Keeping pace with the ever-changing life sciences industry, Morrison Foerster stays on top of the trends and political, legal, and economic drivers to support striking the balance between innovative discovery and purposeful business planning to assure our clients continued success. MoFo Life Sciences shares timely legal and business insights and in-depth analyses on trends and the complex technologies at the heart of the global pharmaceutical, biotechnology, diagnostics, medical devices, digital health, and AgTech fields.Learn more about our <a href="https://www.mofo.com/capabilities/life-sciences-healthcare" target="_self">Life Sciences practice</a>.<h2 dir="ltr">ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Dr. Meghan Poon counsels clients on patent preparation and prosecution, portfolio strategy, and IP due diligence in the areas of biotechnology and biologics. She has significant experience in diverse technologies including antibodies, cell therapies, gene therapies, diagnostics, and gene-edited plants. She represents clients ranging from large international pharmaceutical companies to midsized companies, startups, and universities.Meghan has filed numerous Patent Term Extension applications to secure additional term for her clients’ patents, which cover FDA-approved products. In addition, Meghan has extensive experience addressing complex obviousness-double patenting and subject matter eligibility issues impacting her clients’ patent portfolios. Meghan also represents clients in both investor-side and target-side due diligence, in deals from seed funding to initial public offerings.Prior to law school, Meghan attended graduate school at the University of California, Los Angeles, where she received a Ph.D. in biological chemistry based on her work on protein-protein and protein-DNA interactions at a molecular level. Meghan is the author of several scientific publications and has presented her research at international conferences.Meghan received her J.D. from the University of Southern California Law School and spent a year as a visiting student at Santa Clara University, where she focused on intellectual property.

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Dr. Meghan Poon counsels clients on patent preparation and prosecution, portfolio strategy, and IP due diligence in the areas of biotechnology and biologics. She has significant experience in diverse technologies including antibodies, cell therapies, gene therapies, diagnostics, and gene-edited plants.

Meghan Poon

Wolfgang advises clients on contentious and non-contentious matters involving their most valuable intellectual property assets in life sciences, digital, and high-tech industries.His subjects of focus include research and development collaborations, complex licensing agreements, and other technology transactions, as well as know-how protection strategies, and employee invention law. He also has substantial experience in litigating patents, trademarks, and other intellectual property assets, often in a multijurisdictional context. In addition, Wolfgang and his team frequently clear trademarks and ad campaigns and prosecute trademark applications.Wolfgang is co-editor of our <a href="https://lifesciences.mofo.com/" dir="ltr" target="_blank">MoFo Life Sciences Blog</a>.Wolfgang is a partner of Morrison Foerster based in our German office in Berlin.<h4 dir="ltr">Representative Transactional Matters</h4><ul dir="ltr"><li>U.S.-based BioTech fund on various research collaborations and other transactions with German start-ups or research institutions.</li><li>Negotiate multimillion-euro strategic partnership between two AgTech leaders concerning the development and commercialization of pest-resistant transgenic traits.</li><li>Craft global multi-million collaboration regarding AI-powered robotic MaaS.</li><li>UK-based digital health company on product roll-out of RPM applications in Germany; coordinate international expansion.</li><li>Advise numerous German start-ups on their U.S. expansion.</li><li>Draft diverse global patent and know-how license agreements in the areas of AgTech and life sciences—including gene licensing and licensing of genome editing technologies (e.g., CRISPR)—and medical devices; draft correlating supply and distribution agreements.</li><li>Structure IP rights in connection with joint ventures and other M&A transactions, including the carve-out of a patent-heavy semiconductor business comprising nine jurisdictions into a German–U.S. joint venture.</li><li dir="ltr">Advise on government-funded, multi-partner R&D projects and/or R&D projects with academic institutions, as well as on employee invention law.</li></ul><h4 dir="ltr">Representative Contentious IP Matters</h4><ul dir="ltr"><li>Lead counsel in an international dispute between software companies on rights and obligations following termination of a multi-million licensing and distribution arrangement; coordinate local counsel.</li><li>Defend Japanese chip manufacturer in high-profile SEP-litigation; advise on global settlement arrangement.</li><li>Represent leading internet retailer in patent infringement and concurrent invalidity proceedings in the context of a multijurisdictional dispute concerning touch-screen technology.</li><li>Represent diverse pharmaceutical and life sciences companies in national and cross-border patent infringement proceedings and other technology-related disputes, including preliminary injunctions as well as pre‑trial discovery and inspection proceedings, concerning, inter alia, drug-coating technologies, toner cartridges, medicinal gases, transgenic plants, and vaccines.</li><li dir="ltr">Conduct trademark, copyright, and false advertising litigation, including, most notably, a high-profile trademark litigation for a German bank, and a nine-country cross-border trademark litigation involving a famous pharmaceutical brand.</li></ul>

