CAFA Intrigue (Pew v. Cardarelli)

This post will completely miss the point.

(Yeah, yeah: So how does that distinguish this post from all the rest of 'em?)

In Pew v. Cardarelli, No. 06-5703-mv, slip op. (2d Cir. May 13, 2008) (here's a link through the Second Circuit website), plaintiffs alleged that officers of an issuer failed to disclose, while marketing debt securities, that the issuer was insolvent. That sounds like a securities case, but the plaintiffs pleaded only claims under New York's consumer fraud statute, presumably to keep the case out of federal court.

As you well know, we don't do that securities stuff on this blog. (We have a running dispute over whether "10b-5" is spelled with a "b" as in "boy" or a "d" as in "dog.") We're not gonna break with tradition and start now.

Instead, we're going to focus on the CAFA aspects of Pew.

The Class Action Fairness Act of 2005 expanded federal diversity jurisdiction in several ways to permit cases of national importance to be heard in federal courts.

After a defendant removes a case under CAFA, a federal trial court may decide to remand the case to state court. Federal trial court remand orders are generally not reviewable "on appeal or otherwise." 28 U.S.C. Sec. 1447(d). CAFA, however, created an exception to that prohibition on review for cases removed under CAFA. CAFA authorized federal appellate courts to "accept an appeal from an order of a district court granting or denying a motion to remand a class action to the State court from which it was removed." 28 U.S.C. Sec. 1453(c)(1).

That left open several procedural issues.

First, for decades before CAFA was enacted, defendants had battled to obtain appellate review of remand orders. The Supreme Court opened the door to occasional appellate review in Thermtron Products, Inc. v. Hermansdorfer, 423 U.S. 336 (1976). But Thermtron left it awfully hard to tell what cases were reviewable by what appellate process. See generally Mark Herrmann, "Thermtron Revisited: When and How Federal Trial Court Remand Orders are Reviewable," 18 Ariz. St. L.J. 395 (1987). Moreover, some courts held that a defendant was required to obtain a stay of the remand order from the federal trial court, on the theory that the trial court lost jurisdiction when it mailed the remand order to state court -- and the federal appellate court at that same instant lost the ability to hear an appeal.

Mercifully, Pew says that a defendant is not required to seek a stay before taking an appeal under CAFA. Pew, slip op. at 8. For practitioners, that's a good result; it means that you don't have to remember to seek a stay before filing a petition for leave to appeal from a CAFA remand order.

(We're not sure that's as good a result for purists or legal scholars. If a federal trial court does, in fact, divest the federal court system of jurisdiction at the instant it mails its remand order, then appellate courts should lack jurisdiction to hear all appeals -- including those under CAFA -- after the remand order is dispatched.)

That jurisdictional stuff is way too theoretical for us. We just like to know what piece of paper to file and where. Pew answers that question, so we're happy -- don't bother seeking a stay in the trial court (at least in the Second Circuit).

We're less happy about a different procedural aspect of Pew.

In Pew, the defendant filed a petition for leave to appeal, and the Second Circuit chose to decide both whether to accept the appeal and "the merits of the appeal simultaneously." Id. at 11-12. A court's allowed to do that, of course, but it does make life much harder for those of us toiling out here in the fields.

When we're drafting a petition for leave to appeal under CAFA, what brief should we write? A brief that explains why the appellate issue is important (so the court should agree to hear it)? Or a brief that explains why my client's position is right (so I should win on the merits, if the court does accept the appeal)?

Those are two different issues, and it doesn't always make sense to merge them.

Lawyers can, of course, strike a middle ground -- "this appeal presents an important question for several reasons, and, in addition, here's a small taste of why my client is right." But if the court then simultaneously decides whether to take the appeal and the merits, you've given the court only a small taste of why you're right -- not the four-course meal that you otherwise had planned.

We can live with many different sets of rules.

But we'd sure like to know, ahead of time, what they are.

