FDLI Publications: Food and Drug Law Journal 54-3

Volume 54 Issue 3

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> Antitrust Enforcement in Pharmaceutical Industry Mergers
> Kickbacks, Courtesies, or Cost-Effectiveness?: Application of the Medicare Antikickback
Law to the Marketing and Promotional Practices of Drug and Medical Device Manufacturers
> The Judicial Coordination of Drug and Device Litigation: A Review and Critique
> A New Public/Private Partnership in the Interest of Public Health
> Judicial Review of FDA Preemption Determinations
> A Voluntary Disclosure Program for FDA - The Time Has Come
> The End of Paternalism: A New Approach to Food Labeling
> Promoting Functional Foods and Nutraceuticals on the Internet
> Food Safety Inspections: A Call for Rational Reorganization
> Meat and Poultry Regulatory Update
> FDA Policy and Regulation of Stereoisomers:
Paradigm Shift and the Future of Safer and More Effective Drugs

Antitrust Enforcement in Pharmaceutical Industry Mergers
Author: David A. Balto & James F. Mongoven,
Issue: 54 Food and Drug Law Journal 255-278 (1999).

The pharmaceutical industry is in the midst of a wave of consolidation. Pharmaceutical mergers that are efficient and procompetitive build stronger competitors in new markets and benefit consumers through lower prices, a greater variety of products, and stronger incentives to innovate. A number of recent pharmaceutical and health care product mergers have had the potential for anticompetitive effects. In fact over the past four years, the Federal Trade Commission (FTC) has brought eleven enforcement actions challenging several of these mergers, the largest number in any single industry. This article considers these pharmaceutical and health care products enforcement actions and explains the importance of these cases for future FTC policy and for similar industries where global competition, technological change, and high regulatory barriers to entry combine to produce an environment conducive to consolidations.

Kickbacks, Courtesies, or Cost-Effectiveness?: Application of the Medicare Antikickback Law to the Marketing and Promotional Practices of Drug and Medical Device Manufacturers
Author: Thomas N. Bulleit, Jr. & Joan H. Krause,
Issue: 54 Food and Drug Law Journal 279-324 (1999).

In the 1990s, law enforcement officials focused seriously on the research and manufacturing sector of the health care industry for the first time. Several high profile cases were brought against manufacturers of prescription drugs and medical devices, and the authority of the Department of Health and Human Services' Office of the Inspector General was expanded to include denial of federal health care program payment for the products of a manufacturer found to have violated the Medicare antikickback law (which is now applicable to nearly all federal health care programs). These and other developments demonstrate that enforcement officials take seriously the broad language of the antikickback law, and may apply it to manufacturing practices such as gifts and business courtesies (including grants and value-added programs), payments for services (including clinical studies), discount arrangements (including bundled sales), and financial relationships with pharmacy benefit managers, commission sales representatives, and managed care organizations. This article summarizes the purposes and history of the Medicare antikickback law and describes its evolution into a potent weapon against the corruption of medical decision making in the procurement of prescription drugs and medical devices. The article also details a variety of strategies for reducing risks under the law in several key areas of importance to manufacturers. While generally supportive of the purposes of the law, the authors suggest that its current broad interpretation may impede not only corruption, but also benign forms of customer relations and innovative approaches to cost-effective medical care.

The Judicial Coordination of Drug and Device Litigation: A Review and Critique
Author: James M. Wood
Issue 54 Food and Drug Law Journal 325-362 (1999).

