Category: Drug & Cosmetic Law

How Social Media Impacted the Teenage Juul Epidemic: Study Recommends Strict FDA Control

BMJ’s journal, Tobacco Control, just released a study recommending that the FDA do more to control Juul’s e-cigarette advertising in social media. The study included a review of over 15000 posts in a three-month period during 2018. Approximately 30% of reviewed posts were promotional, e.g., leading to Juul purchase locations, and over half the posts included “youth” and “youth lifestyle” themes. Because many of these posts were re-posts or user-generated, rather than ads specifically placed by Juul, the company protested that 99% were third-party content over which Juul had no control. However, the intended goal for social media advertising is to “share” and to inspire creation of third-party user-generated content that is also shared. Juul’s public comments weirdly suggest they don’t understand social media advertising. That is quite unlikely.

Juul first came under fire for its youth-focused advertising back in 2016, but has only recently made changes to restrict it. Not until late 2018, long after being called-out by educational and government agencies for targeting youth, did it begin to materially limit its social media accounts and social media messaging.

Juul’s chief administrative officer, Ashley Gould, was quoted last year telling CNN that Juul was “completely surprised by the youth usage of the product.” (Source: CNN.) In response, Dr. Robert Jackler, founder of the Stanford Research into the Impact of Tobacco Advertising, said, “I don’t believe that, not for a minute, because they’re also a very digital, very analytical company,” he added. “They know their market. They know what they’re doing.”

Gould’s obfuscation about underage users doesn’t fool people in the know—and it certainly doesn’t generate trust that Juul will voluntarily follow ethical practices. Juul only instituted its recent changes to restrict youth advertising after FDA scrutiny and bad press.

Juul also advertises its products are for smoking cessation. Last week, in response to San Francisco’s imminent ban on e-cigarette sales, Juul raised concerns that people would resort back to traditional cigarettes—implying this would further negatively impact the health of San Franciscans.

Unfortunately for Juul, the internet remembers everything. In a 2015 Verge interview at the beginning of Juul’s meteoric rise, one of Juul’s R&D engineers made it clear that Juul didn’t care about smoking cessation nor had any concerns about creating an addictive product. The engineer (Atkins) was quoted saying, “We don’t think a lot about addiction here because we’re not trying to design a cessation product at all,” he said, “anything about health is not on our mind.”

Juul’s public “feint and parry” strategy tends to mirror the traditional tobacco industry—a group with a sordid history of youth-focused advertising, concealment, lying to officials, and purposely creating highly addictive products in order to boost sales. It took multiple lawsuits and the Master Settlement Agreement of the nineties for big tobacco to materially comply with government regulations.

Courtesy of Trinkets & Trash Rutgers School of Public Health

Unfortunately, despite all of that history, the tobacco industry’s disregard for consumer protection has spread into the e-cigarette industry. As late as 2017, big tobacco-owned e-cigarette, Blu, launched its “Something Better” advertising campaign. The campaign mocked government-mandated package warnings on traditional cigarettes. The ads included variations of the following text and were designed to look like cigarette warning labels:

“Important: Contains flavor;”
“Important: Vaping blu smells good”
“Important: No ashtrays needed”

The parody on government-mandated safety warnings mocks consumer protection efforts by government agencies—a tactic not surprising coming from a tobacco company. Right now, there is very little regulation over e-cigarettes despite the fact that the FDA was granted oversight in 2016. Like Blu, Juul also has heavy ties to big tobacco. Altria, parent company to Phillip Morris, the maker of Marlboro, is heavily invested in Juul.

If Juul truly intends to address social media advertising, consumer protection, and youth e-cigarette use, it must do more than spew rhetoric through the media. It must take incisive, prophylactic action to reduce exposure of its products to underage users. If history is any indication, that won’t happen without strict FDA regulation.

If you or someone you know has become seriously addicted to nicotine in e-cigarettes, has health problems associated with e-cigarettes, or has been injured by a malfunctioning e-cigarette, you should contact an experienced e-cigarette injury attorney to advise you on the ability to seek compensation for your injuries.

COPYRIGHT © 2019, STARK & STARK
For more on nicotine product regulation see the National Law Review Consumer Protection page.