Dr. Wolfgang Schönig berät Mandanten zum Schutz des geistigen Eigentums sowohl in streitigen als auch nichtstreitigen Angelegenheiten, mit einem besonderen Fokus auf die IP-rechtliche Beratung von Unternehmen aus den Bereichen Life Sciences, Digitalwirtschaft und High-Tech.Zu seinen Beratungsschwerpunkten gehören Forschungs- und Entwicklungskooperationen, komplexe Lizenzvertragsgestaltungen und andereTechnologie-Transaktionen, sowie Know-how-Schutz-Strategien und das Arbeitnehmererfinderrecht. Er verfügt zudem über umfangreiche Prozesserfahrung zur Durchsetzung von Patenten, Marken- und anderen IP-Rechten, häufig auch in einem grenzüberschreitenden Kontext. Darüber hinaus bewertet Dr. Wolfgang Schönig zusammen mit seinem Team regelmäßig die Rechtskonformität von Werbekampagnen, prüft die Verfügbarkeit von Marken und entwickelt entsprechende Anmeldestrategien.Dr. Wolfgang Schönig ist Co-Editor des Life Sciences Blogs von Morrison Foerster.Er hat seinen Doktortitel an der Heinrich-Heine-Universität Düsseldorf und seinen LL.M. an der Fordham School of Law in New York erworben, jeweils mit Schwerpunkt im gewerblichen Rechtsschutz. Seinen MBA-Abschluss erhielt er von der European University in Barcelona.Dr. Wolfgang Schönig ist Partner des deutschen Büros von Morrison Foerster in Berlin.<h4 dir="ltr">Repräsentative Transaktionen</h4><ul><li dir="ltr">BioTech-Fonds mit Sitz in den USA bei verschiedenen Forschungskooperationen und anderen Transaktionen mit deutschen Start-ups oder Forschungseinrichtungen</li><li dir="ltr">Verhandlung einer hochvolumigen strategischen Partnerschaft zwischen zwei Technologieführern im Bereich Crop Science betreffend der Entwicklung und Kommerzialisierung von bestimmten Resistenzen</li><li dir="ltr">Gestaltung einer globalen Multi-Millionen-Zusammenarbeit für KI-gestützte Roboter</li><li dir="ltr">Ein in Großbritannien ansässiges Unternehmen für digitale Gesundheit bei der Markteinführung von RPM-Anwendungen in Deutschland; Koordination der internationalen Expansion</li><li dir="ltr">Beratung zahlreicher deutscher Start-ups bei deren US-Expansion</li><li dir="ltr">Strukturierung und Verhandlung diverser Patent- und Know-How-Lizenzen in den Bereichen Ag Tech und Life Sciences – einschließlich Fragen zu genome editing wie CRISPR-Medizingeräte, sowie Gestaltung von Softwarelizenzverträgen und Erstellung korrespondierender Liefer- und Vertriebsvereinbarungen</li><li dir="ltr">Strukturierung von IP-Rechten im Zusammenhang mit Joint Ventures und anderen M&A-Transaktionen, darunter die Koordination eines neun Länder umfassenden IP Carve-Outs im Rahmen eines Halbleiter-JVs</li><li dir="ltr">Beratung zu staatlich geförderten Multi-Partner F&E-Projekten und/oder F&E-Projekten mit akademischen Einrichtungen sowie zum Arbeitnehmererfindungsrecht</li></ul><h4 dir="ltr">Repräsentative IP-Streitigkeiten</h4><ul><li dir="ltr">Lead Counsel in einem internationalen Rechtsstreit zwischen Softwareunternehmen über Rechte und Pflichten nach Beendigung einer millionenschweren Lizenz- und Vertriebsvereinbarung; Koordinierung der lokalen Anwälte</li><li dir="ltr">Verteidigung eines japanischen Chipherstellers in einem prominenten Streitfall bezüglich Standardessentieller Patente (SEP); Beratung zu einer globalen Vergleichsregelung</li><li dir="ltr">Verteidigung einer führenden Internetplattform gegen Ansprüche eines Patenttrolls wegen vermeintlicher Verletzung von Patent bezüglich Touchscreen-Technologie sowie korrespondierende US-Streitigkeiten</li><li dir="ltr">Vertretung von Pharma- und Life Science-Unternehmen in nationalen und grenzüberschreitenden Patentverletzungsverfahren und anderen technologiebezogenen Streitigkeiten, einschließlich einstweiliger Verfügungsverfahren und vorprozessualer Beweissicherungs- und Besichtigungsverfahren, unter anderem in Bezug auf Arzneimittelbeschichtungstechnologien, Tonerkartuschen, medizinische Gase, transgene Pflanzen und Impfstoffe</li></ul>

