Glaxo Draws Support in Petition for Cert

GlaxoSmithKline LLC of London has filed a petition for cert with the Supreme Court over an attempt by the state of Louisiana to sue the drugmaker separately over allegations the company thwarted the availability of generic versions of a sinus medication. At stake is the question of whether the Eleventh Amendment allows states to work a legal end-around of the outcome of class actions in federal courts, even when the state in question benefited by the class action.

The State of Louisiana had declined to opt out of a federal class action against Glaxo, which revolved around the issue of the company’s alleged interference with the FDA’s efforts to approve a generic version of Flonase. In 2013, the company arrived at a settlement with private and indirect purchasers in the amount of $150 million, but Louisiana’s attorney general filed a suit over the matter the following year.

The State of Louisiana had received a notice of the outcome in 2013 as stipulated by the Class Action Fairness Act (CAFA), but did not receive the notice of settlement approved by the U.S. District Court for the Eastern District of Pennsylvania. In its decision on the matter, the District had purportedly enjoined all states, including Louisiana, from taking further action on the matter, but the Louisiana attorney general successfully argued that the Eleventh Amendment does not allow states to be bound to a class action. The case then moved from the district court to the U.S. Court of Appeals for the Third Circuit, which arrived at essentially the same determination. In its Dec. 22, 2017, decision, the three-judge panel at the Third Circuit said the state did not waive its sovereign immunity merely by its receipt of the CAFA notice.

This isn’t the first time Glaxo Louisiana have tangled. The two settled for $45 million in 2013 over allegations the company had illicitly marketed and/or promoted several drugs for a number of indications, including Avandia and Wellbutrin. This settlement was a separate conclusion to the cases filed jointly by a number of other states, and followed a $3 billion settlement with the federal government the previous year, in part for promotion of off-label use.

Glaxo petitioned the Supreme Court for cert after the Third Circuit declined to grant an en banc hearing, stating in the July 6 petition that states have not enjoyed sovereign immunity “when they are aligned as plaintiffs.” The company stated also that the outcome flies against the 1985 Supreme Court decision in Phillips Petroleum Co. v. Shutts, which provided for the legal use of opt-out class actions. Glaxo said the opt-out class action would be rendered “categorically unconstitutional” by the Third Circuit’s decision.

As it turns out, Glaxo has company in making those arguments. The Washington Legal Foundation has filed an amicus brief, and said in an accompanying statement that Louisiana’s lawsuit was a copycat lawsuit, adding that the Eleventh Amendment applies only to lawsuits filed against a state rather than in response to a lawsuit filed by the state. The Pharmaceutical Research and Manufacturers of America also weighed in, stating that Louisiana “did not somehow become a defendant at any point,” and that a constitutionally sufficient notice of class action eliminates any form of immunity from a plaintiff-side position. The association further stated that absent any textual or historical indications to the contrary, “there is simply no warrant for this Court or the Third Circuit to simply make such rules up.”

Technical assistance or radical overhaul?

Despite its hiatus from the headlines, the question of FDA regulation of lab-developed tests never quite went away, and is now topical again thanks to a technical assistance document recently published by the agency. The proposal has its critics, but Congress might soon act on the question if some stakeholders have their say.

The Aug. 8 technical assistance refers to the notion of a pre-certification program akin to the digital health pre-cert program, but FDA commissioner Scott Gottlieb had already said the pre-cert concept could be applied to LDTs, so such a provision hardly comes across as any surprise. There is a provision in the FDA approach, however, for the use of for-cause inspections when adulteration or misbranding is suspected, and ultimately this document may prove significant if the Diagnostic Accuracy and Innovation Act of 2017 gathers sufficient momentum to reach the House floor in the remaining weeks of 2018.

Among the supporters of the FDA framework is the diagnostic arm of the Advanced Medical Technology Association, which said in an Aug. 8 statement that the FDA document “is an important and necessary next step” in providing a statutory framework for LDT regulation. Perhaps less expected is the support of the American Clinical Lab Association, which had previously expressed skepticism regarding FDA regulation of LDTs.