Courts should make clear whether they will (1) always combine the decision whether to accept an appeal with the merits of CAFA appeals or (2) always separate the two issues, first deciding whether to accept the appeal and then requesting separate briefs on the merits.

Or, if there won't be a bright-line rule, tell us what the gray line will be.

We can live in many environments, but it's only fair to let us know in advance the game that we're supposed to play.

The Limits of MDL Common Benefit Funds

After the MDL Panel coordinates a bunch of product liability cases, the transferee court is likely to appoint lead and liaison counsel for plaintiffs. Those lawyers often take the lead in conducting MDL-wide discovery, and they also "perform functions necessary for the management of the case but not appropriately charged to their clients." Manual for Complex Litigation (Fourth) Sec. 14.125, at 202 (2004).

How are those folks paid for their efforts?

MDL transferee courts often create "common benefit funds." Courts require settling parties to pay a small percentage of the settlement proceeds into that fund, and the fund is then used to reimburse lead and liaison counsel (and possibly others) periodically.

Lots of people don't like those funds, for lots of different reasons. Many plaintiffs' lawyers refer to those common benefit assessments as an "MDL tax" and choose to file their cases in state court, rather than federal, to avoid the MDL and, they hope, to avoid the tax.

The idea is that a federal court has jurisdiction to tax only cases pending before it. A federal court thus lacks power to tax a state court settlement.

Is that right?

MDL transferee courts may believe that the MDL lead and liaison counsel are doing work that benefits all plaintiffs -- state and federal alike -- so even state court settlements should contribute to the common benefit fund. A transferee judge may order, for example, that the settlement tax applies to all state court cases being handled by a plaintiffs' lawyer who has even one case pending in the federal MDL, or to all state court cases being handled by a plaintiffs' lawyer who has signed an agreement to cooperate with the MDL process. That type of order seemingly extends the MDL tax to cases over which the federal court lacks jurisdiction. Is that allowed?

In In re Showa Denko K.K. L-Tryptophan Prods. Liab. Litig. -- II, 953 F.2d 162 (4th Cir. 1992), the MDL transferee court assessed an MDL tax on "actions venued in state courts, untransferred federal cases, and any unfiled claims in which any MDL defendant is a party or payor." Id. at 166. The Fourth Circuit reversed in part, because an MDL transferee court lacks jurisdiction over cases that have not been transferred to it. Showa Denko has since been cited with approval by In re Baycol Prods. Liab. Litig., 2004 WL 1058105 (D. Minn.), and In re Linerboard Antitrust Litig., 292 F. Supp. 2d 644 (E.D. Pa. 2003).

We won't pass judgment on this issue (because, frankly, we have no idea where the bread may be buttered in some later case, so we're forced to be agnostic), but it's worth noting a procedural quirk:

When the MDL court is entering an order to establish a common benefit fund, the court will hear only from the parties before it -- the MDL plaintiffs and MDL defendants. The issue in dispute, however, primarily affects people who are not present in the MDL court -- plaintiffs and their lawyers who have filed cases in state court.

That's an awkward situation for a court, and it thus require special thought.

MDL transferee courts that are asked to create common benefit funds should consider how to protect the rights of lawyers and litigants who are not appearing in the MDL court, but who may be affected by entry of an order creating the fund.

500 Posts!

"Lord, I'm one;
Lord, I'm two;
Lord, I'm three;
Lord, I'm four;
I'm 500" posts away from home.

500 posts.

18 months.

200,000 pageviews.

"No rest for the weary,
ya just move on.
I guess you just keep goin' 'til you're gone.
Tired, Lord I'm tired.
Tired, Lord I'm tired."

Oh, To Be Known By The Company You Keep!

Herrmann's agreed to give a pair of talks at the ALI-ABA Mass Litigation conference that will be held in Charleston, South Carolina, from May 29 to 31, 2008. Here's a link to the conference agenda.

The cast of characters is mighty impressive, as ALI-ABA programs often are. Judges participating in the conference include Hon. Lee Rosenthal, Hon. Barbara Rothstein, and Hon. Shira Scheindlin. Academics include Francis McGovern and Richard Nagareda. Defense lawyers include David Bernick, Sheila Birnbaum, and Barry Ostrager. Plaintiffs' lawyers include Elizabeth Cabraser and Joseph Rice.