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Wolfgang Schönig is a partner of Morrison Foerster (International) LLP based in our German office in Berlin. His practice specialty is advising on IP aspects relative to transactions in, among others, the life sciences, AgTech and pharmaceuticals industry, as well as legal representation in IP disputes. Wolfgang is specialized in research and development collaborations, complex licensing agreements, technology acquisitions, know-how protection strategies, and employee invention law.

Wolfgang Schönig focuses his practice on IP aspects relative to transactions in the digital, telecoms, high tech, life sciences, and pharmaceuticals industry, as well as legal representation in IP disputes.

Wolfgang Schönig advises clients on IP aspects relating to transactions in, among others, the life sciences, AgTech and pharmaceuticals industry, as well as legal representation in IP disputes. His additional focus areas include research and development collaborations, complex licensing agreements, technology acquisitions, know-how protection strategies, and employee invention law.

Wolfgang Schönig

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The Consolidated Appropriations Act for 2023 was signed into law on December 29, 2022 and includes the Food and Drug Omnibus Reform Act (FDORA).  FDORA authorizes a variety of new and important amendments to the Food, Drug, and Cosmetic Act (FDCA) governing drugs, medical devices, and clinical trials, as well as cosmetics and other personal care products.  FDORA enacts many of the amendments to the FDCA that were previously drafted and negotiated as part of Congress’s reauthorization of the U.S. Food and Drug Administration’s (FDA) user fee programs.  Some key provisions of FDORA are summarized below.Generally Applicable Reforms<ul><li>Clinical Trial Diversity – Several FDORA provisions are aimed at addressing the need for racial, ethnic, gender, and social diversity in human clinical research.  Previously, while FDA had encouraged and sometimes requested that sponsors enroll more diverse patient populations in late-stage clinical trials of FDA-regulated products, it did not have the authority to mandate such measures.  FDORA requires sponsors to submit “diversity action plans” for phase 3 clinical trials or other pivotal studies for drugs and devices, unless otherwise waived or exempted.  The action plans must include the sponsors’ goals for enrollment, the underlying rationale, and an explanation of how the sponsor plans to achieve them.  FDA is tasked with issuing new guidance on diversity action plans and hosting at least one public workshop to solicit input from industry stakeholders on increasing diversity in enrollment and encouraging clinical study participation that reflects the prevalence of the disease among demographic subgroups.  The public workshop will take place sometime in 2023.</li><li>Real-World Data and Real-World Evidence (RWD/E) – FDORA requires FDA to issue guidance on considerations for the use of RWD/E to support regulatory decision-making for drugs and devices.  FDA must also conduct public workshops related to development of endpoints for rare diseases, which may include, “as appropriate, the use of [RWD/E] to support the validation of efficacy endpoints . . . for rare diseases.”</li><li>Pre-approval Communications with Payors – FDORA provides that both drug and device manufacturers are permitted to share certain information with payors, formulary committees, and similar entities regarding investigational products and investigational uses of approved products.  This amendment codifies FDA’s existing policy on pre-approval communications with payors that was detailed in its<a href="https://www.fda.gov/media/133620/download" target="_blank"> Guidance for Industry on Drug and Device Manufacturer Communications with Payors, Formulary Committees, and Similar Entities</a> (June 2018).</li></ul>Drug Reforms<ul><li>Accelerated Approval – FDA requested various updates to the language in the FDCA authorizing the agency to grant accelerated marketing approval to certain products for serious or life-threatening disease or conditions.  FDORA amends FDA’s accelerated approval process for drugs and biologics by:</li><ul><li>Allowing FDA to require the sponsor to have confirmatory clinical trials underway before accelerated approval is awarded.</li><li>Requiring sponsors of products granted accelerated approval to submit progress reports for post-approval studies to FDA every six months.  Information from the progress reports must be publicly available on the FDA website.</li><li>Giving FDA the option to use expedited procedures to withdraw approval if the confirmatory trail fails to verify the product’s clinical benefit.</li><li>Requiring FDA to post the rationale for any decision not to require a post-approval study in connection with an accelerated approval.</li><li>Ordering the establishment of an intra-agency Accelerated Approval Council with senior official members from various FDA centers and divisions, including the Center for Drug Evaluation and Research (CDER) and the Center for Biologics Evaluation and Research (CBER), to “ensure the consistent and appropriate use of accelerated approval” across the agency by engaging directly with product review teams which may include providing training and developing guidance.  The Council must meet at least three times a year and publish an annual report detailing its activities.