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Trends and developments

Legal developments

Are there any notable trends or recent legal developments in your jurisdiction’s pharmaceutical industry?

The Food and Drug Administration recently revised its regulations governing submission and approval of new drug applications and abbreviated new drug applications. In the patent space, the America Invents Act provides a streamlined administrative process for challenging the validity of pharmaceutical (and other) patents. Congress also created an abbreviated pathway for biosimilar products, including a regulatory scheme for handling related patent disputes.

Legal framework

Legislation

What is the primary legislation governing medicinal products in your jurisdiction?

The Federal Food, Drug and Cosmetic Act and associated regulations set forth in Title 21 of the Code of Federal Regulations govern the regulation of prescription and over-the-counter drugs, including biological therapeutics and generic drugs. Other legislation governing biological therapeutics includes the Public Health Services Act (which lays out the approval process) and the Biologics Price Competition and Innovation Act ((part of Obamacare) relates to biosimilars).

Are any legislative changes proposed or expected in the near future?

The pricing of pharmaceuticals, both branded and generic, was a hot topic on the 2016 campaign trial and remains a major issue facing the industry. The new administration in Washington is expected to attempt legislative and regulatory reform in 2017, including potential changes to or repeal of the Affordable Care Act (Obamacare).

Regulation

Which bodies regulate medicinal products in your jurisdiction and what is the scope of their powers?

The Food and Drug Administration (FDA) has broad authority to regulate and ensure the safety, effectiveness, quality and security of human and veterinary drugs, vaccines and other biological products and medical devices. Within the FDA, the Centre for Drug Evaluation and Research regulates over-the-counter and prescription drugs, including biological therapeutics and generic drugs.

Are any other legal regimes applicable to the trade of medicinal products (eg, competition, international trade, data protection, consumer protection)?

Imported drug products are subject to inspection by the US Bureau of Customs and Border Protection, and the FDA may refuse admission of any drug that appears to be unapproved, misbranded or adulterated. Foreign drug manufacturers that wish to import drugs into the United States must register with the FDA.

Imported and exported medicinal products may also be subject to regulation as controlled substances by the US Drug Enforcement Administration, and medicinal products derived from animals (including certain biologics) are subject to additional regulation by the US Department of Agriculture.

Are any medicinal products exempt from regulation (eg, complementary and alternative medicines)?

The Food and Drug Administration does not review or approve dietary supplements based on their safety and effectiveness; instead, it merely monitors and researches adverse events.

Supply

Manufacture

What is the authorisation procedure for the manufacture of medicinal products in your jurisdiction?

The approval process for new drug and generic drug marketing applications includes a review of the manufacturer's compliance with the Current Good Manufacturing Practices (CGMP) regulations. Food and Drug Administration (FDA) inspectors determine whether the firm has the necessary facilities, equipment and skills to manufacture the new drug for which it has applied for approval. Decisions regarding compliance with CGMP regulations are based on inspection of the facilities, sample analyses and the firm’s compliance history. This information is summarised in reports which represent several years of the firm’s history (www.fda.gov/Drugs/DevelopmentApprovalProcess/Manufacturing/ucm090016.htm, see also Section 210 of Title 21 of the Code of Federal Regulations).

What is the fee for obtaining authorisation?

Fees for obtaining authorisation are set out in the Prescription Drug User Fee Act. The act provides fees for, among other things:

  • approval of a new drug submitted under Section 505(b)(1) of the Federal Food, Drug and Cosmetic Act after September 1 1992;
  • approval of a new drug submitted under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act after September 30 1992, which requires approval of:
    • a molecular entity which is an active ingredient (including any salt or ester of an active ingredient); or
    • an indication for a use that had not been approved under an application submitted under Section 505(b); and
  • licence of certain biological products under Section 351 of the Public Health Services Act submitted after September 1 1992.

The legislative authority for Prescription Drug User Fee Act expires in September 2017. Reauthorisation for 2018 to 2022 is expected. The FDA website should be consulted for schedule of fees. 

What is the validity period for authorisation?

As the review of the manufacturer’s compliance with the CGMP regulations was part of the marketing authorisation, the validity period would be the same as that of the marketing authorisation, which is unlimited unless the regulatory authority decides otherwise. 

Additionally, manufacturers of medicinal products are required to register annually with the FDA. Such manufacturers will be inspected at least once within two years from the date of registration and at least once in every successive two-year period thereafter.

How robust are the standard good manufacturing practices followed in your jurisdiction?

The FDA requires compliance with the CGMP regulations in the production of medicines. The FDA publishes regulations and guidance documents in the Federal Register and provides links to the CGMP regulations, guidance documents and various resources on its website (www.fda.gov). Section 210 of Title 21 of the Code of Federal Regulations sets forth the CGMP regulations for manufacturing, processing, packing and holding of drugs and Section 211 sets forth the CGMP regulations for finished pharmaceuticals.

