Thursday, March 31, 2011

Mensing Oral Argument In Stream Of Consciousness

Everybody knows we’re interested in prescription drug preemption.  That means we’re interested in the Mensing/Demahy appeal in the Supreme Court that was orally argued yesterday.

First of all, here’s a link to the transcript.  You don't have to take our word for it.

As to generic drug preemption, we're quite frankly conflicted.  We of course like preemption, but after our side lost Wyeth v. Levine, 129 S. Ct. 1187 (2009), we also don't want to see our brand-name clients get stuck with liability on some new cockamamie legal theory – read, Conte – for drugs made by generic manufacturers.  To force brand name manufacturers to increase the price of their other drugs to pay for liability for drugs they don't make on some theory relating to drugs they no longer even sell is crazy for a lot of reasons.

If the generics win on preemption, simple necessity will force plaintiffs claiming injury from generic drugs to advance such theories (they’re already doing so, even without the additional incentive), and as Conte shows there’s always a judge somewhere ready to adopt any liability theory, no matter how bizarre.

Given our mixed feelings, we think we can give a pretty neutral take on yesterday’s oral argument.  We warn you in advance, however, that this discussion will be rather stream of consciousness.  We’ve read the transcript, and flagged what we find interesting/important, but we haven’t imposed much organization on our thoughts.

Our take going in was that the specter of Levine hangs over all implied preemption arguments these days, especially involving prescription drugs.  Indeed, since Levine the defense side of the generic preemption argument hasn’t had much success.  And that’s how the oral argument started out.  It didn't take long at all for the Chief Justice (Roberts, for any Supreme Court newbies) to hit defense counsel (Jay Lefkowitz of Kirkland & Ellis, arguing first as appellant) with good old Levine.  The question was pitched pretty much as a softball, and counsel distinguished Levine as turning on an FDA changes-being-effected ("CBE") regulation that allowed brand name manufacturers to strengthen warnings without FDA pre-approval.  According to both defendants and the government, generic manufacturers don’t have the same leeway (although the government's position is that the generics lose anyway).

If the generics lose the Chief, who was for preemption in Levine, it's likely lights out.

The defense response brought out the new doyenne of the anti-tort-preemption wing of the Court (with Justice Stevens finally retiring), Justice Ginsburg.  She, of course, brought up the government's position that regardless of the CBE regulation, the generics lose anyway, because they could have approached the FDA informally and proposed a label change that would affect all relevant labels (generic and branded).  We’re calling this – as did some justices during the argument – the "take steps" rationale.  This argument posits that even if generic manufacturers couldn't change their labels unilaterally (given a statutory requirement that their labels remain the “same” as the last branded label), they could nevertheless have opened a dialogue with the FDA.

There is, however, no FDA requirement for generics to do that, nor any FDA regulation even setting out such an informal process.  The generic side’s initial response to “take steps” was to point that out.  Having been engaged in litigation involving FDA-regulated products for quite some time, however, we know that there's a great deal that the FDA does that the Agency doesn’t (for one reason or another) put in its regulations.  It might be a good idea for courts to make the FDA engage in more rulemaking, but we didn’t think that was the issue before the Supreme Court in Mensing/Demahy.

The way the oral argument played out, however, it’s possible that might happen.

The second arrow in the generics’ quiver was that the "take steps" rationale seeks to insert common-law tort plaintiffs into the determination, as between the FDA and those (generic drugs) it regulates, of what those entities should and should not ask the FDA to do.  Once one gets into that sphere, the shadows of the Buckman Co. v. Plaintiffs’ Legal Committee, 531 U.S. 341 (2001), case start to fall on the legal landscape.  Buckman certainly held that, when the common law tries to dictate to the FDA and those it regulates how they should interact with one another, the presumption against preemption goes out the window.

But does this aspect of Buckman do more than that?  Does it also preempt claims that are predicated on how a defendant did (or did not) interact with the FDA – as opposed to the usual warning claim that simply challenges the adequacy of an FDA-approved label?

We’ll probably find out in a few months.

