take place in an Article III court, but also that an IPR hearing does not violate the Seventh Amendment right to a jury trial. Thomas pointed to the ex parte reexamination of patents as an example of administrative proceedings that do not take place in a courtroom, a procedure that has been part of routine practice at the Patent and Trademark Office since 1980. He also cited the existence of the inter partes reexamination, which was replaced by the IPR process via the AIA.

Justice Neil Gorsuch wrote the dissenting opinion with the concurrence of Chief Justice John Roberts, stating that no courts other than federal courts were empowered to invalidate a patent until 1980. Gorsuch said the outcome does not “represent a rout, but it at least signals a retreat from Article III’s guarantees,” going on to argue that enforcement of Article III is principally about “ensuring that people today and tomorrow enjoy no fewer rights against governmental intrusion than those who came before.”

Gorsuch wrote the majority opinion in another IP case delivered on April 24, SAS v. Iancu, which held that the Patent Trial and Appeal Board must make a determination on each of the claims challenged by a petitioner in an IPR. In contrast to Oil States, this case squeaked by in a 5-4 vote, but the newest Supreme Court justice is definitely making his mark on the Court’s handling of patent law despite a lack of certainty on his views when he was appointed last year.

Gilead Up, Nargol Down at SCOTUS

We previously reported that two cases pertaining to the False Claims Act were the subjects of petitions for cert at the Supreme Court, and not unexpectedly, the Court passed on a chance to hear Medical Device Business Services, Inc. v. United States ex rel. Nargol. The Court said Justice Alito had taken no part in deciding whether to hear the case, although no explanation for that was given. The Court’s interest in Gilead v. Campie seems to have quickened, however, given that the justices have asked the Solicitor General to file a brief.

It may be too soon to speculate as to how the Trump administration would advise the Court regarding Gilead, but the 8-0 outcome in the Supreme Court’s review of Escobar would suggest that Solicitor General Noel Francisco has a limited amount of wiggle room for suggesting that the standard for materiality in False Claims Act cases ought to be relaxed. Conversely, however, federal attorneys are loathe to give up any leverage where FCA cases are concerned, and it might be pertinent to recall that the Thompson memo arose from an administration that might have been presumed to be less unfriendly to business than the administrations that preceded and followed.

In the end, the Solicitor General has the option to opine on nothing more than whether the Court should hear the case. The reader will hopefully excuse the cliché that this case “bears watching” as the Court will at the very least provide some additional clarity regarding the current standard for materiality.

FDA Issues First Inspection Report under FDARA

The legislation for the most recent series of FDA user fee agreements stipulated that the agency publish data on inspections for drugs and devices needed to approve that drug or device, and while the data are interesting, they are perhaps most useful as a baseline for evaluating the agency’s performance in this area over the next few years.

The report, which fulfills Section 902 of the Food and Drug Administration Reauthorization Act of 2017 (FDARA), covers calendar year 2017 only, not an unexpected limitation given the novelty of the requirement. The report states that for new drug and abbreviated new drug applications, the median elapsed time between the agency’s internal request for an inspection and the date of the inspection was 102 calendar days. Drug makers may be accustomed to such delays, but might not be happy with them all the same.

The median elapsed time for issuance of forms 483 for inspections with compliance issues was seven calendar days from the start of the inspection, and the agency pointed out that 483s are typically issued upon the close of the inspection. Perhaps more problematic is that 191 days on average passed between the date of the 483 and the date of any related warning letter, while any regulatory meetings to review the inspections on average took place 169 days later.

Ergo, the numbers suggest that a drug maker could end up waiting 300 days from the date of an internal FDA request for inspection to see a warning letter for that inspection, which sounds like a significant problem when trying to get a new drug to market. The report does not cover inspections related to biologics license applications, but does include data on inspections for supplemental drug filings.

The report states that FDA used the complete response (CR) letter to deny 94 new drug applications and supplemental filings for chemistry, manufacturing and controls in calendar 2017, a relatively small denominator in comparison to the more than 2,460 CR letters issued last year. However, the agency said it had issues another 194 facility-related CRs for a total of 288 facility-related CR letters in 2017, although there is little information on what sort of facility-related issues drove those additional 194 CRs. In any case, these numbers are likely to shift at least somewhat thanks to the concept-of-operations paradigm now in force at the Center for Drugs.