To ensure compliance, the FDA inspects facilities manufacturing either active ingredients or finished pharmaceutical products entering the US market regardless of the facility location. Inspections are conducted by trained FDA staff and rely on reports regarding potentially defective drug products to identify inspection sites.

What are the consequences of failure to obtain manufacturing authorisation and/or follow good manufacturing practices?

The CGMP regulations require pre-approval of manufacturing processes. Within the FDA, the Office of Compliance (which is part of the Centre for Drug Evaluation and Research) oversees the pre-approval programme. The Office of Compliance conducts initial CGMP evaluations to determine whether the application or product submitted meets product specific criteria and to ascertain whether the establishment adheres to good manufacturing practices.

Where the failure to meet CGMP requirements results in the distribution of a drug that does not match its labelling, the company may voluntarily recall that product to protect the public from harm. As stated by the FDA: 

While [the] FDA cannot force a company to recall a drug, companies usually will recall voluntarily or at the FDA’s request. If a company refuses to recall a drug, FDA can warn the public and can seize the drug.” (See www.fda.gov/Drugs/DevelopmentApprovalProcess/Manufacturing/ucm169105.htm.)

To address CGMP violations, even where no direct evidence of a defect affecting the drug’s performance exists, the FDA can bring seizure or injunction cases. In a seizure case, the FDA typically asks a court for an order allowing federal officials to take possession of adulterated drugs. In an injunction case, the FDA often asks a court to order compliance with CGMP regulations. Court orders resulting from seizure and injunction may require, among other things:

  • employee training;
  • repair of facilities and equipment; and
  • additional testing to verify product quality.

Criminal cases with penalties, including fines and jail time, may also be brought for CGMP violations.

Distribution

How are the distribution and storage of medicinal products regulated?

Regulation of the distribution and storage of medicinal products in the United States is based on a two-class system:

  • prescription drug products; and
  • non-prescription (over-the-counter) drug products. 

Prescription drugs include controlled and non-controlled substances. ‘Non-prescription drugs’ are generally defined as drugs that are safe and effective for use by the general public without the need for supervision by a healthcare practitioner and therefore without a prescription. The Federal Controlled Substances Act defines a ‘controlled substance’ as "a drug or other substance, or immediate precursor, included in schedule I, II, III, IV, or V [in the act or implementing regulations]". Controlled substances are labelled as such based on their history or potential for abuse.

Subject to certain limited exceptions, the Federal Food, Drug and Cosmetic Act requires FDA approval for a new drug product's intended use before the introduction of the drug product into interstate commerce. It generally governs the labelling, marketing and certain aspects of the distribution of drug products in the United States.

The Drug Supply Chain Security Act 2013, amending the Federal Food, Drug and Cosmetic Act and the Prescription Drug Marketing Act 1987, governs the wholesale distribution of prescription drugs. The Drug Supply Chain Security Act prohibits the wholesale distribution of prescription drugs without a licence in the state from which the prescription drugs are distributed (or an FDA licence in the state if the state does not require a licence), and a licence from any state in which the prescription drugs are distributed if the state requires a licence. Section 205 of Title 21 of the Code of Federal Regulations sets forth requirements for state licensure of wholesale prescription drug distributors, including the storage and handling of prescription drugs and for the establishment and maintenance of prescription drug distribution records. Additionally, the federal Controlled Substances Act and its implementing regulations govern the distribution of controlled substances. State laws establish additional requirements, creating a complex and overlapping set of standards.

The Drug Supply Chain Security Act:

  • limits wholesale distributors of prescription drugs to dealing with authorised trading partners that are licensed as required by applicable federal and state law;
  • provides for drug-tracing requirements;
  • requires wholesale distributors to report their licence status and contact information to the FDA annually;
  • requires wholesale distributors to have a system of verifying the legitimacy of prescription drug products and dealing with suspect and illegitimate products; and
  • notifies the FDA and trading partners of suspected abuses.

The Drug Supply Chain Security Act also directs the FDA to create minimum standards for the handling of prescription drugs by wholesale distributors to replace the set of minimum standards introduced under the Prescription Drug Marketing Act.

Generally, there are limited federal requirements to distribute non-prescription (over-the-counter) drug products in the United States. State law may establish additional requirements for the distribution of over-the-counter drugs.

Beginning in 2015, the Drug Quality and Security Act establishes a framework for a federal system to govern the traceability of drug products in the United States. Until full implementation of this law, certain state laws will also continue to regulate drug product traceability.

Import and export

How are the import and export of medicinal products regulated?

