Earlier this summer, Ethan P. Davis, Principal Deputy Assistant Attorney General for the Civil Division of the U.S. Department of Justice (DOJ) delivered remarks addressing DOJ’s top priorities for enforcement actions related to COVID-19 and indicating that DOJ plans to “vigorously pursue fraud and other illegal activity.”[1] As discussed below, Davis’s remarks not only highlighted principles that will guide enforcement efforts of the Civil Fraud Section under the False Claims Act (FCA) and of the Consumer Protection Branch (CPB) under the Food, Drug, and Cosmetic Act (FDCA) and the Controlled Substances Act (CSA) in response to the COVID-19 public health emergency (PHE), they also provide an indication of how DOJ might approach enforcement over the next few years.

DOJ’S KEY CONSIDERATIONS & ENFORCEMENT STRATEGY FOR COVID-19

Davis highlighted two key principles that would drive DOJ’s COVID-related enforcement efforts: the energetic use of “every enforcement tool available to prevent wrongdoers from exploiting the COVID-19 crisis” and a respect of the private sector’s critical role in ending the pandemic and restarting the economy.[2] Under that framework, DOJ plans to pursue fraud and other illegal activity under the FCA, which Davis characterizes as “one of the most effective weapons in [DOJ’s] arsenal.”[3]

However, as DOJ pursues FCA cases, it will also seek to affirmatively dismiss qui tam claims that  DOJ finds meritless or that interfere with agency policy and programs.[4] DOJ also plans to collect certain information from qui tam relators regarding third-party litigation funders during relator interviews.[5] DOJ’s emphasis on qui tam cases—cases brought under the FCA by relators or whistleblowers—for COVID-related enforcement highlights the impact such matters have on DOJ’s enforcement agenda.[6]

  1. DOJ will consider dismissing cases that involve regulatory overreach and are not otherwise in the interest of the United States.

Although Davis emphasized that the majority of qui tam cases would be allowed to proceed, in order to “weed out” cases that lack merit or that DOJ believes should not proceed, DOJ will consider dismissing cases that “involve regulatory overreach or are otherwise not in the interest of the United States.”[7] This is consistent with the principles reflected in the 2018 Granston Memo that instructed DOJ attorneys to consider “whether the government’s interests are served” when considering whether cases should proceed and listed considerations for seeking alternative grounds for dismissal of FCA cases.[8] Davis gave examples throughout his speech of actions DOJ might consider dismissing:

  • Cases based on immaterial or inadvertent mistakes, such as technical mistakes with paperwork
  • Cases based on honest misunderstandings of rules, terms, and conditions
  • Cases based on alleged deviations from non-binding guidance documents
  • Cases against entities that reasonably attempted to comply with guidance and “in good faith took advantage of the regulatory flexibilities granted by federal agencies in the time of crisis.”[9]

DOJ litigators have been advised to inform relators of the possibility of dismissal.[10] Additionally, qui tam suits based on behaviors temporarily permitted during the COVID-19 pandemic, particularly in circumstances in which agencies exercised discretion to waive or not enforce certain requirements, might
“fail as a matter of law for lack of materiality and knowledge.”[11]

  1. DOJ will now include a series of questions during relator interviews to identify third-party litigation funders.

During each relator interview, DOJ has instructed line attorneys to ask a series of questions to identify whether the relator or their counsel has a third-party litigation funding agreement,[12] which is an agreement in which a third party—such as a commercial lender or a hedge fund—finances the cost of litigation in return for a portion of recoveries.[13] Under the new policy detailed in Davis’s speech, if a third-party funder is disclosed, DOJ will ask for the following:

  • the identity of the third-party litigation funder,
  • information regarding whether information of the allegations has been shared with the third party,
  • whether the relator or their counsel has a written agreement with the third party, and
  • whether the agreement between the relator or their counsel and the third party includes terms that entitles the third-party funder to exercise direct or indirect control over the relator’s litigation or settlement decisions.

Relators must inform DOJ of changes as the case proceeds through the course of litigation.[14] While Davis characterizes these changes as a “purely information-gathering exercise for the purpose of studying the issues,” the questions are in furtherance of DOJ’s ongoing efforts to uncover the potential negative impacts third-party litigation financing may have in qui tam actions. [15] The questions Davis referenced in his remarks reflect DOJ’s concerns with third-party litigation funding as expressed by Deputy Associate Attorney General Stephen Cox in a January 2020 speech.[16] Davis emphasized that DOJ particularly sought to evaluate the extent to which third-party litigation funders were behind qui tam cases DOJ investigates, litigates, and monitors; the extent of information sharing with third-party funders; and the amount of control third-party funders exercised over the litigation and settlement decisions.[17] While the Litigation Funding Transparency Act of 2019 has remained inactive since its introduction in February 2019 by Senator Grassley[18] and the 2018 proposal by the U.S. Court’s Advisory Committee on Civil Rights’ Multidistrict Litigation Subcommittee to require disclosure of third-party litigation funding remains under consideration,[19] DOJ’s plans to include this line of questioning potentially signals DOJ’s intention to take more concrete and significant steps to address third-party litigation funding in the future.


Continue Reading False Claims Act Enforcement During the COVID-19 Pandemic and Beyond

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).


Continue Reading FDA Issues Draft Guidance on Cannabis Clinical Research and Sends CBD Enforcement Discretion Guidance to OMB for Review

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

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

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.