The dust-up between the FDA and device makers regarding inspection delays is well known – and the total number of original PMAs in any given year is presumably still fewer than 50 – so it’s no surprise that the numbers for device inspections differ significantly from those for drugs. The agency needed only a median of 35 days between the request for the inspection and the first day of that inspection, and the average time to issuance of a 483 was five days. As was the case for the drug inspection numbers, data pertaining to supplemental filings were included.

At first glance, it seems odd that Congress had included pre-clearance inspections for 510(k) applications in Section 902 if one takes the FDA at its word when it states that clearance of a device “does not require a pre-clearance inspection.” While the statement is sufficiently generic to be more or less defensible, it seems somewhat contradicted by the March 25, 2014, draft device classification rule, in which the agency acknowledged that it had conducted pre-clearance inspections for 510(k) applications, although it had done so only on “rare occasions.”

Two Tales of Preemption

FDA preemption for medical devices is never out of the spotlight for long, even if the story usually seems unchanged by the latest retelling. One recent case confirms that success is sometimes measured in large part by the adversary’s miscues, but the other seems to break new ground in this area by posing the question of how preemption works when a PMA and a 510(k) device are joined. Perhaps as important, however, is that this second case portends a growing split in the courts on a central point in the preemption debate.

Alphatec Prevails in Sixth Circuit

Some preemption cases are a trial in more ways than one, but Alphatec Spine, Inc. prevailed fairly handily in a hearing of Agee v. Alphatec Spine in the U.S. Court of Appeals for the Sixth Circuit. The district court had dismissed the charges with prejudice despite allowing the plaintiff to amend the complaint, describing the plaintiff’s arguments as “a rambling, disorganized mess,” which consisted primarily of conclusory arguments that came up short of pleading standards under the Federal Rules of Civil Procedure 8 and 9.

The plaintiff seems to have compounded the problem by failing to directly respond to Alphatec’s argument regarding implied preemption during district court proceedings, taking up the subject only from the standpoint of doctrine. The plaintiff attacked express preemption at the district court stage, but Alphatec never raised express preemption. Also apparently unchallenged by the plaintiff was Alphatec’s argument that state law in Ohio bars common-law negligence claims.

The Sixth Circuit allowed the plaintiff to return to the district court to revisit the issue of whether the complaint met federal pleading standards, a move attributed to what is said to have been an abuse of discretion on the part of the district court judge. Nonetheless, the Sixth Circuit made clear it was unimpressed with more or less the entirety of the plaintiff’s handling of the matter, stating that the plaintiff’s failure to challenge the district court’s conclusions regarding preemption “fully determines this appeal inasmuch as the forfeited arguments encompass all of the plaintiffs’ causes of action.”

Preemption, PMAs and Predicate Devices

Express preemption might seem a largely settled matter thanks to Reigel v. Medtronic, but the recently decided case of Shuker v. Smith & Nephew took up the relatively novel predicament of a combination of both PMA and 510(k) devices. The outcome in this case in the U.S. Court of Appeals for the Third Circuit affirmed preemption for PMA devices, but seems to have created a schism with respect to the presumption against express preemption.

Shuker addresses a combination of devices that were not approved by the FDA in the configuration used by the implanting physician, and the plaintiff alleged the company’s literature had violated the law when it discussed the use of Smith & Nephew’s R3 acetabular cup in this configuration. The court received an amicus brief from the Department of Justice, which affirmed preemption for PMA devices even when attached to one or more 510(k) devices, but the Third Circuit seems to have sustained the possibility that Smith & Nephew’s printed material regarding the R3 could support a claim of misrepresentation. The Third Circuit sent that discussion back to the district court, which had dismissed that claim with prejudice.

