Kirkpatrick & Lockhart LLP
Life Sciences FOCUS
NOVEMBER 2003
In This Issue
FDA’s Risk-Based Enforcement Strategy
Device Manufacturers Beware: EPA Continues to Expand Its Reach into FDA Jurisdiction
WTO Dispute Settlement Process on Biotech Crops
Project BioShield
SEC Says No Certification of Form 8-K Financials Required Under Sarbanes-Oxley
FDA’s Risk-Based Enforcement
Strategy
by Suzan Onel, Partner, Food and Drug
In August 2003, Food and Drug Administration (“FDA”) Commissioner Mark McClellan announced the agency’s new riskbased enforcement strategy that is to be applied across all areas
regulated by the agency—drugs, biologics, medical devices,
food, dietary supplements, veterinary products, and cosmetics.
In confronting its vast regulatory and enforcement responsibility, McClellan stated that FDA’s risk-based policy will be guided
by four key principles: (1) clarity in guidance and communication with industry, (2) incorporation of the latest scientific understanding and innovation into FDA practice and policy on
production, inspection and enforcement, (3) combined activity
with other federal and state agencies, as well as private organizations for coordinated enforcement, and (4) deterrence through
enforcement of “bad actors” whom FDA will aggressively seek
out and punish through enforcement actions and the court system.
Commissioner McClellan stated that where compliance cannot
be achieved through “better guidance, better science and better partnerships,” the agency will seek the maximum allowable
civil or criminal penalties, especially regarding serious public
health threats. McClellan cited two examples of organizations
agreeing to financial penalties for failing to comply with FDA’s
good manufacturing practice regulations. McClellan also cited
recent criminal penalties imposed on FDA-regulated companies, including $879 million for conspiracy to commit violations
of the Prescription Drug Marketing Act, $355 million for health
care fraud and $92 million for failure to report medical device
malfunctions to FDA. Other areas of special enforcement interest to FDA are counterfeit drugs, false and misleading claims
made for drug and dietary supplement products, and food security.
Device Manufacturers Beware:
EPA Continues to Expand Its
Reach into FDA Jurisdiction
by Barry Hartman, Partner, Homeland Security,
Environment & White Collar, and
Suzan Onel, Partner, Food and Drug
The Federal Insecticide, Fungicide, and Rodenticide Act, 16
U.S.C. § 136-136y (“FIFRA”), authorizes the U.S. Environmental Protection Agency to require that all “pesticides” be registered. The legal definition of “pesticide” focuses on the purpose of the product—to repel any pest (which includes viruses,
bacteria and other microorganisms). The EPA has, by unwritten
“interpretive policy,” vastly expanded the reach of FIFRA, to
require separate registration of FDA-approved medical devices
that are manufactured with antimicrobial substances, even though
the purpose of those products is not to repel pests. This interpretation subjects anyone involved in the manufacturing, distribution, and sale of these products to an entirely new regulatory
regime, and places some medical devices in the same category as
ant traps and rat poisons. It can also substantially delay bringing
new medical devices to market, since FIFRA registration can
often take years. Regardless of the accuracy of the claims (and
sometimes because of that accuracy), the agency often threatens
to issue an order immediately stopping all sales and distribution
of the device if the company does not immediately remove the
claims, even before any hearing can be held.
WTO Dispute Settlement Process
on Biotech Crops
by Dirk Michels, Partner, International
In May 2003, the United States, joined by Canada and Argentina
and supported by nine additional countries,1 initiated the
consultative process before the World Trade Organization
(“WTO”) against the 15 nations comprising the European Union
(“EU”) to bring an end to a five-year moratorium on approvals
for genetically modified crops in the EU. The complaining parties
argue that the EU moratorium violates WTO rules, more
specifically the WTO Agreement on the Application of Sanitary
and Phytosanitary Measures (SPS Agreement).
Since 1999, the EU has not approved any genetically modified
crop products for planting or import due to safety concerns to
use such products as food. According to U.S. Trade Representative Robert Zoellick, the European moratorium “harms farmers
and consumers around the world by denying them the benefits
of productive, nutritious and environmentally friendly biotech
products.”
After the United States, Canada, and Argentina were unable to
narrow their differences with the EU in June, they requested
the formation of a WTO hearing panel at the beginning of August.