Not everyone is so optimistic, however. An entry at the FDA Law Blog by Hyman, Phelps and McNamara points out that the FDA document would jettison the existing lexicon for premarket review of LDTs, to be replaced by “a whole new vocabulary.” Jeffrey Gibbs of Hyman Phelps said the novel regulatory mechanism of a test group is not functionally similar to that of the predicate device of 510(k) lore. Gibbs said the document would also seem to offer outside parties the opportunity to challenge the approval obtained by a test maker, an outcome he said the FDA “would not want.”

FDA Suspends LDT Regulation, But Liability Still in Play

After two years and seemingly endless sturm und drang, the FDA’s device center has announced it will suspend its proposed framework for regulation of lab-developed tests. The agency made it clear this is not the end of its interest in the matter, but Congress has an eye on this issue as well, which makes the outcome of all this activity difficult to forecast. If there is anything resembling certainty in all this, it may be that lab-developed tests will soon be subject to more liability under state tort law.

PMA Preemption Likely to Hold

The FDA said in its Nov. 18 announcement that the agency is aware of the importance of working with “stakeholders, our new administration, and Congress” to forge the appropriate approach to regulation of lab-developed tests (LDTs). However, the statement includes the remark that the FDA will publish an outline of what the agency sees as an appropriate risk-based paradigm for LDT regulation “in the near future,” which could be used to “help guide continued discussions” on the subject. Clearly, the FDA intends to stay in the game as this controversy evolves in 2017, although it is interesting to ask whether the agency would have pulled back on the draft had the presidential election yielded a different result.

The House Energy and Commerce Committee had floated a discussion draft of a new framework for regulation of LDTs in 2015, which calls for the establishment of a new center at FDA that would regulate these tests, and which would report to the FDA commissioner “in the same manner as the other agency centers.” This passage would seem to put LDTs on the same regulatory footing as therapeutic devices, which in turn would suggest a similar legal status where preemption of tort law for PMA devices is concerned. The draft also cited preemption with the statement that the states would not be allowed to sustain any existing or establish any new requirements for LDTs that would be “different from, or in addition to” the mandates set out in the discussion draft, a seemingly familiar passage that presumably would not pertain to tests cleared under the 510(k) program.

Regardless of how the preemption question evolves, there are a number of parties who have expressed concern about the potential for an LDT-specific regulatory regime to increase legal exposure. The American Society for Human Genetics said in a Feb. 2, 2015, letter to the FDA that the agency’s proposed LDT regulation framework would subject tests for genomic purposes “to the states’ strict product liability tort regimes.” The American Clinical Laboratory Association raised a similar set of concerns in a June 2013 citizen’s petition to the FDA requesting the agency scupper the LDT regulation effort.

Lawsuits Already a Risk

There have already been several liability cases for LDTs, including the wrongful birth case in the state of Washington that cost LabCorp – and the hospital where the test was conducted – a total of $50 million. LabCorp was on the receiving end of another lawsuit, Khadim v. LabCorp, a case the company managed by having itself identified in legal terms as a provider, which in Virginia limits the damages available to plaintiffs. It does not seem a stretch to imagine that provider status under state law would suffer in a formal federal regulatory environment.

There are other ways the FDA can boost its enforcement activities in this area, such as the issuance of a safety alert, a move that would lead to increased media scrutiny and possibly media coverage-driven lawsuits. There is one inescapable fact to consider, however: Modern medicine’s reliance on LDTs will continue to increase and grow increasingly visible, particularly as gene sequencing technologies become less expensive and more commonly used to determine a course of treatment that may or may not achieve the desired result.

Obviously there are several moving parts to this predicament, but the net effect is unavoidably that the stakes for makers of these tests will grow, regardless of how Congress, the FDA and the White House answer the LDT regulation question.