The Year That Was: 2016

Sonia M. Valdes, Esq.Vice President, Medmarc

Kara Trouslot Stubbs, Esq.Partner, Baker Sterchi Cowden & Rice, LLC

AgendaDrug and Device PricingOff-Label Communication/Free Speech IssuesState Actions vs. Drug and Device Manufacturers/Distributors2016 Verdicts and SettlementsFDA ActivityWhat’s on the Horizon?Q & A

1

Drug and Device Pricing CasesTuring Pharmaceuticals- DaraprimMylan Pharmaceuticals- EpiPen Rodelis Pharma – CycloserineValeant – Isuprel and Notropress (two heart drugs)Hepatitis CGeneric Drugs

2

Why are drug costs so high in the US?

Other countries often restrict patients’ access to superior, but more expensive drugs to keep prices down. Analysis in these countries is whether the product justifies the cost differential.In the US, all a patient needs is a prescription from a physician, and Medicare or a health plan will pay for it.FDA approval period is much, much longer than in Europe.Longer exclusivity period for patents keeps generics out of the market place.

3

Do we really want the government involved in drug/device pricing?

Government imposed controls do not work:Price controlsNegotiated Medicare drug pricesValue-based pricingCapping out-of-pocket costs of certain drugsScrap patent monopolies and drug exclusivity

Will lead to shortages and curtailed production

4

Defending the CompanyRigorous and detailed accounting of:

Costs of clinical trialsCosts of premarket approval or approval processCosts of Regulatory Compliance such as AE reporting to the FDACosts of any corrective actionCosts of sale of product at reduced pricesInvestments in additional research to update the product by making it safer (warnings, delivery methods, etc.)Investments in the community

5

Off-Label Marketing/Commercial Free Speech

Tension between FDA and the First Amendment

FDA’s historical position: Off-label promotion by a manufacturer is unlawful even if statements are truthful and non-misleading.

Case law challenging FDA’s position – Caronia and Amarin

FDA’s March 2016settlement with Amarin

What does the landscape look like today?

6

Off-Label Marketing/Commercial Free Speech

Amarin Stipulation and Order of Settlement (March 2016) –Erosion of FDA regulation of off-label promotion.

Amarin may engage in “truthful and non-misleading speech” promoting off-label use of Vascepa and under Caronia, such speech may not form the basis or a prosecution for misbranding.FDA agrees to be bound by Court’s conclusion that the statements and disclosures Amarin proposes to make to physicians are truthful and non-misleading.Amarin bears the responsibility of assuring that its communications remain truthful and non-misleading.FDA agreed to provide Amarin with an optional preclearance provision through 2020 for new off-label claims.Both sides agreed to a dispute resolution provision intended to avoid future litigation.

7

Off-Label Marketing/Commercial Free Speech

What does the landscape look like today?No protection for statements that are either untruthful or misleading.It may be easy to determine if a claim is untruthful, but it can be much more difficult to know if a claim is misleading or not.A manufacturer that leaves its sales force at liberty to converse unscripted with doctors about off-label use of an approved drug, risks a misbranding action, if false or misleading.Medicine and science is ever-evolving. A statement that is truthful and non-misleading today, may not be tomorrow.The speech at issue in Amarin was directed to healthcare providers, which limits applicability to direct-to-consumer advertising.Key rulings are limited to Second Circuit.

8

Off-Label Marketing/Commercial Free Speech

LATEST AND GREATEST:

Nov. 9 and 10, 2016 - FDA conducted a public meeting on “Manufacturer Communications Regarding Unapproved Uses of Approved or Cleared Medical Products.”

Written comments will be accepted by FDA until 1/9/17.

9

State ActionGenesis – Medicaid reimbursement by the tobacco industry.Birth of “regulation by litigation.” Advances policy preferences against gun manufacturers, lead paint manufacturers, alleged contributors to global warming, gasoline refiners and not surprisingly, pharmaceutical and medical device manufacturers.How it works.Confidential contingency fee arrangements between public officials and private firms that are politically connected.

10

2016 State Actions FiledOpioids:

Illinois AG sues Insys Therapy for deceptive marketing of spray version of Fentanyl.NY AG sues Endo Pharmaceuticals for false advertising. Alleges company distorted addictive nature of the Opana ER.NY, PA and 33 other states have filed anti-trust complaint against Invidor alleging it was trying to keep out generic version of its opiate addiction treatment drug.

Other Drugs and Medical DevicesNew Mexico AG goes after Bristol Myers for false advertising of Plavix. Alleges unsafe and ineffective for certain people.