Import and export of medicinal products are primarily regulated by the Centre for Drug Evaluation and Research. The Federal Food, Drug and Cosmetic Act prohibits import or export of unapproved new drugs, meaning any drug that has not been manufactured with FDA approval. Imported drug products are subject to inspection by the US Bureau of Customs and Border Protection and the FDA may refuse admission of any drug that appears to be unapproved, misbranded or adulterated. Foreign drug manufactures that wish to import drugs into the United States must register with the FDA.

Imported and exported medicinal products may also be subject to regulation as controlled substances by the US Drug Enforcement Administration, and medicinal products derived from animals (including certain biologics) are subject to additional regulation by the US Department of Agriculture.

Are parallel imports permitted in your jurisdiction?

The parallel importation of prescription pharmaceuticals for commercial sale is effectively prohibited by the Federal Food, Drug and Cosmetic Act ban on the interstate shipment (which includes importation) of unapproved new drugs (see Section 331 of Title 21 of the Code of Federal Regulations). Unapproved new drugs include both drugs that have not been manufactured in accordance with FDA approval and foreign-made versions of US-approved drugs. The Pharmaceutical Drug Marketing Act amended Section 801(d) of Title 21 (part of the Federal Food, Drug and Cosmetic Act) to make it illegal for anyone but the manufacturer to reimport a prescription medicine into the United States unless authorised by the secretary of health and human services for emergency medical care.

In addition to the regulation of drug importation into the United States by the Federal Food, Drug and Cosmetic Act, other US laws and regulations (including patent, copyright and trademark laws) may affect parallel drug importation. For example, Section 133 of Title 19 of the Code of Federal Regulations permits US Customs and Border Patrol, under appropriate circumstances, to prohibit goods from entering the United States if they are determined to be physically and materially different (eg, drugs formulated or packaged differently) from the articles authorised by the US trademark rights holder. 

Sale and purchase

What rules govern the dispensing, sale and purchase of medicinal products?

State laws and regulations regulate pharmacy practice, as well as the preparing and dispensing of prescription drugs to consumers. Pharmacists and licensed assistants can dispense prescription drugs to consumers pursuant to a prescription from an authorised healthcare professional. State pharmacy laws also establish requirements for:

  • pharmacist licensure;
  • background checks for personnel;
  • storage;
  • preparation;
  • packaging and labelling of prescription drugs;
  • record keeping;
  • security; and
  • other conditions for pharmacies dispensing prescription drugs.

Under the laws of most states, physicians can dispense prescription drugs and over-the-counter drugs to their patients.

State laws govern the licensing and scope of practice of healthcare practitioners, including their prescribing authority. All states permit licensed physicians to prescribe prescription drugs and vary widely in the prescribing authority of other licensed healthcare practitioners.

The federal Drug Enforcement Administration (DEA) and applicable state regulatory agencies require registration of pharmacists and licensed healthcare practitioners maintaining and dispensing controlled substances (as defined by the federal Controlled Substances Act) with the DEA. DEA registration is also required for physicians and other healthcare practitioners prescribing controlled substances.

Generally (but with some state exceptions), the sale of pharmaceutical products not requiring a prescription to consumers does not require state or federal licensing.

In recent years, in response to prescription and over-the-counter drug abuse, federal and state laws have imposed limited dosage rules. Various state laws have been passed to:

  • require consumers to provide identification;
  • prevent ‘doctor shopping’;
  • regulate pain management clinics; and
  • regulate other laws aimed at reducing drug abuse and injury.

Are there any restrictions on the online sale and purchase of medicinal products?

Under federal law, buying prescription drugs from online pharmacies or by mail order is legal, so long as orders are filled with medications approved by the FDA pursuant to a valid prescription, as defined under applicable state law and dispensed from a licensed US pharmacy. To operate legally within the United States, mail order and online pharmacies are generally subject to:

  • laws restricting importation of medicinal products;
  • federal laws relating to controlled substances; and
  • state laws governing prescribing authority and pharmacy practice.

State laws vary in the requirements for a valid prescription (eg, with regard to the requirements for the medical consultation with the prescriber). The federal Ryan Haight Online Pharmacy Consumer Protection Act 2008 prohibits remote medical consultation online to prescribe a controlled substance without a special DEA permit.

Named patient supply

What rules govern named patient supply of pre-launch medicinal products?

Under the Federal Food, Drug and Cosmetic Act, a patient may seek individual patient expanded access to investigational products for the diagnosis, monitoring or treatment of a serious disease if specified conditions are met. Part 312(I) of Title 21 of the Code of Federal Regulations provides:

  • general requirements;
  • criteria to authorise access to products;
  • requirements for expanded access submissions; and
  • safeguards to protect patients.

