Health Law Advisor

On July 7, the Court of Justice of the European Union (ECJ) invalidated the EU-US Privacy Shield framework in its ruling in Data Protection Commissioner v. Facebook Ireland and Maximillian Schrems (Case C-311/18). More than 5,000 organizations in the United States have certified their adherence to this framework, and have relied on it to receive personal data from organizations in the EU in compliance with the General Data Protection Regulation (GDPR) since 2016. The framework was a joint effort between the US Department of Commerce and the European Commission and Swiss Administration to provide companies on both sides of the Atlantic with a mechanism to comply with data protection requirements when transferring personal data from the European Union and Switzerland to the United States in support of transatlantic commerce. The Department of Commerce released the following statement:

The United States shares the values of rule of law and protection of our democracies with our partners in the European Union (EU).  Therefore, we are deeply disappointed that the Court of Justice of the European Union (“ECJ”) has invalidated the EU-U.S. Privacy Shield framework.  The United States is reviewing this outcome and the consequences and implications for more than 5,300 European and U.S. companies, representing millions of transatlantic jobs and over $7.1 trillion in commercial transactions.

The United States and the EU have a shared interest in protecting individual privacy and ensuring the continuity of commercial data transfers.  Uninterrupted data flows are essential to economic growth and innovation, for companies of all sizes and in every sector, which is particularly crucial now as both our economies recover from the effects of the COVID-19 pandemic.  This decision directly impacts both European companies doing business in the United States as well as American companies, of which over 70 percent are small and medium enterprises.  The United States will continue to work closely with the EU to find a mechanism to enable the essential unimpeded commercial transfer of data from the EU to the United States.

FDA took two important steps last week to clarify the regulatory landscape for cannabis products, including CBD products.  First, FDA issued a draft guidance on Quality Considerations for Clinical Research Involving Cannabis and Cannabis Derived Compounds.  This guidance builds off of earlier guidance FDA has issued about the quality and regulatory considerations that govern the development and FDA approval of cannabis and/or cannabinoid drug products.  See e.g., here and here.  The draft guidance iterates a federal standard for calculating delta-9 THC content in cannabis finished products, which addresses a significant gap in federal policy regarding those products.  While the testing standard is neither final nor binding on FDA or DEA, when finalized it would iterate what FDA considers to be a scientifically valid method for making the determination of whether a cannabis product is a Schedule I controlled substance.  Therefore, it may be useful in many contexts, including federal and state cannabis enforcement actions.  We encourage affected parties to file comments on FDA’s Guidance, which they may do until September 21, 2020.

Second, FDA sent to the Office of Management and Budget for review a proposal on how FDA intends to exercise enforcement discretion over CBD consumer products.  See here.  While the contents of this guidance have not yet been made public, we forecast that it likely will align with FDA’s past enforcement actions and memorialize the agency’s intent to pursue enforcement actions against CBD consumer product companies that make egregious claims about their products treating or preventing serious diseases or conditions.

Guidance on Considerations for Cannabis Clinical Research

FDA’s guidance recognizes that Congress’s enactment of the Agricultural Improvement Act of 2018 (“2018 Farm Bill”) improved domestic access to pre-clinical and clinical cannabis research material that may be used in the research and development of novel therapies.   However, currently marijuana only may be obtained domestically from the University of Mississippi under contract with the National Institute on Drug Abuse.  While DEA issued a policy in 2016 to allow for the additional registration of marijuana cultivators for legitimate research and licit commercial purposes, the Office of Legal Counsel in June 2018 issued an opinion finding that such policy violates the United States’ obligations under applicable treaties.  However, in March of this year, DEA issued a proposed rule to allow for the registration of additional cultivators of cannabis for these licit purposes.  See here.

There is an alternative pathway to the procurement of Schedule I research material which FDA’s guidance does not mention: importation.  Researchers may obtain certain Schedule I material pursuant to a federal DEA Schedule I importer registration, and DEA has in the past issued such registrations.  See 21 CFR 1301.13(e)(1)(viii).

On July 20, 2020, the United States Food and Drug Administration (FDA) announced a six-month extension of its enforcement discretion policy for certain regenerative medicine products requiring pre-market review due to the COVID-19 pandemic. Included in a final guidance document entitled, “Regulatory Considerations for Human Cells, Tissues, and Cellular and Tissue-Based Products: Minimal Manipulation and Homologous Use,” this extension will give manufacturers additional time to determine whether they need to submit an investigational new drug (IND) or marketing ...

In an important win for healthcare providers, on July 17, 2020, the Third Circuit determined in a published opinion that an out-of-network provider’s direct claims against an insurer for breach of contract and promissory estoppel are not pre-empted by ERISA.  In Surgery Ctr., P.A. v. Aetna Life Ins. Co.^[1] In an issue of first impression, the Third Circuit addressed the question of what remedies are available to an out-of-network provider when an insurer initially agrees to pay for the provision of out-of-network services, and then breaches that agreement.

This case arose because two patients—identified as J.L. and D.W.—required medical procedures that were not available in-network through Aetna. J.L. needed bilateral breast reconstruction surgery following a double mastectomy and D.W. required “facial reanimation surgery,” which the Third Circuit describes as “a niche procedure performed by only a handful of surgeons in the United States.” Neither J.L. nor DW had out-of-network coverage for these procedures. D.W.’s plan also contained an “anti-assignment” clause, which would have prevented D.W. from assigning his or her rights under the plan to the Plastic Surgery Center, P.A.

On March 18, 2020, the United States Food and Drug Administration (FDA) announced the suspension of all domestic routine surveillance facility inspections until further notice. FDA took this measure to protect the health and well-being of its staff and those who conduct the inspections for the agency under contract at the state level, and due to industry concerns regarding visitors. During this interim period, the FDA conducted only a limited number of mission critical inspections using a risk-based approach. On July 10, 2020, FDA announced its plans to resume on-site inspections ...

The cannabidiol (“CBD”) consumer product marketplace is booming.  And, while FDA has maintained its position that CBD, even hemp-derived CBD, may not be included as an ingredient in conventional foods or dietary supplements, FDA has signaled its intent to create a lawful marketing pathway for these products.  Also, while FDA has issued Warning Letters to companies who made egregious claims about their products curing serious diseases and conditions like Alzheimer’s disease and cancer, FDA has also signaled a willingness to exercise enforcement discretion over CBD products that pose less serious safety concerns.  What has resulted is CBD manufacturers, retailers, and other businesses living in FDA regulatory purgatory.  Fortunately, several courts have recently held that CBD companies will not face consumer product liability, at least while their FDA regulatory fate is being decided.

A number of federal lawsuits were recently brought by consumers against manufacturers of various types of CBD products, ranging from ingestible foods and beverages, dietary supplements, topical oils and sprays, and vape products. The plaintiffs in these cases all bring similar claims, that the products purchased were misleading as to the amount of CBD in the product and/or that the products were mislabeled and falsely advertised as dietary supplements.  The plaintiffs’ claims are based, at least in part, on assertions that the defendants violated the federal Food, Drug, and Cosmetic Act (“FD&C Act”) by introducing adulterated and misbranded products into the U.S. market.

However, over the course of 2020, at least three judges have found that the outcome of these cases will have to wait until FDA completes its rulemaking on the regulation of CBD products. Citing the primary jurisdiction rule, the judges each issued a stay on their respective cases. The judges found that FDA has primary oversight over claims involving the illegal sale or marketing of CBD products, and that regulatory clarity is needed before a decision may be made on the matters brought by the plaintiffs. Thus, the fate of these cases now depend on when and whether FDA will issue regulations governing CBD products.