</li></ul></ul><ul><li>Bioresearch Monitoring (BIMO) Inspections – FDORA explicitly permits FDA inspection of facilities involved in the preparation, conduct, or analysis of clinical and non-clinical studies submitted to FDA, in addition to other persons holding study records or otherwise involved in the study process, such as contract research organizations and institutional review boards.  FDA must issue draft guidance on this additional inspection authority within 18 months of FDORA enactment.</li><li>Classification of Certain Products as Drugs – A provision in FDORA clarifies that any contrast agent, radioactive drug, or over-the-counter monograph drug is classified as a drug and not a device.  This provision was in direct response to Genus Medical Technologies, LLC v. FDA, 994 F.3d 631 (D.C. Cir. 2021), in which the court found that FDA lacked discretion to regulate a product meeting the statutory definition of a device as a drug.  Nonetheless, there may still be examples of other products that have been traditionally regulated as drugs but should be regulated as devices that are not included in these products that are deemed to be drugs.</li></ul>Medical Device Reforms<ul><li>Cybersecurity of Devices – FDORA imposes new premarket submission requirements for devices that meet the definition of a “cyber device” which must now include cybersecurity information, including a software bill of materials and plan to address cybersecurity vulnerabilities.  “Cyber devices” are defined as those that include software (including SAMD), have the ability to connect to the internet, and contain any such technological characteristics that could be vulnerable to cybersecurity threats.  FDA has the authority to identify devices or categories of devices that are exempt from the requirements.  FDORA also amends the list of prohibited acts in the FDCA to include failure to comply with these cybersecurity requirements.</li><li>Predetermined Change Control Plans – FDORA amends the FDCA to provide that predetermined change control plans may be approved in premarket applications and supplements or cleared under premarket notifications (510(k)).  If a predetermined change control plan is approved or cleared, then a change to a device that is consistent with such approved or cleared plan does not require submission of a supplemental PMA or new 510(k).</li><li>Device Bans for Specific Uses – FDORA expands FDA’s authority to ban medical devices under section 516 of the FDCA to allow FDA to ban specific intended uses.  This provision is enacted in response to the decision in Judge Rotenberg Educ. Ctr., Inc.v. FDA, 3 F.4th 390 (D.C. Cir. 2021), which held that FDA could not ban individual intended uses of an otherwise legally marketed device.</li></ul>Cosmetic and Consumer Product ReformsAs detailed in a previous <a href="https://lifesciences.mofo.com/topics/congress-expands-fda-authority-over-cosmetics-regulation?" target="_blank">blog post</a>, FDORA included the Modernization of Cosmetics Regulation Act (MoCRA), which strengthens FDA’s authority over the regulation of cosmetic products.  MoCRA introduces a comprehensive structure that implements regulatory requirements for responsible parties involved in the manufacture of cosmetic products, including facility registration, product and ingredient listing, serious adverse event reporting, compliance with product labeling requirements, and maintenance of records substantiating product safety.  MoCRA also tasks FDA with issuing regulations to establish good manufacturing practices for cosmetics and standardized testing methods for detecting asbestos in talc-containing cosmetic products.  In the prior blog post, the MoFo FDA + Healthcare Regulatory team discusses the specifics of the cosmetics regulation reforms and FDA’s expanded authority.In addition to MoCRA, FDORA also included the INFORM (Integrity, Notification, and Fairness in Online Retail Marketplaces) Consumer Act in an effort to deter online sale of counterfeit goods.  Among other things, the INFORM Consumers Act requires online retail marketplaces that include third-party sellers of consumer products to verify the identity of “high-volume third-party sellers” by authenticating the seller’s government ID, tax ID, bank account information, and contact information.Notable OmissionsWhile many of the policy riders left out of the user fee reauthorization legislation were included in FDORA, it is important to note that Congress did not reach agreement for some other key regulatory reform measures in time for inclusion as part of the omnibus bill.VALID Act – The Verifying Accurate Leading-edge IVCT Development (VALID) Act would have rewritten FDA regulation of in vitro diagnostics (IVDs), redefining them as in vitro clinical tests (IVCTs), a new category of medical device products that includes both laboratory-developed tests (LDTs) and in vitro diagnostics.  The VALID Act would have conferred on FDA explicit statutory authority over LDTs for the first time and subjected this product category to requirements for registration and listing, premarket review and approval, adverse event reporting, and related processes for FDA oversight.Product Listing for Dietary Supplements – The original Senate version of the user fee reauthorization bill also contained provisions establishing product listing requirements for dietary supplements that would require dietary supplement manufacturers, distributors, and packers to list product information with FDA.  The provisions would require FDA to provide unique listing numbers for each listed supplement and conduct facility inspections for high-risk facilities, suppliers, and dietary supplement types.