There are three categories of expanded access:

  • individual patients, including for emergency use;
  • expanded access for intermediate-size patient populations; and
  • expanded access for widespread use. 

Clinical trials

Authorisation

What is the authorisation procedure for conducting clinical trials in your jurisdiction?

In the United States, a ‘clinical trial’ is commonly defined as a scientific investigation involving the use of an experimental drug, medical device or clinical intervention on a human being. The conduct of clinical trials in the United States is regulated by two federal agencies – the Food and Drug Administration (FDA) and the Office of Human Research Protection (OHRP) – both of which are within the US Department of Health and Human Services. 

Clinical trials conducted for the purpose of seeking approval to market and sell a new drug, medical device or clinical intervention are regulated by the FDA under the authority of the Federal Food, Drug and Cosmetic Act and its associated regulations. 

Clinical trials conducted for the purpose of establishing generalisable knowledge, which can be published in a reputable peer-reviewed publication, are regulated by the OHRP under the authority of the Public Health Services Act and its associated regulations. The OHRP also regulates clinical trials funded by the federal government, including clinical trials funded by the US National Institutes of Health.

The specific procedures for conducting a clinical trial are set forth in the associated regulations for each of these agencies and strict compliance is required. For FDA-regulated clinical trials, the objective of these trials is to produce sufficient scientific evidence to statistically demonstrate the safety and efficacy of the experimental drug, medical device or clinical intervention before the product may be sold to consumers in the United States. For OHRP-regulated trials, the objective is more academic and focuses on the development of information that will advance scientific learning which could not be achieved without the involvement of a human subject.

For both FDA and OHRP-regulated trials, the clinical trial must be conducted under the immediate oversight of a non-governmental human subject protection committee called an institutional review board. The regulations set forth the requirements for the composition and charge of the institutional review board to ensure that the clinical trial is conducted in a manner that protects the rights of the human subjects, including the right to know that participation in the clinical trial is voluntary and subject to the participants’ informed consent.

Clinical practices

How robust are the standard good clinical practices followed in your jurisdiction?

Good clinical practice is an international ethical and scientific quality standard for designing, conducting, recording and reporting trials that:

  • involve the participation of human subjects;
  • are developed in a collaborative effort by the International Conference on Harmonisation; and
  • are issued under the E6 Guideline. 

Clinical trials regulated by the FDA must follow good clinical practices codified in the FDA regulations at Parts 50 and 56 of Title 21 of the Code of Federal Regulations. The FDA has issued guidelines on good clinical practice compliance, which may be found at www.fda.gov/downloads/Drugs/.../Guidances/ucm073122.pdf.

Clinical trials regulated by the OHRP are not required to follow all aspects of good clinical practice, but the agency has adopted specific regulations to address human subject protections at Part 46 of Title 45 of the Code of Federal Regulations.

Reporting, disclosure and consent

What are the reporting and disclosure requirements for the results of clinical trials?

In the United States, the Food and Drug Administration Amendment Act (21 USC §301 et seq) requires all applicable clinical trials to register and report results on a government-administered website (www.clinicaltrials.gov). The law defines applicable clinical trials to include all clinical trials involving a drug, biologic or device, where:

  • the trial has one or more sites in the United States;
  • the trial is conducted under a FDA investigational new drug application or investigational device exemption; and
  • the trial involves a drug, biologic or device that is manufactured in the United States or its territories and is exported for research.

If a clinical trial involves a drug in Phase I, the results are not required to be submitted. For a clinical trial of a device not previously approved by the FDA, the law allows for a delay in reporting the results until one year after the approval or clearance of the device by the FDA.

What are the informed consent obligations with respect to clinical trial subjects?

The Food and Drug Administration requires that clinical trial subjects be given adequate information to make an informed decision on whether to participate. The subject must be given sufficient time to consider all information and the opportunity to ask questions and have those questions answered. The entire process must take place under circumstances that minimise the possibility of coercion or undue influence. As the trial progresses, there is a continuing duty to provide information to the subject. 

Insurance

What are the insurance requirements for clinical trials?

In the United States, there are no regulations mandating human clinical trial liability insurance. However, most foreign jurisdictions do require minimum insurance and the regulations vary considerably by country. Multi-country trials are likely to require multiple insurance policies. Companies sponsoring clinical trials need to understand all regulatory requirements, legal obligations and the availability of insurance before committing to conduct trials in certain countries. Since some countries now require admitted policies only (a policy written and issued in a specific locale by an insurer authorised to transact business under local law), lead time for procuring insurance has increased. In addition, certain insurance companies will underwrite only up to a maximum amount per country, so that companies may find themselves with limited options if carriers have already reached their country maximum for coverage. As a result, it is recommended that companies considering clinical trials work closely with brokers and lawyers familiar with jurisdictional requirements before entering into sponsorship agreements.