Protecting Your Brand and Trademarks in the Cannabis Space Following the 2018 Farm Bill

The 2018 Farm Bill [1] relaxed restrictions covering hemp-based cannabis products, and it is causing a shift in business strategies in the industry. Instead of a full prohibition of trademark registrations covering cannabis goods or services, a narrow range of filings is now permitted, so long as they conform to the requirements of the Farm Bill and the latest USPTO guidelines. While the regulatory framework is still being developed, cannabis-related business owners who could not previously receive federal trademark protection are now reconsidering their trademark strategies.

The principal change from the 2018 Farm Bill is that while all cannabis products derived from marijuana are still prohibited by federal law under the Controlled Substances Act (CSA), those derived from hemp are now permitted, albeit still tightly regulated. Hemp-based cannabis products are defined as those that contain no more than 0.3 percent THC, the primary active ingredient in marijuana. Accordingly, certain products and services derived from hemp are now legal under federal law, and the USPTO has published guidelines that allow narrow federal trademark registrations covering them.

The USPTO had previously refused any trademark application that covered cannabis products or services. In response, many businesses have filed state-law trademark applications in jurisdictions in which marijuana has been legalized, although this provides only limited protection. Businesses have also tried to circumvent the federal prohibition by filing for goods and services tangentially related to marijuana or cannabis, such as apothecary or pharmacy services for medical marijuana, or services for the provision of information and/or advocacy for cannabis and its uses. The policy at the federal level is still to refuse these applications that cover goods and services that are legal on their face but are in fact related to marijuana. But that policy is now moot for certain hemp-related applications that conform to the new guidelines.

Even for applicants that have succeeded in registering trademarks for cannabis-based products under facially legal goods and services descriptions, attempts to enforce these marks can be hollow. During the course of litigation, it may become clear that the activities of the trademark owner are not permitted under federal law. These registrations are still valuable to block other filers as well as to signal that a business is adopting and is willing to enforce a particular mark, but the new USPTO regulations can provide substantially more protection to businesses that sell qualifying hemp-related products or services.

Under the new USPTO guidelines, marks covering hemp-based cannabis products and services are permitted to be registered as long as they contain no more than 0.3 percent THC and are otherwise legal under federal law. Accordingly, there are certain exceptions and requirements, which include the following:

  • The 2018 Farm Bill left jurisdictional responsibility for regulating certain products to the FDA. As of now, the FDA does not permit cannabidiol (CBD) to be sold in food or drug products. Accordingly, registrations for marks that cover “foods, beverages, dietary supplements, or pet treats containing CBD” are still prohibited. This restriction applies only to CBD at this point. Other non-CBD hemp-based food or drug products would be permitted registration so long as they conform to the applicable FDA guidelines. Also, CBD products that are not a food or drug may still be permitted registration as long as they do not fall under the FDA’s jurisdiction or are not otherwise prohibited by other federal laws.  See USPTO Examination Guide 1-19.
  • For marks covering cultivation and other services related to hemp-based products, applications will be examined not only for compliance with applicable USPTO requirements but also for compliance with the 2018 Farm Bill and applicable state laws. Applicants must show that they have an applicable state license to provide their services, as not all states follow the 2018 Farm Bill’s guidance for hemp products, and in many states, these products are still illegal for commercial purposes or highly restricted.[2]

The new guidelines also allow for applicants to amend pending applications covering cannabis products to conform to the new requirements. To do so, the applicant must limit the list of goods and services to products that contain no more than 0.3 percent THC and submit any required documents showing that the goods and services covered are legal. The application’s filing date would also be amended to coincide with the legalization of hemp-based products, and the USPTO would conduct a new search of the register for prior marks to account for the later filing date.

Under the new regulations, cannabis businesses should consult a trademark attorney to consider their options to protect their trademarks on a federal level. Although the law is in flux and uncertainty abounds, there are several points from a trademark-filing strategy perspective to keep in mind when considering filings under the new guidelines:

  • The new, narrow USPTO guidelines will not be helpful to every business operating in the cannabis space. Businesses that will be helped either already offer or are considering offering hemp-derived goods and services that contain less than 0.3 percent THC, goods that do not constitute food or drug products that contain CBD, and goods that are not otherwise in conflict with FDA or other federal laws or guidelines.
  • A large number of trademark applications will likely be filed for hemp-based products soon, regardless of their applicants’ qualifications. Businesses should explore their options and file quickly, and keep in mind that it will be difficult to show prior use to oppose a third-party filer, as any such use was likely illegal under federal law.
  • Because the USPTO can suspend applications for good cause, it is logical to expect the USPTO to grant suspensions of applications while applicants are in the process of obtaining a license to cultivate hemp-based products.
  • Creating even more uncertainty, the 2018 Farm Bill has directed the U.S. Department of Agriculture (USDA) to derive regulations for hemp-related activities that fall outside of the FDA’s jurisdiction. The USPTO is expected to quickly adopt new guidelines to conform to the USDA.
  • Narrowing an existing application to conform to the new requirements will significantly narrow the filing. After such an amendment, the application cannot be amended back to cover the previous broader range of goods and/or services. If an applicant anticipates a change in law and can draw out the application process to wait for such a change, it may be advisable to file a new application that conforms to the new guidelines rather than amending the old one. The applicant can then keep the broader application alive to preserve their options.
  • In some cases, existing registrations may have made it through the examination process, even if they cover goods and services that were prohibited under federal law at the time of filing. If this is a possibility, businesses should consider their options for re-filing based on the new guidelines which on their face do not apply to amending existing registrations.

The new marijuana legalization framework being put in place state by state, most recently in Illinois, has raised more questions than answers in the state-regulatory sphere. However, until now, the federal guidelines were clear, as all cannabis-related products were prohibited under federal law. After the passage of the 2018 Farm Bill, this is no longer the case. As the law in the cannabis sphere unfolds, businesses should work closely with a trademark attorney to explore options for protecting their valuable brands.

© 2019 Dinsmore & Shohl LLP. All rights reserved.
More on Cannabis & Marijuana law developments on the National Law Review Biotech, Food & Drug law page.

Juul Gives $7.5 Million for Research as Sales Continue to Climb

Just like the traditional tobacco industry, Juul has started to issue grants to study the effects of e-cigarettes on users. Back in the bad, old tobacco days, almost all research was funded by tobacco companies through the Council for Tobacco Research (CTR) and the Center for Indoor Air Research (CIAR). Both companies were included in fraud cases against the industry. After a settlement in 1998, the tobacco industry started funding private groups. Much of that funding was undisclosed in study results, suggesting there might be a conflict of interest.

So…is Juul, a company heavily funded by big tobacco, the same? Or is this highly successful, private interest, for-profit company an altruistic anomaly?

Juul’s grant program seems to be part of a new advertising campaign to reverse its bad reputation for targeting youth. Juul is now focused on creating a socially-responsible reputation for health-conscious product marketing, including:

  • Its unproven claim that the product works for smoking cessation;
  • An adults-only website landing page and public statement campaign; and, now,
  • An investment in e-cigarette research.

However, Juul’s concern for its product users only arose after coming under fire for the rising use of Juul products by underage users. By the time Juul launched its new advertising campaigns, it had already completed its big tobacco investment with Altria. According to reports, underage use of e-cigarettes had further increased another 40%. These facts throw shade on the selfless reputation Juul is trying to create with its new grant program. While you might applaud them for listening to their new tobacco investor, you should probably question their motives for the same reason.

If you look at this grant you will see Juul is giving $7.5 million tax-deductible dollars to a school. This is about 0.3% of its estimated annual sales. It’s a pretty meager investment with a high-value publicity gain. That is smart marketing–Juul’s key skill. Smart marketing is how Juul swept up 75% of the e-cigarette market, largely composed of underage users. Juul’s youth-focused advertising (which has decreased as of this date) smacks of historic big tobacco advertising which was eventually and belatedly banned. Juul’s similar approach has generated exponential market growth, and, more recently, FDA and congressional investigations into its operations. Regrettably, the initial investigations only seem to address the prevention of advertising to underage users. Although this satisfies an immediate and important need, it largely ignores the health dangers inherent in e-cigarette use; health dangers that affect the adult population as well.

E-cigarette product development is still unregulated due to former FDA chief, Scott Gottlieb’s, failure to impose immediate FDA oversight of the industry back in 2016 and 2017. There have been many e-cigarette explosions that have caused devastating, permanent, injuries to youth and adults alike. There is also the danger of developing life-altering lung conditions, terminal cancers, and other health risks related to inhaling e-cigarette chemicals into the body. These dangers are exacerbated by a higher rate of nicotine addiction—alleged to be worsened by Juul’s nicotine delivery system—because addicted users vape more often and for extended periods.