Manufacturers of prescription drugs and medical devices are today's mass tort targets. Many management tools adopted by the courts to coordinate mass tort litigation have trampled on the common-law, statutory, and constitutional rights of these manufacturers, driven by the goal to resolve the litigation efficiently. Worse, these management tools have had the unintended effect of fueling mass tort litigation. Having been rebuffed recently in their experimentation with various procedural tools to manage mass torts, such as the self-transfer of cases for trial and class certification, some courts have explored the use of the common issue trial as a means to resolve a mass tort "efficiently." Frequently, these courts aggregate plaintiffs whose damage awards will serve to create a matrix for damages to all other plaintiffs. Yet, this aggregation has been accomplished only through the denial of manufacturers' due process and Seventh Amendment rights, as well as through abuse of statistics now prohibited by Daubert v. Merrell Dow Pharmaceuticals, Inc. This article critiques these management tools with a particular emphasis on their application to drug and medical device litigation. It describes the template that has been used by the federal courts in managing this litigation. The course of pharmaceutical and device litigation through the class certification also is summarized. Finally, this article examines the possibility that, now stripped of the ability to manage mass torts through the self-transfer of cases for trial and through class certification, federal courts might try to aggregate drug and device claims. The article concludes that mass tort litigation truly may benefit from pretrial coordination but, once completed, a class action cannot be certified and the individual cases must be remanded, without aggregation, to the jurisdiction where they originally were filed. It also explores alternative means for resolving litigation, such as the early appointment of independent scientific panels that can evaluate the reliability of the scientific underpinnings of mass tort claims involving a drug or medical device.

A New Public/Private Partnership in the Interest of Public Health
Author: Wayne K. Barlow
Issue: 54 Food and Drug Law Journal 363-366 (1999).

The Center for Devices and Radiological Health, and in some measure the Food and Drug Administration (FDA), has transformed its relationship with the medical device industry since 1995. The "new" FDA is more user-friendly, is undertaking a more pragmatic approach to regulation, and is engaged in an ongoing, productive dialogue with the industry. This unique new public/private partnership already has produced significant benefits for both the agency and the industry, but most importantly, for the public health. This article reviews the history of medical device regulation with an emphasis on the most recent changes and the grassroots forces that helped to create them.

Judicial Review of FDA Preemption Determinations
Author: Amanda Frost
Issue: 54 Food and Drug Law Journal 367-388 (1999).

Courts and litigants frequently question whether the Food and Drug Administration's (FDA's) determinations regarding the preemption of state law should be granted deference. Normally, courts defer to an agency's reasonable interpretations of its governing statutes. Out of concern for state sovereignty, however, courts are reluctant to interpret statutes as preempting state law unless Congress clearly intended to do so. This presumption against preemption appears to conflict with the deference normally granted agency decisionmaking. This article examines the principles underlying both Chevron deference and the presumption against preemption, and develops a set of guidelines for judicial review of agency preemption determinations that utilize these two doctrines in ways that complement, rather than contradict, one another. The article then applies these guidelines to FDA preemption determinations under the Medical Device Amendments to the Federal Food, Drug, and Cosmetic Act.

A Voluntary Disclosure Program for FDA - The Time Has Come
Author: John R. Fleder
Issue: 54 Food and Drug Law Journal 389-400 (1999).

The Food and Drug Administration (FDA) has failed to provide industry with incentives to self-report violations of law. As a result, many companies and individuals are left in a quandary: do they report a violation to FDA or do they hide the information from the agency? FDA can help provide answers to that question by promulgating a voluntary disclosure program that draws from the experience of other federal agencies that have implemented such programs successfully. In order to be effective, FDA must provide industry with concrete and substantial benefits for self-reporting violations.

The End of Paternalism: A New Approach to Food Labeling
Authors: Steven B. Steinborn & Kyra A. Todd
Issue: 54 Food and Drug Law Journal 401-422 (1999).

Structure/function claims represent a lawful and effective way for food companies to communicate useful diet and health information to consumers, and provide manufacturers with the necessary incentive for developing and marketing the healthful foods consumers seek. The law's authorization of such claims for food products also presents the Food and Drug Administration (FDA) with the opportunity to implement a flexible standard of review that will best attain its goals of protecting consumers from false or misleading information, while allowing consumers access to useful, nonmisleading information. This article urges FDA to adopt such a flexible standard of review, focusing its efforts on ensuring that these foods are safe and that there is adequate substantiation for any structure/function (or other) claims conveyed on the food label. In arriving at this recommendation, the article looks at the effect of FDA's highly restrictive regulation of health claims, and the potential constitutional shortcomings of these policies in light of Pearson v. Shalala, and a series of earlier cases involving the Federal Trade Commission.