And then there's "who's he?," who will speak on Friday morning about the role of the MDL Panel and state counterparts in managing mass litigation and speak again on Saturday afternoon (they can't get enough of him) about punitive damages after Williams. (Heck, we even have a thesis or two about that second topic.)

If you can't attend in person, the program is also available by webcast.

Off-Label Use - Is The FDA Missing An Opportunity?

As we mentioned last week, we’re both going to be speaking on the same panel at the American Enterprise Institute’s conference next week about off-label use. That’s got us thinking – surprise, surprise – about off-label use.

So we’ve been reading a couple of things. One of them is the Justice Department’s recent amicus brief concerning off-label use and False Claims Act liability. Here’s a link to the brief.

Another thing we’ve been reviewing is some of the comments to the FDA’s proposal to loosen, just a bit, its restrictions on off-label promotion involving medical journal articles and medical textbooks. We blogged about that proposal shortly after it first came out. Now the comment period has closed (no, we didn’t comment – that would have to be paying work) and we were curious about what the interested parties were saying.

You can find and review all 96 comments here. When you click on this link, you’ll get a list of all the comments, and next to them are icons that take you to the comments themselves.

So what do we think? Well, we don’t claim to be experts in False Claims Act (“FCA”) litigation, and while reading the Department of Justice’s brief, we were pinching ourselves to remember that the Department both prosecutes these suits and is responsible for protecting the government’s money. So we can’t say that we’re really very surprised that the government took what to our uninitiated minds seems like a rather broad interpretation of the statute.

But we’re interested primarily in off-label use – and especially in the dissemination of truthful information about such uses, an activity that we believe is First Amendment protected. So we read the government’s brief with an eye towards whether a “false” claim can lie where all of the information that a manufacturer gave out to promote the use is truthful.

A lot of the DOJ's brief is about the off-label uses that the government pays for under certain circumstances. That’s because, for Medicare purposes, there are off-label uses – and then there are off-label uses. The government pays for off-label uses that are “supported” by citations in certain designated (and authoritative) medical compendia. 42 U.S.C. §1396r-8(k)(6). The DOJ goes through an extensive argument about whether the mere presence of a citation in those compendia qualifies as “support,” and if not, how much beyond a “mere” listing is needed to qualify as “support.” We suppose that reasonable minds may differ on that.

More important, to us is the fact that the government pays for some of the very same off-label uses that the FDA is simultaneously prohibiting manufacturers from promoting truthfully. That fact undercuts the constitutional validity of the FDA’s prohibition by putting the Agency at cross purposes with other agencies.

The DOJ’s brief doesn’t address, one way or the other, truthful promotion of off-label uses that are not “supported” by any of these compendia. That’s because the specific case in which it was filed (called Rost) involved an arguably “supported” use.

In its “support” argument, however, the DOJ doesn’t seem to be taking a position, one way or another, about truthful statements about off-label uses. Rather its argument is about whether there could ever be a false claim, because if an off-label use is “supported,” the government is supposed to pay for it, and thus it can’t be “false” (without more) to submit a claim for a “supported” off-label use.

How much more?

Even if an off-label use is “supported” within the meaning of the statute, it can be “false” for other reasons, the DOJ argues. We don’t care about kickbacks, unlicensed doctors, or non-existent patients. Beyond those examples, the government states, “a claim [for a supported off-label use] may be rendered false if a drug manufacturer falsified studies or engaged on other unlawful, fraudulent conduct in the promotion of a drug….” DOJ br. at 7. Well, falsifying studies is certainly not truthful activity, and there is no “or” between “unlawful” and “fraudulent,” so it seems like the government is limiting liability to promotional activity that is not only “unlawful” (such as truthful promotion of off-label use) but also “fraudulent.”

So far, so good.

But that’s as far as anything good goes.