Data protection

What data protection issues should be considered when conducting clinical trials?

Most clinical trials today are designed according to International Conference on Harmonisation guidelines with multiple jurisdictions in mind. Accordingly, data protection must be approached with the same mindset. The data protection issues break down into two basic categories:

  • data integrity and retention; and
  • patient privacy.  

With regard to data integrity and retention, the FDA periodically issues guidance for industry documents on its website, which should be consistently monitored for updates. In 2013 the FDA published a document concerning electronic source data in clinical investigations, which covered:

  • identification and specification of authorised source data originators;
  • creation of data element identifiers to facilitate examination of the audit trail by sponsors, the FDA and other authorised parties;
  • ways to capture source data into the electronic case report form using either manual or electronic methods;
  • clinical investigator responsibilities with respect to reviewing and retaining electronic data; and
  • use and description of computerised systems in clinical investigations (see www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/UCM328691.pdf).

Marketing authorisation

Authorisation

What is the marketing authorisation procedure for medicinal products in your jurisdiction?

Within the Food and Drug Administration (FDA), the Centre for Drug Evaluation and Research oversees the approval of prescription, generic and over-the-counter drugs. Approval for a new drug is obtained by submitting a non-disclosure agreement, while generic drugs may be approved via the abbreviated new drug application pathway. New biologic drugs are approved using a biologics licence application, with the Biologics Price Competition and Innovation Act providing an abbreviated licensure pathway for biosimilars. 

What criteria are considered in granting marketing authorisation?

A non-disclosure agreement or biologics licence application includes:

  • drug test results;
  • manufacturing information demonstrating that the drug can be properly manufactured; and
  • proposed labelling for the drug.

The application must demonstrate that the drug’s benefits outweigh its known risks and that it can be manufactured in a way that ensures a quality product. An abbreviated new drug application must show that the proposed generic drug product is bioequivalent to the FDA-approved reference product. Under the abbreviated Biologics Price Competition and Innovation Act pathway, an applicant must show that its proposed product is biosimilar to or interchangeable with an FDA-approved reference product. 

What is the fee for obtaining marketing authorisation?

The Prescription Drug User Fee Act authorises the FDA to collect three types of user fee from companies that produce certain human drug and biological products:

  • application fees;
  • establishment fees; and
  • product fees.

The fees for the various applications are available from the FDA. 

What is the validity period for marketing authorisation?

There is no validity period for FDA marketing authorisation in the United States – approval ends only if the FDA withdraws authorisation for safety reasons. However, in the United States sponsors may conduct post-marketing studies and trials after approval to gather additional information about a product's safety, efficacy or optimal use. Some of the studies and clinical trials may be required (post-marketing requirement); while others may be studies or clinical trials that a sponsor has committed to conduct and are not required by statute or regulation (post-marketing commitment) (see www.fda.gov/Drugs/GuidanceComplianceRegulatoryInformation/Post-marketingPhaseIVCommitments/).

What are the consequences of failure to obtain marketing authorisation?

Sale of unapproved drugs is subject to injunction to prohibit continued sale, and unapproved drugs currently in existence may be seized. Persons who market unapproved drugs are subject to imprisonment and fines. The FDA can take unilateral enforcement actions to remove unapproved drugs from the market. For example, the FDA can order companies to stop making, shipping and marketing the unapproved drug. Additionally, civil and criminal charges can be brought against those involved in distribution of unapproved drugs under the Federal Food, Drug and Cosmetic Act. Unapproved drugs introduced onto the market after September 19 2011 are subject to immediate enforcement action at any time, without prior notice.

Pharmacovigilance

Monitoring

What post-market monitoring mechanisms are in place to ensure the ongoing safety and efficacy of medicinal products after marketing authorisation has been granted?

The Centre for Drug Evaluation and Research oversees a number of post-marketing surveillance programmes for ensuring continuing drug safety and efficacy. These include programmes to identify serious adverse events not detected during pre-approval studies, including via mandatory reporting by manufacturers, which can lead to revised drug labelling or in rarer instances re-evaluation of a marketing authorisation decision. The Food and Drug Administration also conducts periodic unannounced inspections of facilities that are part of the drug production and manufacturing process, and runs other programmes to ensure drug safety.

Data protection

What data protection issues should be considered when conducting pharmacovigilance activities?

Pharmacovigilance involves monitoring and evaluation of information relating to adverse effects of drugs, biologics and medical devices in public use. Because pharmacovigilance involves commercial products, public safety and brand protection are of utmost concern.