Promoting Functional Foods and Nutraceuticals on the Internet
Author: Sarah E. Taylor & Harold J. Feld
Issue: 54 Food and Drug Law Journal 423-452 (1999).

The number of health-oriented websites sponsored by food and dietary supplement manufacturers has mushroomed as companies have sought to gain the unique interactive access to consumers offered by the Internet. Such sites offer a panoply of health and nutrition information, including advertising and other promotions of "functional foods" and "nutraceuticals" - foods offering specialized health benefits. While the Internet sometimes is portrayed as a regulatory "Wild West" where anything goes, the laws that apply in real space also apply in cyberspace. This article discusses key legal considerations in developing promotions of functional foods and nutraceuticals on the Internet such as Food and Drug Administration and Federal Trade Commission regulatory requirements, the scope of state law jurisdiction, and laws protecting consumer privacy rights. The article also gives "rules-of-thumb" and illustrations applying important legal requirements to hypothetical Internet promotions.

Food Safety Inspections: A Call for Rational Reorganization
Author: Caroline Smith DeWaal
Issue: 54 Food and Drug Law Journal 453-458 (1999).

The Clinton Administration has taken important steps to improve food safety in the United States, including encouraging preventive controls systems such as Hazard Analysis and Critical Control Points (HACCP) for seafood, meat, and poultry, signing the Food Quality Protection Act, and implementing the President's Food Safety Initiative. While these improvements are significant, creating a single agency in charge of food safety is vital to assure a coherent response to existing and emerging hazards in the food supply. In addition, Congress must enact improved statutory mandates. Until these changes are accomplished, consumer protection from unsafe food will depend on the effectiveness of a disjointed and fragmented food safety system.

Meat and Poultry Regulatory Update
Author: James H. Hodges
Issue: 54 Food and Drug Law Journal 459-462 (1999).

Today's meat and poultry inspection program has its origin in the Federal Meat Inspection Act of 1907. This inspection program is designed to prevent unwholesome, adulterated, or misbranded products from being sold as food to consumers, and to ensure meat and poultry products are slaughtered and processed under sanitary conditions. The Department of Agriculture's Food Safety and Inspection Service (FSIS) has broad powers to oversee the industry and a large budget to back its efforts. In 1997, steps were taken to begin implementation of a new science-based governmental food inspection process called Hazard Analysis and Critical Control Points (HACCP). HACCP focuses on preventing and intercepting any food safety hazard before the product leaves the plant. The transition from FSIS' traditional "command and control" inspection procedures to HACCP has created many challenges for both government and industry that are discussed briefly in this article.

FDA Policy and Regulation of Stereoisomers:
Paradigm Shift and the Future of Safer and More Effective Drugs
Author: Michael Strong
Issue: 54 Food and Drug Law Journal 463-488 (1999).

The development of single enantiomers of chiral compounds represents an important innovation in drug development because racemic mixtures have dominated this industry for so long. The foundation for this technological leap forward was laid during the last few decades with research that demonstrated the advantages of separating single enantiomers from the "isomeric ballast" of the racemate. Indeed, calls for strategic retooling began to appear in the chiral drug literature in 1984 and continue to this day. The Food and Drug Administration (FDA) released its Policy Statement on Stereoisomeric Drugs in 1992. The Policy Statement provided FDA's suggestions on development of chiral drugs and suggested that fixed combination law might apply to racemic mixtures, even though fixed combination law was not intended for, and does not specifically apply to, racemates or enantiomers. In 1997, FDA published a Request for Comments on a reexamination of the five- versus three-year term for chiral drug market exclusivity. The submitted comments contain diverse viewpoints, and some submissions argue that three years is an appropriate term since enantiomers are trivial innovations and are approved in racemate new drug applications. Other comments argue for five years based on prior agency treatment of racemate drugs as well as a close reading of the Federal Food, Drug, and Cosmetic Act (FDCA) and agency regulations implementing the 1984 Hatch-Waxman amendments to the FDCA.