While Shuker is a win for preemption, this appears to be the first instance in which an appeals court has undertaken the question of a device system bearing both 510(k) and PMA components. There is a novel source of tension in the decision, however, in that the court declared that the presumption against express preemption is still alive. The U.S. Court of Appeals for the Eight Circuit arrived at a different conclusion last year in Accord Watson v. Air Methods Corp., but the outcome in Shuker is based in part on the notion that what some believe is pertinent a Supreme Court precedent – that of Puerto Rico v. Franklin California Tax-Free Trust – is not applicable to the areas of the economy regulated by the FDA because Puerto Rico v. Franklin was directed toward bankruptcy law.

Consequently, the Third Circuit argued that the presumption against federal preemption is still a functioning legal theory, but attorneys for Medtronic might differ. The company won a case in the Arizona Supreme Court in October 2017, Conklin v. Medtronic, in which Judge Lori Bustamante declared that even though federal laws are not typically presumed to preempt state laws, the courts “do not invoke that presumption when the federal statute contains an express preemption clause.” Bustamante cited Puerto Rico v. Franklin in support of that conclusion.

It is predictably difficult to forecast how the presumption dilemma will unfold if only because a device maker will have to suffer an adverse outcome in a circuit court before the question is brought to the Supreme Court. On the other hand, there is clearly a growing trend toward differential outcomes on this point, which at the very least suggests the Supreme Court may find this a compelling problem should a device maker apply for cert.

ECJ Rules in Favor of EMA Transparency

The European Medicines Agency published a draft guidance for clinical trial transparency in 2013, and the agency scored a win recently at the European Court of Justice in what appears to be the first legal challenge of transparency to reach the ECJ. The decision in the case of Pari Pharma v. EMA affirms the legal standing of this practice, but the decision also makes clear that broad assertions of confidentiality and unsupported claims of damaged commercial interests will not sway the European Union’s high court.

Novartis, Pari in Nebulizer Standoff

EMA announced early in February that the court had declared that three companies, including Pari Pharma of Starnberg, Germany, had no legitimate claim that the disclosures of their data constituted a compromise of intellectual property. The court’s decision makes clear that Pari’s cause was thwarted by Novartis, which along with the French government pushed the court to side with EMA in the dispute.

Novartis’ interest in the market for tobramycin nebulizers was driven by its Tobi Podhaler, which like Pari’s Vantobra aerosol is indicated for pediatric cystic fibrosis. According to an earlier court document, Novartis had acquired a marketing authorization for the Tobi via an orphan product designation in 1999, but subsequently received an extension of marketing exclusivity through 2023.

Pari had claimed its product offered superior safety, and won that debate in 2015, when EMA granted the product a CE mark. The EMA’s decision summary makes clear that the European Commission had misgivings about how EMA had interpreted orphan product legislation on the point of product similarity, but in any event, Novartis lost its exclusivity for this treatment and indication.

No General Presumption of Confidentiality

Pari’s argument before the ECJ seems to revolved in part around the notion that the information found in its filings enjoyed “a general presumption of confidentiality,” an argument the court found unpersuasive. Pari also argued that both publicly available and confidential information together would disclose the company’s proprietary strategy for obtaining marketing authorization. The Court replied that this purported strategy was enabled in part by an exchange with the EMA as “part of a specific regulatory process” and consequently not entitled to discretion.

Pari further asserted that its strategy constituted intellectual property as defined by the 1995 Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), but the Court would have none of it, in large part due to the fact that much of the information in question was already in the public domain. The Court said also that knowledge of the effect of the use of a nebulizer on intolerance to dry powder “could be obtained without difficulty and without any particular inventiveness.”

Pari fared no better on the confidentiality of its patient survey data, either, largely because the data set included information drawn from a patient registry set up by the European Cystic Fibrosis Society. According to the court, much of Pari’s survey data was little or nothing more than a “refinement” of the ECFS registry data. Much of Pari’s problem with the ECJ was due to what the court said on several occasions was as a failure to demonstrate any damage to the company’s commercial interests stemming from the disclosure.

There were two other cases in this clutch of losses on the transparency question – PTC Therapeutics fared no better over disclosure of data related to its treatment for Duchenne muscular dystrophy, Translarna (ataluren) – but only time will tell whether drug and device makers will eventually score a win at ECJ over the EMA transparency paradigm. In any event, Pari’s experience makes clear that nebulous arguments and better nebulizers won’t win the day at the European Union’s high court.