11

2016 State Actions, cont.CA and WA State AGs sue J&J for false advertising and deceptive marketing of its surgical mesh products for women. Allege failure to warn of severe potential complications.

Drug PricingMD AG sues J&J for antitrust violations alleging the Company negotiated an agreement with Costco to increase the price of its lens products.Mass AG files an action against Gilead arising out of price increases on two Hep C drugs, Sovaldi and Harvoni.City of Providence, RI proceeds against Allergan, Mylan and others over generic drug prices.UK fined Pfizer ₤84.2 ($106M) for escalating the price of an Epilepsy drug.Notable settlements

Novartis will pay $35M settlement to dismiss of-label allegations arising from its Elidel product

12

State Actions: Kitchen Sink Approach

AG Allegations:False advertisingOff-label promotionInadequate warnings or instructions in labeling or promotional materials (second guessing the FDA)Inadequate AE reportingWithholding data from the FDAUnfair competition – attempting to control availability of genericsUnfair pricing

13

State Actions: Defending these cases

Challenge the appointment of private counselImproper designation – denial of due processSeparation of powersState statutory grounds

First Amendment right to free speechPreemptionLimits to AG injunctive powerRegulatory Activity Exception

14

2016 VerdictsIn re: DePuy Orthopaedics, Inc., Pinnacle Hip Implant Product Liability Litigation, USDC for the N.D. Texas

$1.04 BILLION VERDICT (12/1/16) Third bellwether trial - 6 CA plaintiffs$4-6M per plaintiff for compensatory damages$504M punitive damages against J&J and DePuy (each)

$502 MILLION VERDICT (3/17/16)Second bellwether trial – 5 TX plaintiffs$140M in compensatory damages divided between 5 plaintiffs$360M in punitive damages; reduced to $10M per TX caps

DEFENSE VERDICT IN FIRST BELLWETHER (2014)8000 cases remain in the MDL

15

2016 Verdicts, cont.Talcum Powder Verdicts

Plaintiffs allege link between talcum powder and ovarian cancer

Three trials in Circuit Court for City of St. Louis (MO)Fox v. J&J: $72M verdict (2/2016) - SD plaintiffRistesund v. J&J: $55M verdict (5/2016) – AL plaintiffGiannecchini v. J&J: $70M verdict (8/2016) – CA plaintiff

J&J appealing verdicts

2500 claims pending, majority in the City of St. Louis

16

2016 Verdicts, cont.City of St. Louis Circuit Court – Litigation Tourism

Permissive joinder statute and venue statute permit massive joinders of plaintiffs in product liability complaints who have nothing in common except that they are suing over injuries (not the same) allegedly caused by the same product.

Talcum powder, pelvic mesh, hernia mesh, IVC filters, etc.

Low bar for admission of expert testimony/junk scienceNJ state court judge granted summary judgment in two talc cases finding plaintiffs’ experts (same ones who testified in MO cases), had gaps in their “made-for-litigation” scientific methods and failed to explain how talcum powder specifically causes ovarian cancer.

Misleading advertising about product in advance of trial

17

2016 Verdicts, cont.Risperdal, Mass Tort Program, Philadelphia Court of Common Pleas

Allegation: Risperdal, an anti-psychotic medication, causes gynecomastia in adolescent boys5 Trials:

1st trial – Defense Verdict2nd – 4th trials – Verdicts totaling $4.75M for plaintiffs5th trial - $70M Verdict (7/1/16) – compensatory damages ONLY6th trial - Case settled running up to trial, amount undisclosed (11/2/16)

2000 cases remainJ&J/Janssen Pharmaceuticals are not looking to globally resolve the litigation

18

2016 Verdicts, cont.Carlino v. Ethicon, Inc., Philadelphia Court of Common Pleas – 2/16

Pelvic mesh case – transvaginal tape product

$13.5M Verdict$10M in punitive damagesFollowed $12.5M Prolift verdict in Dec. 2015 ($7M punis)

Plaintiff did not have extraordinary injuries or numerous surgeries afterwards.

“Trial in a box”

19

2016 Verdicts, cont.Sherrer v. Boston Scientific Corporation and C.R. Bard, Inc., Circuit Court of Jackson County, Missouri (Kansas City)

Alleged BSC’s Solyx pelvic mesh and Bard’s Align pelvic mesh products were defectively designed and contained inadequate warnings.

First trial involving two manufacturers

Plaintiff sought $28M, punitive damages

DEFENSE VERDICT

20

2016 Verdicts, cont.DeLine v. Wright Medical Technology, Inc., et al., Circuit Court Of St. Louis County, Missouri (11/3/16)

Alleged femoral neck component of the ProFemur metal-on-metal hip prosthesis was defectively designed, and inadequate warnings.