The brand protection aspect takes two forms:

  • Regulatory requirements must be wholly satisfied when reporting adverse events in order to maintain licensure and avoid punitive governmental actions. Timeliness and accuracy are key. 
  • Control of information during the news cycle must be maintained to ensure that accurate information is disseminated. Steps must be taken to minimise the possibility of rumours and false stories.

While some adverse events can result in a product losing its approval and being pulled from the market, others may require only additional warnings on the label, thus still allowing the product to be sold. Reputational damage is mitigated most effectively by rapid and accurate response. 

Pricing and reimbursement

Pricing

Are there rules governing the pricing of medicinal products in your jurisdiction?

There are no US laws or regulations specifically directed at medicinal product pricing, although federal legislation regulating (or requiring a justification for) drug product pricing has been considered recently. In June 2016 Vermont became the first state to adopt a law requiring justification for drug price increases. The Medicare Act governs the reporting and related anti-fraud provisions for reimbursement. Federal and state laws and regulations applicable to pricing generally (eg, the Sherman Antitrust Act (prohibiting price fixing) and the Robinson-Patman Act (prohibiting price discrimination)) apply to medicinal products.

Reimbursement

What is the structure for state reimbursement of medicinal product costs?

provide coverage for prescription drugs. Some patient co-pays may apply. Reimbursement to suppliers by state Medicaid programmes or their managed Medicaid contractors varies. Pharmacy payment requirements are outlined in Title 42 of the Code of Federal Regulations, which specifically addresses payment requirements for estimated acquisition costs and reasonable dispensing fees, as well as co-payment amounts. Many state Medicaid programmes reimburse for drug ingredients based on cost (eg, actual acquisition costs, average wholesale price and wholesale acquisition cost) and dispensing fees. State governments also purchase medicinal products for other state programmes.

Part D of the federal Medicare programme provides coverage for outpatient prescription drugs, and managed Medicare (Medicare Advantage plans operated by contractors) provides prescription drug coverage. In general, the federal law creating the Part D benefit does not permit the negotiation of drug costs by the federal Centres for Medicare and Medicaid Services (CMS).

CMS, state Medicaid agencies and participating drug manufacturers participate in the Medicaid Drug Rebate Programme, which is designed to offset the federal and state costs for most outpatient prescription drugs dispensed to Medicaid patients.

The federal government purchases medicinal products for other federal programmes and agencies, including the Department of Defence, the 340B Programme (under the Public Health Services Act), the Veterans Administration and the Centres for Disease Control.

Advertising and labelling

Advertising

How is the advertising of medicinal products to healthcare professionals and the general public regulated in your jurisdiction?

The Food and Drug Administration (FDA) regulates advertisements for prescription drugs. Drug advertisements are split into three categories:

  • product claim advertisements;
  • reminder advertisements; and
  • help-seeking advertisements.

The permitted content of an advertisement depends on which of these categories it falls into.

Product claim advertisements Product claim advertisements discuss a drug’s benefits and risks and must contain:

  • the name of the drug;
  • at least one FDA-approved use for the drug; and
  • the most significant risks of the drug.

The remaining content of the advertisement depends on whether it is a print or broadcast advertisement:

  • print must contain all risks listed in the prescribing information approved by the FDA; and
  • broadcast can include the drug’s most important risks, and either all the risks listed in the prescribing information or a variety of sources where consumers can find the prescribing information.

The FDA recommends that broadcast advertisements identify the following sources:

  • a healthcare provider;
  • a toll-free telephone number;
  • a current issue of a magazine containing a print advertisement; and
  • a website.

Product claim advertisements must not be misleading in any way and must use understandable language throughout.

Reminder advertisements Reminder advertisements presume that the audience is already familiar with the drug and:

  • must give the name of a drug only, not information about the drug’s uses or how well it works; and
  • are not permitted for certain prescription drugs with serious risks.

Help-seeking advertisements  Help-seeking advertisements describe a disease or condition but do not recommend or suggest a specific drug treatment. They also:

  • encourage people with particular, identified symptoms to talk to their doctor;
  • may include a drug company’s name or a telephone number to call for more information; and
  • should not be considered drug advertisements (they are regulated by the Federal Trade Commission, not the FDA).

Any other promotional materials must contain a drug’s prescribing information if it mentions the drug’s benefits. All print product advertisements must contain the following statement: “You are encouraged to report negative side effects of prescription drugs to the FDA. Visit MedWatch or call 1-800-FDA-1088”.

The FDA provides a helpful summary of these rules at: www.fda.gov/Drugs/ResourcesForYou/Consumers/PrescriptionDrugAdvertising/ucm072077.htm.

Do any special rules apply to online advertising of medicinal products?