The Difference Between Faster and Earlier

To some, the term “regulatory harmonization” might suggest more or less simultaneous approvals across jurisdictions, but a recent study of drug approvals by three regulatory agencies hints that this dream is still just a dream. There are confounders in the latest study of drug approvals, however, including that the approved indications are anything but identical.

The Feb. 22 issue of the European Journal of Clinical Pharmacology states that the FDA, Swissmedic and the European Medicines Agency approved a total of 134 new drugs between 2007 and 2016. The FDA is credited with being the first to approve 66.4 percent of these, while the EMA was the first to approve nearly 31 percent, leaving Swissmedic with a paltry three percent first-to-approve rate.

While this report has gained some traction in the trade press, non-subscribers to the journal have only the abstract to rely on, which states that the approved indications were similar in only 23 percent of the drugs across all three agencies. The differences between the Swissmedic and EMA approvals were few, while the differences in labeled indications between the FDA and EMA were “significant.”

Obviously it is difficult to know what to make of this information without knowing how those labeled indications varied, but another absent piece of this puzzle is the total premarket review time for each drug at each agency. It’s one thing to say that agency A approved a product sooner than agency B, but it’s quite another to say the total review time was shorter. Without that context, this abstract has little to offer.

As might be expected, the total review time question has its own moving parts as this study in the New England Journal of Medicine suggests. The authors of this write-up from April 2017 indicate that cancer therapies and orphan drug applications moved more swiftly through the FDA premarket process than was seen in the EMA process, but that does not apply to all drug types or drug application types. The take-away from all this is that comparisons remain nettlesome and often are not particularly informative.

DoJ Revisits Standard for Qui Tam Dismissal

The Department of Justice has released a new memo addressing the standard for dismissal of relator lawsuits under the False Claims Act, and both the content and the tone of the memo are starkly different from what might have been expected under previous administrations. Precisely how this memo will change routine practice is “difficult to predict,” as the saying goes, but the memo is at the very least a suggestion that some of the less credible qui tam suits will have a very short shelf life, indeed.

Resources an Issue for DoJ                                                             

The DoJ memo says the annual total of qui tam actions has neared or exceeded 600 new matters in each of the past several years, a disclosure that might surprise no one, given the related provisions of the Affordable Care Act. However, the rate of federal interventions “has remained relatively static,” the memo stated, although the department must nonetheless expend resources to monitor cases in which the government ultimately does not intervene.

One might impute a number of motives for the memo overall, but one thing is clear: DoJ is seeking to economize when it comes to dealing with relator lawsuits, as demonstrated by the passage directing the reader’s attention to “the government’s limited resources.”

The memo points out that the department can dismiss an action over the relator’s objections, although that relator may be entitled to an appeal of that decision. DoJ lists seven factors that seem to have driven dismissals since 1986, including the curbing of meritless cases and prevention of relators who seek to piggyback onto an ongoing government investigation. Another factor would be whether the federal agency affected by the action expects the case to interfere with the policies and programs of that agency.

Standard for Dismissal Clarified

In addition to the factors cited above, the memo states that dismissal is an option to address a case pockmarked with “egregious procedural errors,” citing the case of Surdovel v. Digirad Imaging as an instance. This case was dismissed in 2013 after government attorneys determined that the relator had “failed to serve the United States with the complaint and disclosure of all material facts.” However, the memo indicated that federal attorneys should feel free to leverage both the unfettered discretion and the rational basis standards for dismissal.

As might be expected, the D.C. District Court is one jurisdiction where the unfettered discretion standard is at work, although the Ninth and Tenth Circuits have made use of the rational basis test. The memo argues that even the rational basis standard “was intended to be a highly deferential” standard, and the memo advises a federal attorney to notify the court as to the basis for a motion to dismiss in jurisdictions where a standard has not been identified.

The memo offers some tactical advice, suggesting for instance that prosecutors separately assert any alternative grounds for seeking dismissal, citing the bars on public disclosure and pro se relators as examples. This approach provides independent legal bases for dismissal, but partial dismissal is another tactic available to federal attorneys.