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Brigid is a food, drug, and medical device lawyer who counsels life sciences companies on a wide range of U.S. Food & Drug Administration pre- and post-market regulatory issues.

Brigid DeCoursey Bondoc

Brigid is a food, drug, and medical device lawyer who counsels life sciences companies on a wide range of U.S. Food & Drug Administration pre- and post-market regulatory issues.

Brigid Bondoc

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FDORA Passage Brings Significant Changes to FDA’s Drug, Device, and Cosmetic Authorities

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The Consolidated Appropriations Act for 2023 was signed into law on December 29, 2022 and includes the Food and Drug Omnibus Reform Act (FDORA).  FDORA authorizes a variety of new and important amendments to the Food, Drug, and Cosmetic Act (FDCA) governing drugs, medical devices, and clinical trials, as well as cosmetics and other personal care products.  FDORA enacts many of the amendments to the FDCA that were previously drafted and negotiated as part of Congress’s reauthorization of the U.S. Food and Drug Administration’s (FDA) user fee programs.  Some key provisions of FDORA are summarized below.

FDORA Passage Brings Significant Changes to FDA’s Drug, Device, and Cosmetic Authorities

The Federal Trade Commission (FTC) has enforced its Health Breach Notification Rule (the “HBNR”) for the first time since it was enacted in 2009. On February 1, the FTC announced a first-of-its-kind proposed order (the “Order”) with digital health platform GoodRx Holdings Inc. (“GoodRx”), a telehealth and drug discount provider. The FTC alleged that GoodRx shared users’ information with third-party advertising companies and advertising platforms contrary to its privacy promises, notably scrutinizing GoodRx’s ad targeting and use of third-party tracking technologies. Read the <a href="https://www.mofo.com/resources/insights/230208-ftc-brings-first-enforcement-action" target="_self">full client alert</a>.<div></div>

FTC Brings First Enforcement Action of the Health Breach Notification Rule

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Melissa Crespo helps clients navigate a wide range of challenging privacy compliance and data security matters with a focus on the health information and the health care sector.

Melissa M. Crespo

Melissa Crespo

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FTC Brings First Enforcement Action of the Health Breach Notification Rule

New York Enacts Employee Monitoring Notification Law

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The Federal Trade Commission (FTC) has enforced its Health Breach Notification Rule (the “HBNR”) for the first time since it was enacted in 2009.