It is now expected that the WTO panel will circulate its final
report on this issue to all WTO members by the middle of next
year. Assuming an appeal will be filed by the complaining parties
or the respondent to the WTO Appellate Body, a final decision
on this issue may be expected by the fourth quarter of 2005.
Australia, Chile, Colombia, El Salvador, Honduras, Mexico, New
Zealand, Peru, and Uruguay.
1
Project BioShield
Industry, Dual Use Products
by Barry Hartman, Partner, Homeland Security, Environmental
& White Collar
Some in industry support BioShield but want Congress to provide
liability protections for companies that invest in researching and developing bioterrorism countermeasures.
The House on September 24, 2003 approved $890 million in
fiscal year 2004 funding for President Bush’s Project BioShield
initiative.
The initiative would create a special reserve fund for the executive branch to buy emergency bioterrorism countermeasures, including vaccines, drugs, and other treatments.
The $890 million is part of $5.6 billion in “advance appropriations,” a promise of funding for fiscal years 2004 through 2013.
The funding is part of the homeland security fiscal 2004 appropriations conference report (H.R. 2555), which the House approved in a 417-8 vote. House and Senate conferees merged
differing versions of the homeland security appropriations measure on September 17, 2003.
The Senate must approve the conference report before it goes
to President Bush for his signature.
Others are concerned that the pending legislative proposal would
not allow for funds for the purchase of “dual use” countermeasures.
For example, a vaccine already approved for commercial use that is
effective as a bioterrorism countermeasure would not be eligible for
government purchase using BioShield funds.
The House-approved homeland security appropriations conference
report also includes $484 million in funds for countering potential
biological, disease, and chemical threats to civilians. Included in that
allotment is $400 million that would be available for the strategic
national stockpile of pharmaceuticals and other treatments.
SEC Says No Certification of
Form 8-K Financials Required
Under Sarbanes-Oxley
By Eileen Smith Ewing, Partner, Corporate/Transactional
The proposed BioShield
initiative aims to spur private
industry to create vaccines
and other treatments for
Given their appetite for consolidation and partnering, publicly traded
life science companies are no strangers to Form 8-K, the vehicle for
reporting material events to the Securities and Exchange Commission (SEC).
There has been confusion in recent months as to whether Section
906 of the Sarbanes-Oxley Act requires CEO and CFO certification
of financial statements filed as part of a Form 8-K. In recent weeks,
SEC staff has clarified the issue, stating definitively that Form 8-K is
not a “periodic report” for Section 906 purposes. Thus, certification
of Form 8-K financial statements is not required.
bioterrorist threats....
Authorization Still Needed
With funding being put in place for BioShield, the initiative still
needs to be authorized. The House approved BioShield authorizing legislation in a 421-2 vote on July 16, 2003 (H.R. 2122).
The Senate, however, has not passed authorizing legislation.
The proposed BioShield initiative aims to spur private industry
to create vaccines and other treatments for bioterrorist threats—
such as anthrax, botulinum toxin, Ebola, and the plague—by
providing a guaranteed government market. The treatments
would be added to a national stockpile of pharmaceuticals maintained by the federal government.
For more information
K&L’s interdisciplinary Life Sciences Practice Group is a nationwide network of lawyers experienced in solving the complex legal and regulatory issues facing our pharmaceutical, biotechnology, health care and medical device clients. Practicing in areas as
diverse as corporate and securities, intellectual property, food and
drug, regulatory compliance, litigation, environmental and venture capital, we apply cutting-edge technological and business
savvy to the rapidly evolving life sciences industries.
The national contacts for K&L’s interdisciplinary Life Sciences
team are listed below. We invite you to contact one of them if you
have any questions or to learn more about our practice.
Eileen Smith Ewing
Christine R. Ethridge
Barry M. Hartman
Lorraine Massaro
Dirk Michels
Suzan Onel
Stephen A. Timoni
617.951.9227
412.355.8619
202.778.9338
212.536.4043
415.249.1022
202.778.9134
973.848.4020
eewing@kl.com
cethridge@kl.com
bhartman@kl.com
lmassaro@kl.com
dmichels@kl.com
sonel@kl.com
stimoni@kl.com
This publication/newsletter is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in
regard to any particular facts or circumstances without first consulting a lawyer.
BOSTON
www.kl.com
© 2003 KIRKPATRICK & LOCKHART LLP. ALL RIGHTS RESERVED
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