There's also a "proves too much" element in the “take steps” rationale.  Specifically, if the generics had to take steps to lobby the FDA for a label change, do branded manufacturers have a similar obligation?  That point was brought up by Justice Scalia, who at times seemed ready to re-fight the Levine war. That’s another vote that the generics have to have to win.

And what does this informal "take steps" rationale entail?  At what point does the generics' admitted obligation to report adverse events spill over into an obligation to go beyond that and ask that the labeling actually be changed?  Justice Sotomayor – a vote that the plaintiffs need to win – was all over that one.  The generics drew a line between reporting of adverse events, which was mandatory, and informally seeking a label change, which they placed within the penumbra of Buckman's discussion of the exclusively federal relationship between the FDA and those it regulates.  So there’s the Buckman argument again.

But if there is an ability to ask, which the generics concede, how would that square with the "impossibility" prong of implied preemption as interpreted in Levine?  That the FDA might not act doesn't mean that simply asking is impossible.  It was undisputed in these cases that the generics never even asked.  That position seemed to be Justice Kagan's take on this debate.  She is a vote the plaintiffs pretty much have to have to win.

Again, the generics’ counter was the Buckman proposition – that common-law plaintiffs shouldn't be suing over what manufacturers did or did not do vis a vis the FDA.

But Buckman was also a practical decision, Justice Roberts pointed out.  Here, unlike Buckman, the government wasn't particularly concerned that the FDA would be overwhelmed by large numbers of such requests.  Justice Ginsburg also referred to the government's lack of concern.  That’s a legitimate point, because the fraud on the FDA theory at issue in Buckman was malleable enough essentially to challenge anything and everything submitted to the FDA.  A "take steps" rationale, particularly if somehow confined to generic manufacturers, would affect a much smaller universe.

That was a practical distinction, but given that §337(a) says no private enforcement, then does it really matter how much private enforcement is asserted?  But back to first principles – is a failure to ask even an FDCA violation, or rather simply something within a generic (or branded, for that matter) manufacturer's discretion?  Lots of labels could be changed, but must they be?  The generics' position was no, that if the FDA thinks a label change is appropriate, it will convey that conclusion to the generics, at least once the branded product has been driven off the market by generic competition.

Then we heard from Justice Breyer, who, as usual, was concerned with practicalities.  If a generic comes across new information suggesting a risk, what then? The response was basically report everything to the FDA and let the agency make up its mind. Can a state turn that FDA reporting obligation into some sort of "reasonable man" requirement?  Would something conflict?  The generics argue yes, since the plaintiffs aren't just seeking reporting, they're demanding that the manufacturers “take steps’ to get the FDA to make a label change.

So far, so good, but then Justice Breyer – a critical swing vote on preemption issues – goes further and throws in a fraud on the FDA hypo:  can the states "get involved" because the manufacturer "purposely didn't tell anybody" about some "really serious problem"?  The generics of course answered "no" because that would not just be a penumbra from Buckman, that is Buckman.  Plainly Justice Breyer was seriously interested in the Buckman aspect of the case.

Justice Kagan pulled back from hypos, and asked whether the plaintiffs were really alleging anything more than “traditional” failure to warn. The generics argued that the straight warning claim is preempted because there's no mechanism (like the CBE regulation) by which generics can simply change the label that goes to physicians.  Interestingly, Justice Kagan agreed with that.  But she offered up the FDA's “take steps” position as an alternative.  Again, the generics attacked that as not being based on any FDA regulation, or anything at all except a Federal Register "preamble" (which became a dirty word in Levine), and that even after all that the FDA ultimately makes the decision.

Then Justice Kennedy made a startling statement – that this case may even be "a fortiori" from Buckman.  Whoa.  Justice Kennedy is another crucial swing preemption vote.  If that was really what he thinks, then that sounds like good news indeed for the generics, since he voted against preemption in Levine.

Justice Sotomayor raised some serious questions of congressional intent – why would Congress:  (1) create a system where only brand-named products are subject to tort suits? or (2) create differing reporting/misbranding requirements for different kinds of drugs?  As to the first, we'd of course say that the Court got it wrong in Levine, but that's not what one does in an oral argument.  The generics’ counsel started with the second, responding that never, since there have been generic drugs, has the FDA found a generic drug with the statutorily required labeling (that is to say, labeling that’s the “same” as the last branded label for the drug) to be in violation of the Act.  As to the first question, counsel argued that Congress intended generics to be cheap – "pennies" rather than "dollars" per pill.  That’s the generics’ obstacle preemption argument, although it was not presented as such.