The U.S. Supreme Court recently declined to review a Second Circuit decision that blocked Pfizer from implementing a cost sharing assistance program. Pfizer had sought to cover out-of-pocket expenses for financially eligible Medicare patients who need tafamidis, the only approved drug by the Food & Drug Administration (FDA) to treat a rare heart condition. In 2019, Pfizer sought an advisory opinion from the Department of Health and Human Services (HHS) regarding the subsidy program, and in September 2020, HHS advised Pfizer that the program “plainly would” involve prohibited conduct under the Anti-Kickback Statute (AKS) because it would induce Medicare patients to purchase this medication. Pfizer brought a suit to challenge the determination, which ended with the Supreme Court’s denial of certiorari. The decision has special implications for the pharmaceutical industry and potentially impacts any entity that conducts business with federal health care programs.Covering copays potentially encouraged Medicare patients to seek Pfizer’s drug, implicating the Anti-Kickback Statute.The AKS, <a href="https://www.govinfo.gov/content/pkg/USCODE-2010-title42/pdf/USCODE-2010-title42-chap7-subchapXI-partA-sec1320a-7b.pdf" target="_blank">42 U.S.C. § 1320(a)-7b(b)</a>, aims to prevent fraud in federal health care programs and financial “renumerations” (including kickbacks, bribes, or rebates) for inducing the purchase of particular health care products or services. AKS violations can carry felony criminal liability with up to 10 years’ imprisonment. In addition, HHS has the authority to exclude any individual or entity from federal health care programs if it determines they have violated the AKS.The HHS Office of Inspector General (HHS-OIG) issued a special advisory bulletin in 2005 that first alerted companies how patient assistance programs may violate the AKS. The bulletin stated that manufacturers’ programs could implicate the AKS because “the manufacturer would be giving something of value (i.e., a subsidy) to beneficiaries to use its product.” <a href="https://www.govinfo.gov/content/pkg/FR-2005-11-22/pdf/05-23038.pdf" target="_blank">70 Fed. Reg. 70, 623 (Nov. 22, 2005)</a>. The bulletin explained that these programs induce patients to seek specific drugs and “present all of the usual risks of fraud and abuse associated with kickbacks, including steering beneficiaries to particular drugs; increasing costs to Medicare; providing a financial advantage over competing drugs; and reducing beneficiaries’ incentives to locate and use less expensive, equally effective drugs.” Id. at 70,625.In 2019, Pfizer sought an HHS-OIG advisory opinion regarding a proposed Direct Copay Assistance Program for eligible Medicare patients that need tafamidis. Pfizer wanted to cover the majority of the approximately $13,000 annual cost sharing obligations, and eligible patients would only pay $35 a month. Pfizer was concerned that many “middle-income” Medicare patients are unable to afford the annual cost sharing obligations and that even if they were to cut the price of tafamidis in half, the patient annual cost sharing obligations would be approximately $8,000, which still remains a significant financial barrier for many patients. Pfizer pointed to one study that indicated 49% of cancer patients failed to refill prescriptions when there was a $2,000 copay. Pfizer emphasized that it would not provide financial incentives to physicians to favor tafamidis or use the program to solicit new patients.In 2020, HHS-OIG issued an unfavorable opinion that found Pfizer’s proposed program would involve conduct prohibited under the AKS. The opinion specified the program would induce a beneficiary to purchase tafamidis by “removing the financial impediment, and the Medicare program would bear the costs.” <a href="https://oig.hhs.gov/documents/advisory-opinions/768/AO-20-05.pdf" target="_blank">HHS-OIG Advisory Opinion No. 20-05</a>. HHS-OIG held that the program “plainly would involve remuneration to an individual to induce that individual to purchase an item for which payment may be made under a Federal health care program.” As a result, HHS-OIG concluded that the program could violate the AKS because it presented some of the same concerns of fraud and abuse associated with kickbacks that it alerted the public to in its 2005 bulletin – increased costs to Medicare, beneficiary steering and anti-competitive effects, and interference with or skewing clinical decision-making.Pfizer argued that violating the AKS requires “corrupt intent,” but the district court and Second Circuit disagreed.Pfizer sued in federal court under the Administrative Procedure Act to challenge the HHS-OIG determination. The district court agreed with HHS-OIG, granted summary judgment for the government and the Second Circuit affirmed in a unanimous <a href="https://aboutblaw.com/37z" target="_blank">decision</a>. The Second Circuit explained “Pfizer’s primary argument was that the Direct Copay Assistance Program must be administered with a ‘corrupt intent’ to violate the AKS, and Pfizer defines ‘corrupt’ intent as a quid pro quo that ‘improperly or corruptly’ skews the patient’s decision-making.” The district court and the Second Circuit examined the plain language of the AKS which prohibits “any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind to any person to induce such person . . . to purchase . . . any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program.” Because nothing in the text of the AKS requires a “corrupt intent,” the courts sided with the government because the Direct Program would persuade or induce Medicare beneficiaries to purchase the drug.    The Supreme Court’s denial fits into a broader government crackdown on high-cost medications.Pfizer <a href="https://www.supremecourt.gov/DocketPDF/22/22-339/242710/20221007141713303_No.%20-__%20Pfizer%20Petition%20and%20Appendix.pdf" target="_blank">sought review of</a> the Second Circuit decision, using the same argument that corrupt intent to improperly skew patient decision-making was a required element in an AKS violation. The Supreme Court denied review earlier this month.The Second Circuit decision remains in effect and will likely reinforce the Department of Justice’s efforts to target programs designed to help patients pay for high-cost medications, netting the federal government <a href="https://www.bloomberglaw.com/product/blaw/bloomberglawnews/bloomberg-law-news/XA30SOB8000000?#jcite" target="_blank">over $1 billion in settlements</a> between 2017 and 2021. These enforcement efforts coincide with a federal and state legislative efforts to reduce drug prices, including new sweeping requirements of the Inflation Reduction Act that, among other things, require the federal government to negotiate prices for some Medicare Part B and D drugs, require drug companies to pay rebates to Medicare if prices rise faster than inflation, cap out-of-pocket spending for Part D enrollees and limit monthly cost sharing for insulin. Targeting the overall cost of prescription drugs, including high-cost medications, clearly remains a priority for regulators in many levels of government, and the AKS is another tool with a legal standard that favors regulators.Takeaway: Seek advice early because even companies with good intentions can unintentionally violate the AKS.Pfizer’s strategy to seek an HHS advisory opinion on the proposed program was prudent, even if it did not end with the desired result. Pharmaceutical manufacturers are under special scrutiny when providing any financial benefit related to their own drugs, even if it is aimed at helping patients that are in special need. The Department of Justice and other regulators are likely to continue the broader push to enforce cost-control functions within Medicare and other federal programs and scrutinize any programs associated with high-cost medications. Thus, it is similarly prudent for any health care company to seek advice early when designing financial assistance programs that may implicate federally funded programs like Medicare or Medicaid.