Product liability and medical malpractice claims.

DEFENSE VERDICT

21

2016 SettlementsIn re: Wright Medical Technology Inc., Conserve Hip Implant Products Liability Litigation, USDC N.D. GA

Alleged defects related to the metal-on-metal Conserve artificial hip implant1st bellwether trial (11/2015) - Jury indicated that Wright’s system was not defective, yet awarded $11M. Judge ordered that the jury resubmit its form, which then found the hip device defective.

$1M compensatory; $10M punitives, reduced to $1.1M

$240M SETTLEMENT (11/2/16)Ends 1300 claims600 claims not included will be part of subsequent settlement program

22

2016 Settlements, cont.Fresenius GranuFlo/NaturaLyte Dialysate Products Liability Litigation, USDC for Massachusetts (MDL)

Plaintiffs alleged that the company concealed its knowledge that chemical components produced in the body after taking dialysis drugs could eliminate too much acid and create an electrical imbalance that can cause fatal heart attack and stroke.

SETTLEMENT: $250M (2/17/16)Settlement reached day before first bellwether trial to begin$220M funded by insurance4000 cases in the MDL

23

2016 SettlementsIn re: American Medical Systems Inc. Pelvic Repair System Products Liability Litigation, USDC for S.D. West Virginia (MDL) – May 2016

Settled 135 cases/amount of settlement not disclosed

Johnson & Johnson/Ethicon settlement – January 2016Reportedly agreed to pay more tan $120M to resolve 2000 – 3000 lawsuits

24

FDA Activity: Generics Labeling Guidance

Revised generic drug labelingExpedited reviewPublic policy considerationsNew administration in the Executive BranchDelayed to 2017

25

FDA Activity: CybersecurityFDA issues Draft Guidance Document for Postmarket Management of Cybersecurity in Medical Devices

Objective: to provide manufacturers with structure and specificity in their quest to counter threats to patient safety

Three major areas of concern:Risk assessmentRemediating and reporting vulnerabilitiesThe elements of an effective postmarketing cybersecurity program

Agency leaves manufacturers significant leeway in developing their own cybersecurity policies within the framework of known and accepted industry standards.

26

FDA Activity: Draft Guidance for Benefit-Risk Factors in Medical Device Products

“Factors to Consider Regarding Benefit-Risk in Medical Device Product Availability, Compliance and Enforcement Decisions”, released June of 2016

Applies to diagnostic and therapeutic medical devices exempt from Premarket review.Guidance does not apply to:

Devices regulated by CBERCombination productsElectronic products that are not medical devicesPremarket submission review decisions

Patient Focused Benefit-Risk Assessments

27

FDA Activity: Draft Guidelines for Benefit-Risk Factors in Medical Device Products, cont.

Examples of benefit factors include type of benefit, magnitude of benefit, likelihood of tolerance of risk.

Guidance assumes Risk Factors such as risk severity, likelihood of risk, nonconforming product risk, duration of exposure to population, false-positive or fast-negative and patient tolerance of risk.

Assumes Additional Facts exist such as uncertainty, detectability, failure mode, preference for availability, nature of violations and firm compliance history.

28

FDA Activity: Draft GuidanceSoftware as a Medical Device

Defines SaMD as “software intended to be used for one or more medical purposes that perform these purposes without being part of a hardware medical device.”

Examples include software that: Allows a smartphone to view images for diagnostic purposes Processes images from hardware medical devices for aiding in the detection of cancerProvides parameters that become the input for a different hardware medical device or other SaMD

Does not include software that:Drives or controls the pumping of medication in an infusion pumpEncrypts data for transmission from a medical deviceEnables such clinical communication and workflow as patient registration, scheduling visits, voice/video calling.

29

FDA Activity: Draft GuidanceSoftware as a Medical Device, cont.

Imposes risk-based criteria for categorization and clinical evaluation of SaMD.

Guidance is vague on what constitutes the required data for clinical evaluation.Lack of detail may be confusing for manufacturers

Focus shifts toward “observed real world performance as part of post-market monitoring.”

60-day comment period ended 12/13/16

30

What’s on the horizon?Ongoing litigation tourism with mass tortsIncreasing state action, source of revenue for statesChallenges regarding punitive damage awards/new case lawRenewed efforts with tort reformContinued focus on cybersecurity issues with medical devices by FDA and with litigationPotential removal of barriers to entry in the market for “drug providers that offer safe, reliable and cheaper products”Potentially problematic products

31

QUESTIONS?

32