To ignore the health risks of vaping and nicotine addiction is to repeat history. The tobacco industry depended on nicotine addiction for recurring sales and to capture new markets. The vaping industry, including Juul, appear to be banking on the same.

 

COPYRIGHT © 2019, STARK & STARK
Article written by Domenic B. Sanginiti, Jr of Stark & Stark.
For more on product safety, see the National Law Review Products Liability page.

FDA Issues Warning Letters to Companies Illegally Selling Unapproved, Misbranded Kratom Products

On June 25, FDA issued warning letters to two marketers and distributors of kratom products – Cali Botanicals and Kratom NC. FDA determined that the companies were illegally selling unapproved, misbranded kratom-containing drug products with unproven claims about their ability to treat or cure opioid addiction and withdrawal symptoms. Additionally, FDA found that the companies also made claims about treating pain, as well as other medical conditions like depression, anxiety, and cancer.

In FDA’s press release, Acting FDA Commissioner Ned Sharpless noted that there are no FDA-approved uses for kratom and the agency has been active in warning consumers about the serious risks associated with kratom. For example, as our readers may know, FDA has warned about both the high levels of heavy metals found in kratom products and the contamination of certain kratom products with salmonella. Indeed, FDA issued its first ever mandatory recall order for the salmonella-containing kratom products.

The June 25 warning letters allege that the companies used their websites and social media to illegally market kratom products and made unproven claims about the ability of the products to cure, treat, or prevent disease. Examples of the claims include:

  • “Kratom acts as a μ-opioid receptor-like morphine.”
  • “In fact many people use kratom to overcome opiate addiction.”
  • “Of course, people who are using kratom to overcome a preexisting opiate addiction may need to use kratom daily to avoid opiate withdrawal.”
  • “Usage: It is for the management of chronic pain, as well as recreationally.”

FDA reiterates that “[t]hese products have not been demonstrated to be safe or effective for any use and may keep some patients from seeking appropriate, FDA-approved therapies. Selling these unapproved products with claims that they can treat opioid addiction and withdrawal and other serious medical conditions is a violation of the Federal Food, Drug, and Cosmetic Act.” FDA has requested responses from both companies within 15 working days.

© 2019 Keller and Heckman LLP
For more on FDA regulation see the National Law Review Biotech, Food and Drug page.

Historic Vote in Congress Aims to Protect State Cannabis Programs

By a vote of 267 to 165, the United States House of Representatives (the “House”) passed a bipartisan amendment protecting state cannabis programs and its users from federal prosecution.

Named after its co-founder, Representative Earl Blumenauer (D-OR), the Blumenauer amendment explicitly prohibits the United States Department of Justice (the “USDOJ”) from utilizing federal tax monies to enforce the federal prohibition of marijuana in states that have legalized cannabis.

The Blumenauer amendment constitutes a significant diversion from prior Congressional action on state cannabis programs.  Since 2014, Congress has enacted similar appropriations riders which only protected state medical cannabis programs.  The Blumenauer amendment, however, protects all state cannabis programs.  Thus, for the first time, the House has passed an amendment protecting the recreational consumption of cannabis.

Regarding funding, the USDOJ is simply no different than any other federal agency.  Without proper funding, an agency cannot enforce or otherwise impose its mandate on behalf of the federal government.  Thus, for all intents and purposes, the Blumenauer amendment validates state cannabis programs and protects those operating under them.

While the Blumenauer amendment still requires passage through the Senate and President Trump’s signature, the House’s actions are a historic step forward for the federal legalization of cannabis in the United States.

© Steptoe & Johnson PLLC. All Rights Reserved.
This post was written by Ryan D. Ewing and Joshua L. Jarrell of Steptoe & Johnson PLLC.
For more on marijuana laws see the National Law Review page on Biotech, Food & Drugs.

USPTO Issues Examination Guide on Trademark Applications for Cannabis and Cannabis-Related Goods and Services

On May 2, 2019, the United States Patent and Trademark Office (“USPTO”) issued Examination Guide 1-19 (“Examination Guide”), which outlines the path to registration for trademark applications covering hemp-based goods and services.  The issuance of the Examination Guide serves as a departure from the USPTO’s longstanding bar to the registration of cannabis-related marks, and signals the potential for further relaxation of the USPTO’s prohibition on federal registration of trademarks and service marks for cannabis and cannabis-related goods and services as state legalization of cannabis continues to crop up across the country.