Supreme Court Denies Review of Cost Sharing Assistance Program

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Adam L. Braverman is a partner in Morrison Foerster’s Investigations + White Collar Defense practice. Adam formerly served as an Associate Deputy Attorney General for the U.S. Department of Justice (DOJ) and as the U.S. Attorney for the Southern District of California. 

Adam L. Braverman

Adam L. Braverman is a partner in Morrison Foerster’s Investigations + White Collar Defense group. He represents companies and their executives in internal and government investigations, white collar criminal defense matters, and parallel civil litigation related to allegations of bribery, government procurement fraud, COVID-19 and CARES Act fraud, anti-money laundering violations, and matters involving organized crime.

Adam Braverman

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Seth Lloyd, a member of Morrison Foerster’s Appellate and Supreme Court practice, has been counsel in more than a hundred appeals in federal and state courts nationwide.

Seth W. Lloyd

Seth Lloyd is an associate in Morrison Foerster’s Appellate and Supreme Court Practice with broad experience briefing and arguing appeals. Seth has particular experience in patent appeals before the Federal Circuit. He has been a primary author of successful briefs on a wide range of technologies, from medical devices to chemistry to computer hardware and software. He also has successfully argued multiple times in that Court, including obtaining reversal of three Patent Trial and Appeal Board decisions in a consolidated appeal for a computer memory designer. Before joining Morrison Foerster, Seth served as a law clerk for Judge Richard G. Taranto of the Federal Circuit. He earned his J.D. from Stanford Law School and also holds a Ph.D. in electrical engineering from Stanford University.

Seth Lloyd

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Supreme Court Denies Review of Cost Sharing Assistance Program

De Novo Classification Final Rule to Take Effect Next Year

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The U.S. Supreme Court recently declined to review a Second Circuit decision that blocked Pfizer from implementing a cost sharing assistance program. 