Interestingly, the memo concludes with language suggestive of a view that the rate of meritless qui tam actions is on the rise, stating that relators have dismissed more than 700 actions since the beginning of 2012 when the department declined to participate. This more routine withdrawal of a qui tam, the memo states, “has significantly reduced the number of cases where the government might otherwise have considered seeking dismissal.”

Auld Acquaintance; 2017 Guidances and 2018 Enforcement

2017 is now a part of the past, and everyone has their own idea as to which were the most crucial developments of the year. Following is a nomination for two FDA guidances that are at least strong candidates for the title of the most important guidances of 2017, along with developments in two ongoing dramas that could prove pivotal in this new year.

What’s Old is New (yet) Again

The FDA’s Center for Devices and Radiological Health had little to offer in the way of guidances in the first half of 2017, but the center made up for that in a big way in the latter part of the year. CDRH issued 19 draft and final guidances in the last three months of the year, but the month of September was a busy one, too.

Still, the most important guidances might not have been the most widely discussed. The October final guidance for 510(k) changes and the companion software 510(k) changes final guidance might not have the splash value of the agency’s moves in the digital health realm, but it’s easy to forget how long the 510(k) changes controversy has strained relations between the FDA and industry.

Thinking back to the legacy K97 guidance of 1997, this discussion has been the subject of formal regulatory interest for only 20 years despite that the Medical Device Amendments were added to the statute more than 40 years ago. The agency took a stab at rewriting K97 in 2011, but that attempt proved futile thanks to the opposition it triggered.

Traditionally, the estimates of the number of 510(k) clearances each year is somewhere between 3,500 and 4,000, a much greater number than the volume of original PMAs, which hasn’t hit 100 in recent memory, if ever. Are digital health guidances “hotter” in terms of novelty and hence media coverage?

Apparently, but make no mistake: The 510(k) program and the agency’s overarching administration thereof is easily the most important regulatory development in calendar year 2017, particularly given that the new med tech regulations in Europe could drive a lot of traffic back to American shores.

2018: Commercial Speech Comes of Age?

2017 was a regulatory banner year for med tech, thanks to the 21st Century Cures Act and the provisions of the fourth device user fee agreement, so it’s difficult to see how 2018 can measure up. Still, this new year has at least one blockbuster story in store if recent remarks by FDA commissioner Scott Gottlieb are any indication.

Gottlieb said the agency needs “a legally enforceable set of rules” where commercial speech is concerned, a nod to recent court losses, such as Caronia. Hence, Gottlieb’s said the FDA “can’t be operating from a platform where our regulations might be perpetually in conflict with the courts.”

The agency’s January 2017 draft guidance for payer communications is still in draft form, but that’s to be expected with the change in the commissioner’s office, particularly a commissioner with Gottlieb’s views on the commercial speech question. Another consideration is that a payer communication framework might be the lowest hanging of the several commercial speech questions, and there was little indication at the time that the FDA had adopted a less restrictive approach to off-label communications to physicians.

Gottlieb’s comments from September 2017 suggest he wants the agency to provide industry with some rules of the road for the entirety of the commercial speech problem, but the agency’s chief counsel, Rebecca Wood, avoided the subject in her prepared remarks to a gathering of the Food and Drug Law Institute in early December 2017. The net effect is something of a black box inside which the regulatory version of Schrödinger’s cat awaits our collective scrutiny, but Gottlieb seems determined to settle this matter by one means or another, even if there is some understandable skepticism as to the durability of any resolution. This is a matter worth watching as we move into 2018.

Yates Memo; Up for Grabs?

On the other hand, those who are concerned about a hangover from the Yates memo might be encouraged by the fact that FDA’s Woods conceded that it is time for the FDA to revisit the question of vicarious criminal liability in Park doctrine cases. The question here is whether the agency and the Department of Justice are on the same page, given that these two parties have not necessarily agreed on these issues in the past.

The corporate liability question seems ripe for review if only because Sally Quillian Yates is no longer at the Department of Justice, but deputy attorney general Rod Rosenstein acknowledged that the Yates memo is under review in a speech to the Heritage Foundation in September 2017. Although he offered no details other than to affirm that prosecution of individuals is still seen as important as a deterrent, he stated, “I do anticipate that we may in the near future make an announcement about what changes we are going to make to corporate fraud principles.”