To obtain federal registration for a mark, a mark’s use in commerce must be lawful under federal law.  See generally Trademark Manual of Examining Procedure §907.  The USPTO will not issue registrations for marks covering goods or services that violate federal law – even if such goods or services are legal at the state level.  Despite the legalization of cannabis for medical use in 33 states and the legalization of cannabis for recreational use in 10 states, cannabis has been deemed illegal by the federal government under the Controlled Substances Act (“CSA”)1.  Cannabis-related marks have therefore been ineligible for federal trademark registration.

On December 20, 2018, the Agricultural Improvement Act of 2018, better known as the 2018 Farm Bill, was signed into law.  In relevant part, the 2018 Farm Bill removed “hemp”2from the CSA’s definition of marijuana, thus removing “hemp” from the list of controlled substances under the CSA and creating an avenue for federal registration of marks covering some goods and services derived from hemp.  Now, marks covering certain hemp-derived goods and services with less than 0.3% tetrahydrocannabinol (“THC”)3 may be eligible for federal registration.  However, the USPTO will continue to refuse registration when the identified goods or services in an application involve cannabis that meets the definition of marijuana and encompass activities still prohibited under the CSA.

To assist in the prosecution of trademark applications for these newly registerable goods and services, the USPTO outlined the requirements an application must meet before it may be eligible for registration for hemp-derived goods and related services.  First, the USPTO advises that only applications covering hemp-derived goods and services with less than 0.3% THC are registerable.  Second, an application’s identification of goods for all goods derived from hemp must explicitly state that the hemp-derived goods contain less than 0.3% THC.  Third, only applications for marks covering hemp-based products and related services filed after December 20, 2018, are eligible for federal registration.  Any applications filed prior to December 20, 2018, must be amended or refiled.4.  Specifically, applicants must request the USPTO amend their filing date to December 20, 2018, or withdraw their application and submit a new one.   Notably, the USPTO will also examine applications to register service marks for compliance with the CSA and the 2018 Farm Bill; and, as such, an application’s identification of services must also specify that the involved cannabis contains less than 0.3% THC on a dry weight basis.  Moreover, there are additional requirements for applications that include services involving the cultivation or production of hemp.

Restrictions still remain on the registrability of marks for hemp and hemp-derived goods.  For example, applications to register marks covering hemp-derived foods, beverages, dietary supplements, or pet treats will still be refused as unlawful because the use of hemp in items for human or animal consumption has not yet been approved by the Food and Drug Administration (“FDA”)5.

While Examination Guide 1-19 signals the budding federal registrability of marks for certain hemp-derived goods and services, applicants should consider the stringent requirements placed on the same.  Mark owners should think critically about whether their trademarks for cannabis and cannabis-related products and services are potentially eligible for federal protection, as we expect to see a significant influx of applications covering these types of offerings in the near future.  Filing applications for eligible products and services now may help mark owners gain a foothold in what will likely be a competitive business field going forward.

1 Under the Controlled Substances Act the drug class “Marihuana” (also referred to as “cannabis” or “marijuana”) is defined as “all parts of the plant Cannabis sativa L., whether growing or not; the seeds thereof; the resin extracted from any part of such plant; and every compound, manufacture, salt, derivative, mixture, or preparation of such plant, its seeds or resin.”  21 U.S.C. §802(16).  Cannabidiol (“CBD”), a chemical constituent of the marijuana plant is included in the Controlled Substances Act’s definition of “Marihuana.”  See id.

2 Hemp is defined as “the plant Cannabis sativa L., and any other part of that plant, including the seeds thereof an all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol (“THC”) concentration of not more than 0.3% on a dry weight basis.”  Agricultural Improvement Act §297A

3 THC is the main psychoactive ingredient of cannabis.

4 The USPTO takes the position that any applications filed before December 20, 2018 lacked a valid basis to support registration at the time of filing because the applied-for goods violated federal law.  See Examination Guide 1-19: Examination of Marks for Cannabis and Cannabis Related Goods and Services after Enactment of the 2018 Farm Bill.