On December 20, 2022, the Federal Trade Commission (FTC) issued its <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/Health-Guidance-508.pdf" target="_blank">Health Products Compliance Guidance</a> (“Health Products Guidance”). This is the first update in nearly 25 years to FTC’s guidance regarding advertising claims for dietary supplements, foods, over-the-counter drugs, and other health-related products. The update draws on the over 200 new cases since the last guidance was published to illustrate potentially false and misleading claims and proper claim substantiation. Key updates and changes include:<ul><li>23 new examples to broaden the guidance to cover foods, over-the-counter drugs, devices, and other health-related products;</li></ul><ul><li>Clarification of FTC’s coordination with the Food and Drug Administration (FDA) regarding health product claims;</li><li>Detailed guidance on FTC’s standards for proper “clear and conspicuous” disclosure of claim qualifications; and</li><li>Expanded discussion on the required “competent and reliable scientific evidence” and testing methodology required to substantiate health-related claims.</li></ul>I. FTC AND FDA – JURISDICTION AND COOPERATIONFTC and FDA both have jurisdiction over marketing of dietary supplements, foods, non-prescription drugs, devices, and other health-related products. The agencies signed a <a href="http://www.fda.gov/AboutFDA/PartnershipsCollaborations/MemorandaofUnderstandingMOUs/DomesticMOUs/ucm115791.htm" target="_blank">memorandum of understanding</a> that clarifies FDA has primary responsibility for labeling claims (“including the package, product inserts, and other promotional materials available at point of sale”) and FTC has primary responsibility for advertising claims (“traditional TV, radio, print, and internet ads, but also more broadly to [a] variety of marketing techniques and promotion methods”). But as explained in the Health Products Guidance, the agencies may regulate the same type of claims for the same type of product differently. For example, while FDA evaluates a claim differently depending on whether the product is a supplement, food, or drug, FTC treats all health product claims the same. Unlike FDA, FTC does not pre-approve health claims or require notification for structure/function claims. And while FTC gives great deference to claims that FDA has endorsed, an FDA assessment is not dispositive of whether a claim may be deceptive according to FTC.II. FTC’S EVALUATION OF HEALTH-RELATED PRODUCT ADVERTISINGThe Health Products Guidance outlines FTC’s two-step process for evaluating the truthfulness and accuracy of advertising of dietary supplements, foods, over-the-counter drugs, and other health-related products. The first step of the process is to “identify all claims the advertising materials communicate to reasonable consumers.” The second step is “FTC assesses the scientific evidence upon which the company relies to determine whether there is adequate support for those claims.” Examples throughout the Health Products Guidance help illustrate how FTC applies these standards to claims and advertising.Step One: Identifying and Interpreting Claims and AdvertisementsWhen identifying and interpreting advertising claims, FTC focuses on the consumer’s understanding of an advertisement rather than the marketer’s intent because the intended audience may have special attributes that render them more susceptible to certain claims. For example, “terminally ill consumers might be particularly susceptible to exaggerated cure claims.” The Health Products Guidance explains that deceptive advertising may arise from either: (1) direct or implied claims about the benefits, safety, or other characteristics of the product, or (2) omitted information that “is material in light of the claims in the ad or with respect to how consumers would customarily use the product,” such as not indicating that a vitamin may cause fatigue.When disclosure of material information is necessary to prevent advertising from being false or misleading, the disclosure must be “clear and conspicuous.” In other words, mere inclusion of qualifying information is insufficient, and to prevent an ad from being deceptive, advertisers should ensure that a written disclosure is “easily noticed, read, and understood” and that an audible disclosure is “delivered in a volume, speed, and cadence so that it can be easily heard and understood.” Ultimately, whether a disclosure is sufficiently clear and conspicuous depends on whether it has an effective impact on a reasonable consumer.Step Two: Evaluating Claim SubstantiationFTC’s updated guidance dives deep on its second step in evaluating an advertisement’s truthfulness: whether a health product claim is properly substantiated with “competent and reliable scientific evidence.” When evaluating whether the advertiser has a reasonable basis to make a claim, FTC considers the following five factors.<div data-reactroot=""><img src="https://media2.mofo.com/v3/images/blt5775cc69c999c255/bltf85bc77f18179737/63d97ed3ca59cf11374cf0c6/230130-ftc-issues-graph.jpg?format=auto&amp;quality=60" alt="life science chart"/></div>Under this framework, FTC generally requires randomized, controlled human clinical trials for most health benefit claims because they are needed to prove a causal link, but may make some exceptions where experts in the field accept alternative substantiation and human clinical trials are not feasible. The Health Product Guidance explains that to serve as adequate substantiation, a reliable, quality clinical trial should generally include randomization, a control group, double blinding, statistically significant results, and clinically meaningful results, among other characteristics.But the totality of the evidence must be considered in the context of the available scientific evidence in the applicable field and the actual claim being made. An individual study supporting a claim is not enough to make a claim truthful if the surrounding evidence in the field runs contrary to the study.III. OTHER ADVERTISING ISSUESThe Health Product Guidance also discusses five distinct health product advertising issues that may draw FTC scrutiny.<ol><li>Consumer testimonials or expert endorsements.FTC cautions against claims based on consumer testimonials or expert endorsements, unless those claims can be substantiated, as the advertiser is ultimately responsible for the misleading use of an endorsement.</li><li>Traditional use claims. Claims based on traditional use, such as an advertisement that indicates an herbal tea mixture has been used to aid digestion for hundreds of years, are not per se acceptable, and will be considered misleading if such claims are not substantiated.</li><li>DSHEA disclaimers. Mere use of the Dietary Supplement Health and Education Act (DSHEA) disclaimer stating that the product has not been evaluated by FDA and that the product is not intended to diagnose, treat, cure, or prevent any disease will not cure an otherwise deceptive advertisement or claim.</li><li>FDA oversight.Advertisers should be mindful “not to mischaracterize the extent to which a product or claim[GJL1]  has been reviewed, authorized, or approved by the FDA.”</li><li>Third-party literature. FTC will evaluate whether reference to third-party literature may constitute an implied and deceptive claim on a case-by-case basis.</li></ol>Advertisers of health-related products must be especially diligent about what claims they are making. Both FTC and FDA have jurisdiction over this area and both agencies have increased enforcement efforts in recent years for false and misleading claims. And as FTC’s updated Health Products Guidance demonstrates, advertising for health-related products must be nuanced and thoughtfully considered to avoid potential pitfalls that could lead to regulatory enforcement and litigation.Kai Mindick, a former law clerk in our Austin office, contributed to the writing of this post.