Both Justices Ginsburg and Sotomayor engaged on these points - the former raising branded generics, which she said don't fit a description of a generic with lesser capability, and the latter wondering whether generics would ever have sufficient information to propose label changes in the first place.  They were hostile to the notion that the “low cost” rationale allowed generics to, as they saw it, cut corners on safety.  The generics didn’t back down.  They argued that, if the FDA wants generics to go beyond reporting and to start evaluating safety risks in the first instance (something they're arguably not equipped to do) then the FDA should engage in notice and comment rulemaking, because that would be a huge change in their business models.

So much for the defense (although it did reserve time for rebuttal)

The plaintiff's side got the same treatment.  Lewis Bograd, their counsel, barely got his "they want the right to do nothing at all" argument out of his mouth before Justice Scalia pounced, pointing out the adverse event reporting requirement and suggesting that it was up to the FDA to decide how serious the risk really was.  Levine was the rejoinder – that state court juries are perfectly up to that task.  After a little Scalia speech, the plaintiff offered that, if the FDA had actually said no to a request, then that's "clear evidence" that the FDA would have said no.

To us that sounds like more of a tautology than a real concession.

We then get an interesting observation from Justice Breyer that, rather than Levine, the case is more like Buckman, because any supposed duty to tell the FDA something, amounts to a claim that private plaintiffs can enforce that duty, as opposed to the FDA "enforcing their own stuff."  That’s Buckman.  Conversely Levine was a case of the defendant having the power to change its own warning without prior FDA involvement.  If that's what he really thinks (as opposed to playing devil's advocate), that would be good news for the generics, because Justice Breyer also was against preemption in Levine.

So two key swing justices, Kennedy and Breyer, each made comments during oral argument equating generic preemption, and the “take steps” rationale, with Buckman rather than Levine.  That  bears watching.

Although promising to answer Justice Breyer's question about FDA enforcement, plaintiffs’ counsel didn’t.  Instead he offered up the "take steps" rationale, which plaintiff contended was not “impossible” under a Levine rationale.  Maybe he would have gotten around to answering Justice Breyer's question in time, but other justices intervened.  The Chief wanted to know the FDA's turnaround time, which counsel claimed (not based on generic drug data) is about three, or maybe four (he used both figures) months.  He got caught by Justice Scalia mixing statistics of generic apples and branded oranges.

Justice Sotomayor wanted to know how much the defendants would have to know to trigger the “take steps” obligation to lobby the FDA, since many adverse event reports involving generics go to the brand-name manufacturer because generic substitution confuses doctors as to whose drug was actually used.

Interesting question.

The plaintiffs’ answer was interesting, too – standard tort law jargon that the generics should be held to the standard of an “expert” and should have affirmatively examined the FDA's adverse event database.  So it came out that plaintiffs are asseting obligations that go beyond reporting and shade into independent research.

Justice Scalia immediately called plaintiffs on the "expert in the field" point, which was essentially an argument to treat the generic manufacturer as if it were a branded manufacturer.

Plaintiff's counsel, of course, tried to avoid Justice Scalia's logic by arguing that because the generic drugs were being used off-label, the generics had no more or less expertise than a branded manufacturer would have had, because off-label uses have not been studied.

Oops.  Off-label use gets into Buckman, which was the paradigmatic off-label use case.

Thus, along came Justice Breyer to nail down the point that the claim goes beyond mere reporting to the "obligation" to "initiate a label change."  Reporting, Justice Breyer observed, is Buckman.  The second obligation, to do more than just report, becomes superfluous once the FDA has all the information.  Counsel disagreed that it was superfluous, essentially claiming, based on Levine, that the FDA is incompetent and overmatched.  Justice Breyer interprets plaintiff's claim as the generics having to "do their best to change the label" by lobbying the FDA.