5 The 2018 Farm Bill specifies that the FDA retains its authority to regulate goods containing cannabis and cannabis-derived compounds, and the FDA has taken the position that cannabis-infused items for human or animal consumption require the FDA’s approval before they may be sold to consumers. The FDA is conducting clinical investigations into the safety and efficacy of such products for human and animal consumption.

© 2019 Brinks Gilson Lione. All Rights Reserved.
This post was written by Virginia Wolk Marino and Emily Kappers of  Brinks Gilson & Lione
Read more USPTO & Trademark news on the National Law Review Intellectual Property page

Federal Alcohol Regulator follows FDA, No CBD in Beer, Wine and Liquor

While hemp is now legal under state and federal law, the Alcohol and Tobacco Tax and Trade Bureau (TTB) has made clear that cannabidiol (CBD), a product derived from hemp, is not a permitted ingredient in alcohol beverages quite yet.

The use of hemp and CBD in various products has proliferated in recent months, and the public and stakeholders have looked to the Food and Drug Administration’s (FDA) and TTB for guidance.

On April 26, 2019, the TTB issued an industry circular1, making clear the TTB will look to the FDA for determinations on whether hemp ingredients such as CBD may be included in food or alcohol. The FDA recently has reiterated that CBD is not a permitted ingredient in food or dietary supplements under federal law. The FDA is, however, beginning the process of reevaluating this position which could lead to an administrative rulemaking.

Following the approach of the FDA, the TTB has stated it will not approve alcohol beverage formulas including certain hemp ingredients, including CBD. However, hemp seeds and hemp seed oil are approved ingredients as they comply with FDA regulations.

There are a couple key points to consider following the statement by the TTB:

  • All alcohol beverages sold in the United States require formula approval by the TTB, even if the alcohol is sold exclusively within a single state. In comparison, the FDA regulates interstate commerce, therefore, food, beverages and dietary supplements produced and marketed exclusively in a single state may be beyond the scope of FDA regulation (but may subject to state-specific regulations).
  • Certain alcohol beverages may still be legally marketed as containing hemp. However, those products may only contain hemp seeds or hemp seed oil. Both the TTB and the FDA have approved hemp seeds and hemp seed oil as permitted food additives or ingredients. The TTB also left open the possibility of approving other parts of the hemp plant that don’t include CBD or THC.
  • The FDA is holding a public hearing on May 31, 2019, where it is seeking data and information regarding the safety of products containing CBD. The TTB appears likely to follow the lead of whatever decision is ultimately reached by the FDA. The TTB stated it will be issuing more detailed guidance regarding CBD and hemp as well.
  • The TTB further reiterated it will not approve formulas containing marijuana, or other controlled substances.

The 2018 Farm Bill made hemp a legitimate commercial crop and removed hemp from the Controlled Substances Act. Similar legislation in Wisconsin also legalized hemp at the state level. However, hemp and its derivatives, including CBD, remain regulated products. The FDA regulates hemp and CBD as ingredients in food, dietary supplements and cosmetics. The TTB regulates alcohol beverage formulas and ingredients.

 

Copyright © 2019 Godfrey & Kahn S.C.
This post was written by Zachary Bemis of Godfrey & Kahn S.C.
Read more on TTB & FDA Hemp Regulation on the National Law Review Biotech, Food, Drug page.

FDA Takes Action Against Retailers Selling Tobacco Products to Minors

On February 7 FDA initiated enforcement action against a Miami, Florida Walgreens and a Charleston, South Carolina Circle K store for repeated sales of tobacco products to minors.  The enforcement action, called a no-tobacco-sale-order (NTSO) would prevent the individual stores from selling any tobacco product for thirty days.

In its press release, FDA noted that Walgreens is the top violator amongst pharmacies that sell tobacco products, having been cited for tobacco sales to minors during 22 percent of the retail compliance check inspections at Walgreens stores since they began in 2010.  These violations have resulted in over 1,550 warning letters and 240 civil money penalties, but this is  the first NTSO at a Walgreens store.  Other stores identified as frequent violators include Walmart (17.5 percent of inspections resulted in sales to minors violations), Dollar General (14 percent), and Rite Aid (9.6 percent).

FDA commissioner Dr. Scott Gottlieb is quoted in the press release as being “deeply disturbed” by the number and frequency of sales to minors at Walgreens stores and he called on Walgreens management to meet with him to discuss why so many Walgreens stores fail to prevent sales to minors.  Dr. Gottlieb speculated that the pharmacy setting might impact consumer perceptions regarding the safety of tobacco products.