Continue Reading Federal Courts Say They Will Decide Cases Against CBD Product Manufacturers When the Smoke Clears

FDA recently published its “Good Manufacturing Practice Considerations for Responding to COVID-19 Infection in Employees in Drug and Biological Products Manufacturing Guidance for Industry” (“Guidance”) which provides suggestions on managing the potential risk of products being contaminated by SARS-CoV-2, the virus behind COVID-19 infections for drug and biological product manufacturers, 503B outsourcing facilities, and 503A compounding pharmacies.

The Guidance builds on the current Good Manufacturing Practices (cGMPs) regulations for drugs and biological products, which require personnel with an illness that could adversely affect drug safety or quality be excluded from direct contact with drugs and drug components used in manufacturing.[1]  As the Guidance states, preliminary research indicating that SARS-CoV-2 “is stable for several hours to days in aerosols and on surfaces,” and that it has an incubation period of 2 to 14 days, which are both factors that increase the risk of spread and introduction into products.  The actual health risk is hard to calculate – FDA itself notes that there have not been documented transmissions through pharmaceuticals to date.  The regulatory risk, however, is an easier formula – FDA has a clear expectation that drug and biological product manufacturers evaluate the potential for COVID-19 contamination of their products under existing controls, or risk being out of compliance with cGMPs.
Continue Reading Current Good Manufacturing Practices in the Time of COVID-19: FDA Announces New Expectations on Risk Assessment and Risk Management

As an update to our prior blog post, on April 20, 2020 FDA announced the authorization of the first COVID-19 test for home collection of specimens. This announcement, made via the Agency’s FAQs on Diagnostic Testing for SARS-CoV-2 webpage, comes after weeks of FDA reporting that it has been working closely with manufacturers on such a test during the weekly Virtual Town Hall Meetings hosted by the Center for Devices and Radiological Health. FDA clarifies that the test is only authorized for home collection of specimens to be sent back to a laboratory for processing. FDA still has not authorized a COVID-19 test “to be completely used and processed at home.”

According to the Emergency Use Authorization (EUA) letter for the test, the new home collection method involves the use of a nasal swab, as opposed to a nasopharyngeal swab. Home collection is only permitted “when determined by a healthcare provider to be appropriate based on results of a COVID-19 questionnaire.” Instructions for self-collection must be made available to individuals online or as part of the collection kit, and the kit must include materials allowing the patient to safely mail the specimen to an authorized laboratory. The letter states that the EUA will be in effect until there is a declaration that the circumstances justifying this authorization is terminated or revoked.


Continue Reading FDA Authorizes the First Home Collection of Specimens to Be Tested for COVID-19

On Friday, March 27, 2020, FDA issued an update to previous guidance titled, “FDA Guidance on Conduct of Clinical Trials of Medical Products during the COVID-19 Pandemic” (the “Guidance”), adding an Appendix with ten questions and answers for specific topics based on feedback received on the initial March 18th Guidance. To supplement our prior blog post, we identify some key takeaways from the updated Guidance below:

Prioritize Safety of Clinical Trial Participants

  • Ongoing Clinical Trials. Sponsors, investigators, and IRBs should work together to assess whether the participants’ safety is better served by continuing the study as is, discontinuing administration or use of the product, or by ending participation in the trial. The Guidance provides a number of key factors for consideration. FDA also recognizes that there may be an investigational product that is providing benefit to a trial participant, and the sponsor must decide whether to continue administration during the COVID-19 pandemic. This is a context-dependent choice, and sponsors should consider whether there are any reasonable alternative treatments available, the seriousness of the disease or condition, the risks involved in switching treatment, supply chain disruptions, and whether discontinuing administration would pose a substantial risk to the participant.
  • New Clinical Trials. With respect to initiating a new clinical trial, other than one to investigate treatments or vaccines related to COVID-19 infection, FDA advises sponsors to consider the ability to effectively mitigate the risks of a trial in order to preserve safety of the participants and trial integrity. Any new trial must also be designed in a way to comply with the Federal and State public health measures implemented in response to COVID-19.


Continue Reading FDA Issues Update to Guidance for Clinical Trials During the COVID-19 Pandemic

On March 22, 2020, the U.S. Food and Drug Administration (“FDA”) issued guidance, for immediate implementation, that aims to increase the availability of ventilators and other respiratory devices needed to address the COVID-19 pandemic.  While FDA urges health care facilities to use, wherever possible, FDA-cleared standard full-featured ventilators to treat COVID-19 patients (as well as other patients requiring ventilatory support), FDA will allow a more flexible approach to modifications to these devices to help boost manufacturing capacity and supply.  FDA also took the opportunity to lay out guidelines that encourage submission of Emergency Use Authorization (“EUA”) applications for devices not marketed in the United States, continuing an unprecedented Agency response to the pandemic.

Guidance Scope

Specifically, FDA will allow manufacturers of certain FDA-cleared ventilator/respiratory devices (as detailed in the table below) to make modifications to the indications, claims, functionality, or to the hardware, software, or materials of the device without making a new 510(k) submission to FDA, so long as the modification will not create undue risk in light of the public health emergency.  Such changes, which would normally require a new 510(k), could include a significant change or modification in design, material, chemical composition, energy source, or manufacturing process.


Continue Reading FDA Eases Device Modification Rules to Expand Availability of Ventilators During COVID-19 Pandemic

On March 16, 2020, FDA finalized its guidance titled Policy for Diagnostic Tests for Coronavirus Disease-2019 during the Public Health Emergency (the “Policy”). The Policy includes information and recommendations to assist laboratories and commercial manufacturers in development of diagnostic tests for the novel coronavirus (“COVID-19”) during the ongoing pandemic.

During the first week of implementation,