Now we hear from Justice Alito for the first time.  He is another Levine pro-preemption vote that the defendants here have to retain.  His hypo was whether there would still be an obligation to "take steps" if the FDA ruled that, in general, there was no obligation for generics to request a label change. That pretty much stumped plaintiffs’ counsel, who confessed he couldn't answer, but that it may be a "direct conflict."

Justice Alito interpreted plaintiff's theory as leading to that hypothetical, as the "informal" process contemplated by the "take steps" rationale was "nowhere provided for under the FDA rules," and thus could not be required under the existing scheme.  If that wasn't devil's advocacy, then, Alito seems leaning towards preemption.

Assuming there's no firm regulatory basis for the "take steps" process, plaintiffs’ counsel retreated to a "misbranding" obligation.  But that's FDCA violation language.  We hear from Justice Kennedy again, wondering now the case is now different from Buckman.  We're dealing with a statutory relationship that "did not permit a cause of action."  Time to backpedal – plaintiffs can't afford to lose both Breyer and Kennedy. Their answer was basically Levine, that this was simply a warning case, something "traditional."

But Justice Kennedy persisted.  If there wasn’t a cause of action in the context of a "formal" FDA-manufacturer relationship in Buckman, how can there be a cause of action predicated on the "informal" relationship assumed by the "take steps" rationale?  (That was probably what Justice Kennedy meant by his prior "a fortiori" comment.)  Counsel didn't exactly follow and gave two answers: (1) that Buckman involved a "bizarre" non-traditional cause of action, and (2) you can't find preemption because it would preclude suit in some 70% of all prescriptions, which are now generic. The first response simply disrespects Buckman, while the second is a sort of “floodgates” argument that, while it may have independent force, wasn’t really on Justice Kennedy's point.

After deferring to the SG on a regulatory question, plaintiffs' counsel closed with some point about Bates v. Dow Agrosciences LLC, 544 U.S. 431 (2005), not involving any form of CBE.  We confess we're not sure why he thought that was so important to go out of the way to raise it, particularly because Bates was an express preemption case.

Next the Court heard from the government (Edwin Kneedler, deputy SG), which promised to be interesting because the government swings both ways, agreeing with the generics that the CBE requirement is inapplicable, but agreeing on the bottom line with the plaintiffs, based on the informal "take steps" process.

The government didn't get very far either before being interrupted.  It was a very hot court.

Justice Kagan asked whether an "opportunity" to "take steps" - short of an "obligation" – was enough to defeat impossibility preemption.  A plaintiff-side softball.  The SG's position was, as long as there was no prohibition, then state law wasn't asking for the impossible.

Justice Scalia didn't appreciate that.  If the manufacturer could be liable on such a loosy goosey rationale, why not a physician who did not suggest a label change to the FDA?  The government’s counsel seemed well prepped, because he had a coherent answer to a question that came sort of out of left field (or perhaps "right field," because it's Scalia).  He said, no, because a physician could warn the patient without having to involve the FDA at all.

Pretty decent answer.  Unfortunately it went downhill from there.

The Chief Justice asked what if "take steps" produced a boilerplate request to consider a label change attached to each and every adverse event report?  And what if the FDA rejected the boilerplate request; would that lead to preemption?  Here the government’s lawyer got a little confused.  His overall position was that an FDA rejection is preemptive, but then what about a boilerplate request?  That's a real problem with an informal process that has no clearly set standards.  Both the Chief and Justice Scalia hammered that position – why not boilerplate – and the government never had a good answer.  All it could offer was a non-notice and comment FDA preamble.

We know what the Court did to such an FDA preamble in Levine.

Justice Alito wanted to know if the FDA had analyzed the economic consequences of the new "take steps" process (or "opportunity") that its brief relied upon to overcome preemption.  Answer:  No.  But somehow it stems from the "misbranding requirements of the Act" which generics are subject to.  Thus the government denied the process was really something new.

So we returned to misbranding.

Justice Sotomayor decided to help out, asking if generics, in addition to reporting adverse events, also had a duty to "monitor the safety of the drug."  There was no explicit FDA requirement to do that, the government answered, but it's not in conflict with anything in "the Act" (whether the FDCA or Hatch-Waxman, at this point, we aren't sure).