 

© 2019 Keller and Heckman LLP.
Read more news on the FDA on the National Law Review’s Biotech, Food and Drug Type of Law page.

The Blame Game: Senators Clash with the Trump Administration

Why are prescription drug prices so high in the U.S.? While this question can hardly be considered a new topic in American healthcare, the recent clash of words between the Trump Administration and Democratic Senators has once again brought focus to the issue of prescription drug prices. According to the Administration, pharmacy benefit managers (“PBMs”) and drug distributors – who President Trump has dubbed as “middlemen” – are largely to blame for higher drug prices. However, Democratic Senators, PBMs, and drug distributors have recently pushed back against the Administration’s claims, arguing that the Administration’s claims are not supported by any evidence, and, in some cases, are contrary to the core functions of PBMs and drug distributors.

Background

PBMs and drug distributors have been in the crosshairs of the Administration for several months. In a speech on May 11, 2018, President Trump outlined the American Patients First blueprint (the “Blueprint”), which outlined the approach that the Administration would pursue to lower drug prices. Among several targets for change were PBMs and drug distributors, noting that among the Administration’s top goals was “eliminating the middlemen.”[1]

The Blueprint specifically sets forth the Administration’s belief that “[b]ecause health plans, pharmacy benefit managers [], and wholesalers receive higher rebates and fees when list prices increase, there is little incentive to control list prices.”[2] The Blueprint did not, however, provide any evidence or rationale for these claims. Nevertheless, the Blueprint proposes several changes to the way that PBMs operate, including creating a fiduciary duty for PBMs, and restricting the ability of PBMs to retain a percentage of the rebate collected on behalf of health plans. The Blueprint does not, however, elaborate on the Administration’s plans for drug distributors.

United States Department of Health and Human Services (“HHS”) Secretary Alex Azar elaborated on the Blueprint’s claims during a June 12, 2018 hearing before the Senate Committee on Health, Education, Labor and Pensions, where he claimed that PBMs threatened to remove drugs from their formularies if the drug manufacturers decreased list prices.[3] Secretary Azar repeated these claims on June 26, 2018, before the Senate Committee on Finance, where he claimed that drug manufacturers who voluntarily reduced list prices would be harmed by PBMs that would prioritize competing drugs with higher prices when setting their drug formularies.[4]

Senators and Stakeholders Push Back

In a letter to Secretary Azar , Senators Elizabeth Warren (D-MA) and Tina Smith (D-MN) criticize Secretary Azar’s allegations regarding the role of PBMs in drug pricing, calling them “disturbing and serious.” [5] The Senators argue that PBMs and drug distributors hold themselves out as “key players in negotiating lower drug prices and making the market for drugs more efficient” – directly contrary to Secretary Azar’s claims.[6]

The Senators investigated Secretary Azar’s claims by reaching out to the six largest PBMs and three largest drug distributors in the United States. The PBMs unanimously indicated that they never pushed back or otherwise disadvantaged any drug manufacturer for lowering list prices. Express Scripts noted that lower list prices receive favorable formulary consideration, exactly the opposite of Secretary Azar’s claims.[7] The drug distributors gave similar answers, indicating that they did not influence or have any ability to influence the list prices for drugs. Instead, one drug distributor indicated that it negotiated fees for distribution services “agnostic of [the manufacturer’s] product pricing.”[8]

Moving Forward

The Administration appears unfazed by the questions and concerns of PBMs, drug distributors, and Democratic Senators, and has focused its attention on changes to the way PBMs operate. One manner in which PBMs aim to reduce drug prices is by negotiating rebates with drug manufacturers who want to list their products on PBM formularies. On August 17, 2018, Secretary Azar claimed that HHS has the power to eliminate rebates on prescription drug purchases. While the PBM industry contends that only Congress has the ability to change the rebate system, Secretary Azar stated that rebates were created by HHS regulations, and “[w]hat one has created by regulation, one could address by regulation.” [9]

The Secretary’s claims are likely related to a proposed rule that HHS submitted to the Office of Management and Budget (“OMB”) titled “Removal of Safe Harbor Protection for Rebates to Plans or PBMs Involving Prescription Pharmaceuticals and Creation of New Safe Harbor Protection” on July 18, 2018.[10] The OMB is still reviewing the proposed rule, and nothing is currently known about the rule beyond its title; however, Secretary Azar’s comments indicate that the rule may be aiming to adjust or eliminate the ability of PBMs to negotiate with drug manufacturers for rebates. While it is unclear exactly what will be presented in such proposed rule, it appears likely that the Administration will continue pursuing aggressive changes to the way that PBMs operate.