Under the Federal Food, Drug and Cosmetic Act, the FDA is responsible for regulating the labelling and advertising of prescription drugs as part of its broader regulatory authority. Promotional labelling for drugs and advertisements is subject to FDA rules to prevent misbranding and to promote a proper understanding of risks and benefits, as well as other purposes. Advertisements are considered to include:

  • statements by the manufacturer and sales representatives;
  • presentations at trade shows and to professionals; and
  • promotional and direct-to-consumer information in a variety of media, including online communications and social media.

The FDA has issued draft guidance specific to online and social media platforms with respect to:

  • character space and limitations;
  • responses by manufacturers and sales representatives, among others;
  • online and social media misinformation relating to FDA-approved products.

Labelling

What are the packaging and labelling requirements for medicinal products?

Medicinal products must have labels that include a summary of the essential scientific information needed for the safe and effective use of the drug. Labelling must be informative and accurate and not be promotional in tone, false or misleading. The labelling must be based whenever possible on data derived from human experience. Section 201.56(d)(1) of Title 21 of the Code of Federal Regulations provides a detailed listing of the format for medicinal product labels. The FDA provides extensive guidance at: www.fda.gov/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/ucm065010.htm.

How is the promotion of off-label use regulated?

Once the FDA approves a drug, healthcare providers may prescribe the drug for unapproved or off-label use when they judge that it is medically appropriate for their patient. However, pharmaceutical companies are generally prohibited from promoting a drug for off-label uses. The FDA held a hearing in November 2016 to obtain input from stakeholders regarding regulation of pharmaceutical company communications for off-label uses as part of a comprehensive review of off-label use regulations. The FDA has yet to announce any action based on the hearing.

Relations with healthcare professionals

Gifts and incentives

What rules apply to the provision of gifts, discounts and other incentives to healthcare professionals?

Three main federal regulations apply to the provision of gifts, discounts and other incentives to healthcare professionals:

  • the Stark Law;
  • the Anti-kickback Statute; and
  • the Physician Payments Sunshine Act.

Many states have enacted similar legislation and some states have enacted additional requirements.

The Stark Law prohibits physicians and members of their immediate family from referring Medicare and Medicaid patients to entities with which they have a financial relationship for designated services, unless the financial relationship satisfies a long list of exceptions to the prohibition on referral.

Designated services include:

  • imaging (MRI, CT, ultrasound, PET and nuclear);
  • physical and occupational therapy;
  • radiation therapy;
  • home health;
  • outpatient prescription drugs;
  • parenteral and enteral nutrition;
  • durable medical equipment;
  • prosthetics, orthotics and supplies;
  • clinical laboratory; and
  • all inpatient and outpatient hospital services.

Examples of financial relationships include ownership or the exchange of services at no cost.

The Anti-kickback Statute prohibits the exchange, or offer to exchange, of anything of value in an effort to induce or reward the referral of Medicare or Medicaid patients. Penalties for a criminal conviction include a fine of up to $25,000 or up to five years’ imprisonment. The government may also assess civil monetary penalties that can result in treble damages plus $50,000 for each violation. Violations without convictions can result in exclusion from federal healthcare programmes at the discretion of the secretary of health and human services. The Office of the Inspector General (OIG) has authority to create safe harbours for particular business practices. Businesses concerned about violating the Anti-Kickback Statute can ask the OIG to create a safe harbour for their intended practice.

The Physician Payments Sunshine Act requires manufacturers of drugs, medical devices and biologics covered by federal healthcare programmes to report all payments and transfers of value made to physicians and teaching hospitals for public release. Physicians have 45 days to review the information submitted by manufacturers and dispute errors before public release and states are permitted to enact additional requirements.

Liability

Defect products

How can a liability claim for a defective medicinal product be brought?

Generally, there are two major product liability causes of action for personal injury or property damage – strict liability and negligence. With medicinal products, liability is typically sought for personal injury, but occasionally personal injury also results in property damage (eg, a cardiac event while driving). Strict liability focuses on whether the product at issue was defective or unsafe, without regard to the care the manufacturer exercised in making it. Strict liability claims are typically statute based and vary by jurisdiction. Negligence focuses on whether the manufacturer acted reasonably under the circumstances. Under either theory, the plaintiff must prove that a manufacturing defect (product departed from intended design), design defect (product more dangerous than reasonable purchaser would expect or its risks outweigh benefits) or failure to warn (failure to warn of foreseeable, non-obvious risk) existed at the time the product left the defendant’s control. To state a claim, the plaintiff must also prove that he or she was injured and that the defect caused or contributed to the injury. Plaintiffs may also allege that the manufacturer breached an express or implied warranty. 

Which parties can be held liable for a defective medicinal product?