Rosenstein confirmed in an October 2017 speech to New York University that the memo is still in play, explaining that any changes “will reflect our resolve to hold individuals accountable for corporate wrongdoing.” However, Rosenstein also said federal attorneys will not be permitted to “use criminal authority unfairly to extract civil payments.”

While there are few tea leaves to work with, the statement about the use of criminal authority to extract civil payments is at the very least some indicator as to where DoJ may be headed. On the other hand, there are those who worry that the prison sentences handed down in the case of Jack De Coster and Peter De Coster could be part of an emerging pattern despite that the De Costers’ egg businesses routinely and egregiously ran afoul of the law over a period of decades. The corporate prosecution story is clearly another story worth tracking as we work through this new year.

Digital Desires; the FDA’s December Guidance Trove

The end of the year is a time for reflection and maybe even gratitude, but as we can all testify, holiday shopping can be an irritating experience. The FDA got an early start on its holiday shopping list in the first week of December with the publication of several guidances as part of the overhaul of its approach to digital health. As might be expected, though, the experience is a decidedly mixed bag of items, one of which seems likely to be returned for exchange.

SaMD Final: A Leaner, Nicer Approach

On the positive side, the final guidance for software as a medical device (SaMD), the draft of which was written by the International Medical Device Regulators Forum, eliminates some of the seemingly compulsory tone of the draft. Nonetheless, the FDA went to some lengths to emphasize in the final that industry should not read too much into the use of words such as “requirements,” explaining that related provisions fall into the category of recommendations. Given the recent congressional emphasis on the least burdensome standard, the agency perhaps had little choice but to make such a conciliatory gesture.

The final SaMD guidance is 15 pages leaner than the draft (30 pages rather than 45), and large portions of the draft have either slimmed down or disappeared entirely. Definitions have become less descriptive, thus lending an unmistakable air of flexibility to the document. Whereas the draft commits page after page to discussions of generating evidence for scientific and analytical validity, the final guidance offers mere paragraphs for considerations such as analytical and technical validation.

The net effect is that of a high-level document that avoids the quagmire associated with the fine details of product development and testing. Whether this is the last word for some time on SaMD is difficult to forecast, but the reader will note that the agency took the unusual step of announcing the final guidance in the Federal Register, complete with the associated docket number.

The Risk of Saying Nothing About Risk

Conversely, the draft guidance for clinical decision support (CDS) systems presents the reader with a decidedly different dilemma, although it offers some useful content. The draft includes a section spelling out instances in which a CDS would not fall under FDA regulations, such as software that provides recommendations as to the use of a drug within the labeled indication. This document also provides a number of examples of uses of a CDS that would qualify the item as a device, but Bradley Merrill Thompson of Epstein Becker Green had a few choice words regarding the draft.

Thompson, who serves as the general counsel for the CDS Coalition, said the CDS draft lacks clarity on the point of how a vendor might determine how the risks associated with that product’s use might push the CDS into the agency’s regulatory territory. Thompson said this is particularly problematic given the recent and coming advances in artificial intelligence, although others indicated some relief that patient use of CDS was written into the document.

One way of looking at the risk question in this guidance – or more properly, the failure of the draft to directly address the risk question – is that the agency believes it might be a more economical use of its time to draw feedback from stakeholders before committing anything to ink. The docket is open for only sixty days, however, and it seems fairly plausible that the Feb. 6, 2018 deadline for comment will be extended if indeed the FDA intends to provide at least some discussion of risk. After all, the agency’s device center has expended a considerable amount of effort to talk about benefits and risks, including the final guidance on how the FDA will handle the hazards of dealing with problematic devices that may or may not warrant withdrawal.

The last of the three guidances released by the FDA on Dec. 7 was the draft guidance dealing with policy changes to four existing guidances, including the guidance for medical device data systems (MDDS). The agency’s proposal to regulate such software in 2011 sparked a lot of pushback from stakeholders with a lot of bandwidth on Capitol Hill, and the agency walked back from several major features of its early proposals several years ago. This guidance will be substantially revamped, although in its current form it is apparently not operational, as the saying goes.