[1] Kerry Dooley Young, Trump Lays Out Drug Plan, Calling for More Competition, Less ‘Global Freeloading’, Medscape (May 11, 2018)

[2] United States Department of Health & Human Services, American Patients First, The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs, (May 2018)

[3] Prescription Drug Pricing, C-SPAN, (June 12, 2018)

[4] Prescription Drug Supply and Cost, C-SPAN, (June 26, 2018)

[5] Senator Elizabeth Warren & Senator Tina Smith, Letter to U.S. Department of Health and Human Services Secretary Alex Azar, August 17, 2018, at 3, Senator Elizabeth Warren & Senator Tina Smith, Letter to U.S. Department of Health and Human Services Secretary Alex Azar, August 17, 2018, at 3

[6] Id. The Pharmaceutical Care Management Association, which promotes PBMs nationwide, claims PBMs will save employers, unions, government programs, and consumers $654 on drug costs over the next decade. Pharmaceutical Care Management Association, Our Industry

[7] Senators Warren and Smith, at 4

[8] Id. at 6.

[9] Yasmeen Abutaleb, U.S. Health Secretary Says Agency Can Eliminate Drug Rebates, U.S. News, (Aug. 20, 2018)

[10] Office of Management and Budget, RIN 0936-AA08, (July 18, 2018)

 

Copyright © 2018, Sheppard Mullin Richter & Hampton LLP.

New Jersey Expands Medical Cannabis Program

On March 27, 2018, New Jersey approved a significant expansion of its medical marijuana program. Reforms include eligibility for patients with anxiety, chronic pain, migraines and Tourette’s syndrome. The move is expected to expand the number of eligible patients far beyond the current level of 18,874. Registration fees will be lowered for patients and the public registry for participating physicians abolished. Currently only 536 out of 28,000 physicians are registered in the program. The loosening of these restrictions aims to address the low rate of participation by doctors and patients relative to other comparably populated states. Medical marijuana has been legal in New Jersey since 2010.

“We are changing the restrictive culture of our medical marijuana program to make it more patient-friendly,” Governor Phil Murphy said. “We are adding five new categories of medical conditions, reducing patient and caregiver fees, and recommending changes in law so patients will be able to obtain the amount of product that they need. Some of these changes will take time, but we are committed to getting it done for all New Jersey residents who can be helped by access to medical marijuana.”

New Jersey has five dispensaries, also known as Alternative Treatment Centers (ATCs). A sixth ATC is preparing to open its doors in the near future. As a result of the reforms, these ATCs will be able to open satellite locations for the first time. In addition, the 10 percent limit on THC will be removed. “Patients should be treated as patients, not criminals. We will be guided by science,” Murphy said.

Further Legalization

Governor Murphy, a Democrat, indicated he wants to sign legislation to legalize adult use of cannabis by the end of 2018. If the legislation succeeds, analysts predict legalization will generate $1 billion of revenue in its first year.

New Jersey has two competing legalization bills under consideration in the legislature that vary regarding the proposed rate of taxation, legality of home cultivation, the number of shops permitted to operate and the level of government regulation. Political momentum for cannabis reform has been growing in the wake of successful programs in Colorado, Washington and other states. Some New Jersey legislators support legalization as a method of generating revenue required for funding other budgetary obligations.

Nationwide, 29 states have medical cannabis programs. If the pending legislation succeeds, New Jersey will be the ninth state to approve recreational use. This rapidly changing landscape of cannabis law requires a diverse array of legal services. Important areas include business formation & governance, commercial transactions, regulatory compliance, labor & employment, professional liability, product liability, intellectual property, insurance coverage and tax assistance. Because cannabis laws vary from state to state, national firms will undoubtedly lead this rapidly expanding area of specialization.

 

© 2018 Wilson Elser.
This post was written by James Cope of Wilson Elser.