Wednesday, March 30, 2011

Yesterday's Santa Clara Decision and Its Implications for the FDCA

We fingered Astra v. Santa Clara County as a potentially interesting case from the moment that the Supreme Court granted cert.  Here's how we described the case on four days after certiorari was granted:

The statute in question is the Public Health Service Act because the case involves Medicare drug pricing issues.  But to us, the case fairly screams out "Food, Drug & Cosmetics Act."  The issue boils down to whether private plaintiffs can use "federal common law" as a way to get around the fact that certain statutes (such as the FDCA) don't allow private enforcement.
"Interesting Supreme Court Cert. Grants" (DDLaw 9/30/10)

Well, yesterday, the court decided the case.  And we'd have to say that it didn't disappoint.

But first, the background.  As we've stated time and time again, Congress explicitly precluded private rights of action under the FDCA.  The Supreme Court so held in Buckman Co. v. Plaintiffs’ Legal Committee, 531 U.S. 341 (2001).  The relevant FDCA provision is 21 U.S.C. §337(a), which states:
“[A]ll such proceedings for the enforcement, or to restrain violations, of this chapter [the entire FDCA] shall be by and in the name of the United States.”
Because of §337(a), Buckman held that attempts by private litigants to enforce the FDCA, disguised as common-law actions for "fraud on the FDA," were preempted.  Violation claims that “exist solely by virtue of the FDCA disclosure requirements,” 531 U.S. at 353, were impliedly preempted because the FDCA “leaves no doubt that it is the Federal Government rather than private litigants who are authorized to file suit for noncompliance with the medical device provisions.”  Id. at 349 n.4 (citing §337(a)).  Absent any independent state-law basis, private FDA fraud claims conflicted with and were preempted by the FDCA’s exclusive grant of federal prosecutorial authority.  Id. at 353-54.

There are a lot of cases that follow Buckman and do this.  For example, in Goldsmith v. Allergan, Inc., 2011 WL 147714 (C.D. Cal. Jan. 13, 2011), the court reached the same conclusion concerning a consumer fraud claim that, in substance, sought simply to litigate a supposed FDCA violation:
[T]he Court agrees with Defendants suggestion that Plaintiff's [consumer protection] claims are based on conduct promoting [the drug] for off-label use. . . . These, and related allegations . . . constituted an attempt to shoehorn allegations that Defendant had engaged in off-label promotion in violation of the FDCA into state consumer fraud causes of action.
Id. at *3 (quotation marks omitted).

For courts that have difficulty dealing with the word "preemption," we've always thought that the same result can be reached through a standing analysis or something similar.

That brings us to Astra v. Santa Clara, which demonstrates the "something similar."  Like Buckman the case involves a statute, the Public Health Services Act, that doesn't permit private rights of action, because Congress stated numerous times in the statute, 42 U.S.C. §256b, that "the secretary" (meaning the federal Dept. of HHS) "shall establish . . . mechanism[s]" to ensure compliance with the Act's requirements.  See §256b(a)(5)(A)(ii), (a)(5)(D), (a)(7)(A), (a)(D)(1)(b)(i), (d)(1)(B)(i), (d)(1)(B)(iv)(I), (d)(2)(A).  It's a really complex statute, folks.  Between the two, we'd say the FDCA's preclusion of private actions is even more explicit, because it directly addresses who does, and doesn't, get to do the enforcing.

But the result is the same - no private enforcement.  Because of Congress' repeated reservation of the "secretary's" powers, in Astra v. Santa Clara, "[i]t is conceded that Congress authorized no private right of action under [the Act] for covered entities who claim they have been charged prices exceeding the statutory ceiling."  Slip op. at 1-2.  Or, as the Court stated later:
Recognition of any private right of action for violating a federal statute, currently governing decisions instruct, must ultimately rest on congressional intent to provide a private remedy. Congress vested authority to oversee compliance with the [the Act] in HHS and assigned no auxiliary enforcement role to covered entities.

Slip op. at 5-6.

The Court did not buy into the idea that supposedly invoking the common law to sue over something identical to what the statute requires was any different than suing over the statute itself:
The form agreements . . . serve as the means by which drug manufacturers opt into the statutory scheme. A third-party suit to enforce an HHS-drug manufacturer agreement, therefore, is in essence a suit to enforce the statute itself.  The absence of a private right to enforce the statutory ceiling price obligations would be rendered meaningless if [the Act's] entities could overcome that obstacle by suing to enforce the contract’s ceiling price obligations instead. The statutory and contractual obligations, in short, are one and the same.

Slip op. at 6-7 (emphasis added) (citations omitted).


Again, since we're products lawyers, our interest is in making the analogy to the FDCA.  A supposed private "common law" action that simply parrots the FDCA's regulatory standards "is in essence a suit to enforce the statute itself."  Such an action can't be disguised as a common-law suit because it is "one and the same" with the statute itself, and Congress forbade private enforcement actions.

We further note that in Astra v. Santa Clara, the Court gave short shrift to the same sort of "common law litigations accords with the purpose of the statute" argument that the Court used in Wyeth v. Levine.  According to the court, if that was what Congress wanted, it wouldn't have restricted enforcement powers to the government:
Suits like the County’s, the Court of Appeals reasoned, would spread the enforcement burden instead of placing it entirely on the government.  But spreading the enforcement burden . . . is hardly what Congress contemplated when it centralized enforcement in the government. . . .  Far from assisting HHS, suits by [the Act’s] entities would undermine the agency’s efforts to administer both Medicaid and [the Act] harmoniously and on a uniform, nationwide basis.  Recognizing the County’s right to proceed in court could spawn a multitude of dispersed and uncoordinated lawsuits. . . .  With HHS unable to hold the control rein, the risk of conflicting adjudications would be substantial.
Slip op. at 8-9 (various citations omitted).

This is preemption language without calling it preemption.  If it works for the PHSA, it's worth making the same arguments - supported by Buckman, as well - with respect to "parallel violation" claims under the FDCA, which even more emphatically bars private enforcement.  Buckman by any other name will smell as sweet.
 

3 comments:

Anonymous said...

Nice try.

This is a contract case that turns on the Court's conclusion that third party beneficiaries can't enforce contracts between the federal government and pharma companies, especially when those "beneficiaries" are now afforded an administrative remedy. Indeed, if this case is "analogous" to some other legal doctrine, it's exhaustion of administrative remedies, not preemption.

Bexis said...

Not when the court is explicit that there is to be no private, common law enforcement. There's no suggestion that, after exhaustion, there's a common-law claim waiting at the other end.

Anonymous said...

But there is a right of judicial review under the APA following what is now a more thorough quasi-judicial administrative process by which public entities can be reimbursed for overcharges. As there should be, since public entities certainly are harmed when pharma companies violate the PPA's.

No similar administrative process (complete with right of judicial review) exists to bring a "fraud on the FDA" claim. So I really don't see how this is akin to Buckman.