The general wellness app guidance is also scheduled for a thorough rewrite, as are the guidances for mobile medical applications and off-the-shelf software used in medical devices. Device makers have the 21st Century Cures Act to thank for much of this, but the agency’s latest commissioner, Scott Gottlieb, might have pushed for many of these changes even without the help of the Cures Act. All in all, Dec. 7 was not a bad start to the holiday season, even if one or two items will eventually be re-gifted to the giver.

DTC Gene Tests, Tax Reform in the News

2017 is starting to wind down as evidenced by the resurgence of holiday-themed music and Christmas jingle-riddled television commercials, but Washington is nonetheless making good use of these last few weeks of the year. In one of the more significant regulatory concessions in recent memory, the FDA said it will use a more streamlined approach to direct-to-consumer genetic tests, but the current state of tax reform seems headed for game-stopping controversy unless significant concessions are made.

‘Precert’ the New Approach to DTC Gene Risk Tests

The notion of pre-certification, or “precert,” has gained a lot of momentum at the FDA this year. First, the FDA said in July it would use a precert program for some moderate-risk digital health applications, and now the agency is making use of that same concept in connection with direct-to-consumer genetic tests that disclose the customer’s risk for diseases. The announcement affirms yet again that the agency has adopted a much less militant approach to its regulation of the life sciences under the new leadership.

Readers will remember the controversy over DTC marketing of such tests shortly after Margaret Hamburg took the commissioner’s chair in 2009, which led to a warning letter to several makers of these DTC genetic propensity tests. The agency wrote a warning letter to 23andMe of Mountain View, Calif., in 2010 about this kind of activity, but even two years ago, the FDA was still trying to keep a lid on such activity as indicated by a Sept. 21, 2015 warning letter to Pathway Genomics Inc. of San Diego for the company’s marketing of its Cancer Intercept test.

FDA commissioner Scott Gottlieb said in a statement that these tests do carry some risk, but he also cited the need to devise a regulatory regime that avoids strangling innovation in technological spaces that move at a more rapid pace than the agency can hope to match. Gottlieb made reference to a de novo filing for the 25-hydroxyvitamin D test system by AB Sciex LLC of Redwood City, Calif., but the FDA also announced it had approved a de novo application by 23andMe for the company’s Personal Genome Service (PGS) test on the same day the agency announced the precert program.

The net effect is certainly a positive change for makers of these tests, but any allegations that a false negative cost a consumer their life will undoubtedly spark a severe case of whiplash, at least on Capitol Hill. The real test in this scenario is how the FDA would respond to such criticism.

Tax Reform Gains Momentum

The push for corporate tax reform is heating up on Capitol Hill, and both the House and the Senate have legislation in the works. While neither proposal seems to include a repeal of the medical device tax, both versions eliminate at least some of the credit for orphan drug development, a move that seems certain to drive resistance among drug makers and patient groups alike.

The House Ways and Means Committee passed its tax reform vote on Nov. 9 in a party-line vote, perhaps a predictor of how this issue will play out on both sides of the Capitol. Section 3401 of the Tax Cuts and Jobs Act of 2017 completely eradicates the tax credit for clinical testing for orphan drugs, which the authors of the legislation say will save the taxpayer roughly $54 billion over 10 years.

The Senate took a less stringent but more convoluted approach, with the net result that drug makers will lose $30 billion in tax credits over 10 years. At least one patient group, the American Cancer Society Cancer Action Network, voiced its opposition to several features of the House bill, stating that the majority of cancer drugs qualify for orphan drug status “at some point in their lifecycle.” The group also said a study conducted in 2015 suggested that elimination of the orphan drug tax credit “would be to decrease orphan drug development by one third.”

The issue of the device tax is not necessarily dead despite the failure of both chambers to include a repeal in their respective bills. Much of the conversation about a device tax repeal seems to revolve around the reauthorization of the Children’s Health Insurance Program, which must be completed by Dec. 31. Ways and Means chairman Kevin Brady lent credence to that expectation, stating recently that temporary relief from the device tax will arrive via an unidentified legislative vehicle “before the end of the year.”