Things then go rapidly downhill. The government asserts:

This court has held that illegal off-label marketing that results in the submission of impermissible claims for reimbursement states a claim under the FCA. … Proof of falsity could entail a showing that the provider sought payment from a federal health care program that was off-label and not covered by the program. It is not necessary also to show (or allege) an express falsehood from the defendant to the provider to satisfy the “falsity” element.

DOJ br. at 8 (emphasis added). Well, are we talking about falsehood or privity here?

The next paragraph starts out OK, “Defendants correctly observe that to state a claim … there must be a false record or statement.” Id. That’s good by itself, but it’s not by itself. After that, the rabbit goes into the hat:

[R]equiring a false statement to be made by the defendant drug company is contrary to the plain meaning of the FCA. Although [the FCA] requires the existence of a false statement, it does not require the false statement to be made by the defendant.

Id. at 8-9 (emphasis original). In other words, a manufacturer’s entirely truthful promotion of off-label use can still subject a manufacturer to liability if somebody else (usually a prescriber) then makes some false statement in connection with a claim. In a footnote, the DOJ clarifies that liability isn’t contingent on any control requirement – the other party’s false statement can occur without any “affirmative” direction by the manufacturer engaged in truthful promotion of off-label use. Id. at 10 n.8.

So, yes, it appears that the DOJ is taking the position that even a manufacturer’s entirely truthful promotion of off-label use is, without anything more on its (as opposed to somebody else’s) part, sufficient to subject it to liability under the FCA.

And there’s more – another footnote indicates that such liability extends even to promotion using medical journal articles and textbooks that the FDA has proposed should be allowed. See DOJ br. at 9-10 n. 7 (pointing out that the FDAMA safe harbor for such promotion has expired and that the FDA’s new guidance is non-binding).

We’ve learned that, with government amicus briefs, it’s very important to read the footnotes.

Thus, truth, apparently, is not a defense to the FCA.

Think about that – under the FCA, truth can be “false.”

Where have we heard that before?

So yes, not only is Big Brother watching, he’s ready and willing to sue.

So why do we care?

We care because, at least since the Supreme Court’s decision in Thompson v. Western States Medical Center, 535 U.S. 357 (2002), it’s been pretty clear that the FDA’s current regime, which relies upon prohibition of truthful speech to control promotion of off-label uses, is vulnerable to First Amendment constitutional challenge. If you’re interested in the detailed argument, it’s all set out here.

Anyway, that’s our premise.

We’re wondering where that challenge might come from and how it might look. We know that most major manufacturers would much rather cooperate with the FDA than raise constitutional challenges to its actions – especially First Amendment challenges that strike very close to the FDA’s institutional purpose (approval of regulated products). After all, FDA regulated manufacturers have to deal with the FDA on a regular basis.

These FCA cases, however, are for big bucks – many millions of dollars – and they can be brought by private individuals, who are statutorily authorized to sue on the government’s behalf. Well then, if: (1) a company’s facing huge potential liability, (2) it’s not litigating against the FDA directly, and (3) the facts about the truthfulness of the promotion are good enough, a direct First Amendment appellate challenge to the FDA’s prohibitory regime could well emerge from this type of litigation.

It’s the second part of this equation – the truthfulness of the promotion – that had us looking through the comments to the FDA’s proposed reprint practices guidance. As we discussed at length in our first post on this subject, the FDA’s proposal is loaded with caveats designed to ensure the truth and validity of the medical journal articles and published medical textbooks that it proposes to allow manufacturers to disseminate about off-label uses.

And, indeed, the extent of those restrictions are the subject of some of the industry’s critiques of the proposal. Generally speaking the industry groups, such as PhARMA, MDMA, and ADVAMED (the site’s not letting us link directly to all, so we’re won’t favor one over the other, you can find them all here), would like to broaden the categories of materials that can be used (right now it’s limited to “adequate and well-controlled clinical investigations”), would like to see the “safe harbor” language less equivocal, and don’t want anything that limits other, existing exceptions or impinges upon the First Amendment protection of truthful commercial and scientific speech.