The possible defendants vary depending on the state law that applies and cause of action. All entities in the chain of distribution are likely to be sued, including manufacturer, importer, supplier and seller. Depending on the state, some of those entities will be able to get out of the litigation early. Most states impose strict liability on the manufacturer. Some impose strict liability on all entities in a product’s chain of distribution. If the manufacturer is unavailable (jurisdictionally or otherwise), suppliers of products can be held to ‘step into the shoes’ of liability of the manufacturer.

Remedies

What remedies are available to successful claimants?

Available remedies include compensatory damages for:

  • economic and non-economic loss;
  • consequential damages;
  • punitive damages;
  • loss of consortium; and
  • attorney fees.

Plaintiffs may also seek injunctive or equitable relief to, for example, force a manufacturer to recall or stop selling a product. Remedies vary by jurisdiction. Some states have recovery caps, some utilise multipliers and others are unlimited. 

Exclusion and limitation

On what grounds can liability be excluded?

Two doctrines that may bar a suit or a plaintiff’s recovery are the learned intermediary doctrine and contributory or comparative negligence. Under the learned intermediary doctrine a manufacturer can avoid liability for failing to warn a purchaser of a drug of risks by providing the necessary warnings to the purchaser’s doctor. The precise scope of this doctrine varies from state to state. States that have adopted contributory negligence statutes hold that any negligence of a plaintiff that contributes to his or her injuries bars his or her recovery from defendants. In comparative negligence states, a plaintiff’s recovery is reduced in proportion to his or her negligence.

Another more general way to avoid liability is to seek indemnification clauses in contracts with other members of the supply chain. Manufacturers and sellers alike can contract so that the other is liable for adverse effects. However, companies should be aware that some states statutorily require manufacturers to indemnify mere sellers against claims.

In certain jurisdictions, supplier and seller liability can be limited by the ‘sealed container’ doctrine.

Liability for personal injury cannot generally be disclaimed in a contract. However, disclaimers can bar claims for more tangential claims, such as property damage or commercial loss. The precise circumstances under which disclaimers are enforceable when personal injury is not involved are complex and highly variable from state to state.

What preventive steps can be taken to limit liability?

Companies should create risk management plans tailored to their circumstances. As a general list, the following actions can help to reduce liability:

  • Manufacturers must carefully prepare and review warnings, product labels, package inserts and all marketing materials.
  • Manufacturers should ensure that suppliers provide products that comply with US laws and standards.
  • Manufacturers and sellers should seek contractual indemnification from enterprise purchasers.
  • Manufacturers should purchase raw materials, component products and equipment from manufacturers and suppliers that can be sued in the United States and have good quality assurance practices.
  • All entities in the chain of distribution should immediately investigate all reports of adverse effects and, if necessary, halt production and distribution or recall product lots and batches.
  • Distributors and sellers should take care to make sure that they do not alter the product so that they can look to the manufacturer for indemnity.
  • Distributors and sellers should inspect the product on receipt and delivery and document such inspections.
  • Entities should establish and maintain a strong compliance programme to ensure that all employees comply with applicable Food and Drug Administration (FDA) regulations. The Department of Health and Human Services Office of the Inspector General has identified seven elements essential for an effective compliance programme in a document entitled ‘Compliance Programme Guidance for Pharmaceutical Manufacturers’.
  • Comply with the Current Good Manufacturing Practices regulations and related FDA guidance.

Compliance and enforcement

Enforcement

What measures are in place to enforce the laws governing medicinal products?

Federal and state laws and regulations relating to medicinal products create a number of federal and state authorities with compliance and enforcement responsibilities. The sale and distribution of medicinal products are also subject to laws of general application including federal and state antitrust and consumer protection laws. Government health programmes (eg, Medicare and Medicaid) have complex rules regarding reimbursement of covered products. Federal and state laws also contain fraud and abuse prevention laws, targeted at fraud and abuse in connection with programme benefits, including prescription drugs. Applicable laws include criminal and civil penalties, depending on the nature of the violation. In the case of licensure issues (whether individual or corporate), loss of licence and exclusion from applicable government health programmes are possible risks. State agencies, including those regulating the licensure of healthcare professionals, pharmacies and wholesale distributors, have regulatory and enforcement authority, as do state attorneys general.

Dishonest practices

What mechanisms are in place to combat bribery, fraud, collusion, counterfeiting and other dishonest practices in the pharmaceutical sector?

The United States has strict antitrust rules that prevent collusion among competitors and laws against bribery both domestically and abroad (eg, the Foreign Corrupt Practices Act). The Food and Drug Administration has broad authority to investigate and, where appropriate, punish companies that falsify data in regulatory files. The risk of private civil litigation is also a strong deterrent.