Justice Scalia went after that statement, wanting to know how any generic could decide when a label change was necessary under a duty to "monitor safety," since all a generic manufacturer does is "replicate" pills.  The government argued that state law can impose a duty to investigate safety that goes beyond the FDA’s regulations.

But what the government really wanted to discuss was Buckman – even to the point of giving Justice Scalia short shrift.  Buckman was "totally different" because it was predicated on lying to the FDA and thus on the existence of the FDA....

That was as far as he got before the Chief reminded the government of the "flood the FDA" rationale in the brief that the government filed in Buckman.  Why no similar prediction here?

The response was a pre-prepared speech:  that the Buckman claim would have made it a tort to lie to the FDA, while this case remained about the warning given to physicians.  And somehow, preemption was an affirmative defense here rather than an element of a cause of action as in Buckman (we’re scratching our heads over that one).  So there's no preemption if there's enough evidence to request a label change under the same standard as the CBE requirement (even though the CBE requirement isn't applicable).

In short, not one word about the Chief's question about the FDA getting flooded with (probably boilerplate) requests.  The Chief tried one last time and got nowhere.  Because it was not impossible to "take steps" (even though the process is entirely extra-regulatory), then impossibility preemption can't preclude a plaintiff from saying the defendant should have talked to the FDA specifically about a label change.

The defense rebuttal made the most of what overall we'd have to say was a weak performance by the government.  The government's position favored jury trials over violations of FDA duties that aren't anywhere in FDA regulations. The same general duty to inform was also raised in Buckman, etc., etc.

Justice Sotomayor didn't entirely disagree, but distinguished Buckman as not involving a duty to inform plaintiffs (meaning their physicians), as opposed to the FDA.  Where's the impossibility?

The defense answer, because the presentation of the "take steps" rationale was so weak, was that generics can't change the label, which the government admits, and “take steps” process is something ginned up from nothing.  It's not set forth anywhere, and would only worsen the existing backlog (giving figures) of label requests made by the branded manufacturers by dumping who knows how many informal requests on top of those.  Thus, he answered the Chief's question that the government avoided.

But, as Justice Kagan observed, the generics in these cases never asked at all.  The generics’ response hammered the same point – that they did everything they were supposed to do, and the government shouldn't make up new requirements after the fact.

That brought in Justice Ginsburg, who stated that preemption isn't about whether the defendant violated the FDCA (something that ignored Buckman’s no private right of action holding), but only about a conflict with federal law.  So is there a conflict if you have to "tell the FDA" and the FDA doesn't say no?  Actually not a bad question, because the generic's response is that Buckman puts the process of telling the FDA off-limits to tort suits.  Justice Ginsburg mused that Buckman was "a very odd case."

In a sense Justice Ginsburg probably summed it up pretty well.  From the oral argument, it appears that this case is going to be a lot more about Buckman - and a lot less about Levine - than we had thought beforehand.

There appear to be three pro-preemption justices, Scalia, Alito, and Roberts (although he asked the generics tough questions, too), and three anti-preemption ones, Ginsburg, Sotomayor, and Kagan (it's a little hard to tell with her, but as a former SG she may not be inclined to go against the government).  Thomas, as always, said nothing, but his concurrences in both Levine and Buckman indicate he's a tough sell on implied preemption.  But both Justices Kennedy and Breyer seemed fixed on generic preemption being a variant of Buckman preemption because the CBE warning change process is off the table, and "take steps" involves interactions with the FDA (and, we should point out, causation based on speculation on what the FDA might have done).

It's going to come down, we think, to the credibility of the informal "take steps" process, or whether the FDA's anti-preemption stance in Mensing/Demahy is treated with as little deference as its pro-preemption stance was in Levine, both being predicated (it was pointed out) on a preamble with little else behind it.

From how badly the lower courts have treated generic drug preemption in the wake of Levine, we were expecting to be writing an obituary after this oral argument that the handwriting was on the wall, and the generics were doomed.  We can't say that.  If the swing justices see this as a Buckman situation, the generics could win.  If they do, both the legal and practical consequences are likely to be far-reaching.

But we're not going to blog about those possible consequences until the Court decides.