In the middle are groups like the AMA, Sen. Grassley, and others, who offer varying degrees of support for FDA’s initiative, but urge the Agency to tighten up various aspects of it, such as ghostwriting and oversight.

At the other end are the trial lawyers and various consumer groups, whose comments oppose any change, and mostly consist of examples of what they see as industry overreaching and general misconduct. That’s par for the course for them.

A lot of their complaints, as well, have to do with “ghostwriting” of medical articles. That seems to be their hot topic du jour.

We (not surprisingly) don’t view ghostwriting as at all central to the FDA’s proposal. We’re much more concerned with ensuring the truthfulness of what’s actually written than we are with the identity of who actually puts pen to paper. As long as doctors get accurate information, we’re not going to spend much time on the byline.

We’re lawyers, and in our profession ghostwriting happens every day. Precedent remains precedent, even if most of a judge’s legal opinion was actually written by a law clerk. That’s ghostwriting. Nor are we offended that every word of this or that professor’s law review article isn’t actually penned by the professor, but instead by by law students or other research assistants working under the professor’s guidance. That’s the way things are in the law, and we don’t expect them to be different in medicine or other parts of the academic world.

To us, truth is truth and false is false, no matter who actually writes it.

But to the extent that the FDA thinks that ghostwriting tends to inject difficult to control biases into medical literature, or to obscure the actual source of the information from the reader, we wouldn’t be all that exercised if the Agency either chose to require disclosure of the practice, or even to prohibit it in articles to be disseminated under the proposed guidance.

In the greater scheme of things, ensuring the truthfulness and accuracy of the content of the articles and textbooks themselves is to us far more important than who’s listed or not listed as the author.

What we do see in looking over the comments is a possible lost opportunity for the FDA to use this limited guidance concerning published journal articles and textbooks to provide a “test drive” of a less speech-restrictive – and thus less constitutionally suspect – regime of dealing with off-label promotion.

Complaint #1 – off-label promotion generates too much off-label use that’s totally outside any regulatory control.

OK, then how about requiring some record keeping/monitoring as part of the guidance so that the FDA can see whether that’s true or not, and also use the information to formulate more tailored responses to particular situations? Let’s find out if this is true, and if it is whether there’s anything that should be done about it.

Complaint #2 – off-label promotion reduces the incentive to submit new uses for FDA approval.

That’s probably true, but it doesn’t have to be. Based upon the aforementioned record keeping and monitoring, we doubt it would be that hard for the FDA to come up with some formula (percentage off-label use, or dollar value of off-label use, something else, or some combination) under which it could require some off-label uses subject to the guidance to be submitted for approval by the manufacturer (or manufacturers, if there are generics involved). This leads us to….

Complaint #3 – the kinds of studies that the FDA requires for regulatory approval are just too expensive and time consuming to make any requirement to conduct them worthwhile.

That’s certainly what torpedoed the old FDAMA safe harbor - it wasn’t worth the candle to use it. But remember, the FDA’s proposed guidance is for articles and textbooks already describing “adequate and well controlled studies.” If we’ve got that kind of data at the front end, there’s less need for it at the back end.

There are plenty of cheaper ways than blinded, controlled studies for figuring out whether an off-label use is safe and effective. As Bone Screw veterans, we know that the FDA finally dealt with that product’s off-label use (which had become the medical standard of care, thereby ethically precluding studies that withheld treatment to control groups) by ordering a retrospective study. See 63 Fed. Reg. 40025 (FDA July 27, 1998). The Agency could employ the same administrative flexibility with off-label uses subject to the proposed guidance. After all, these aren’t new drugs, and the off-label uses are taking place anyway. It would seem to make sense to capture this clinical experience for labeling purposes if at all possible.

That kind of regime – allowing truthful speech, but accompanied by non-speech regulations – avoids the First Amendment problems inherent in the FDA’s current regime.

Remember, what’s under consideration (at least at this point) is not off-label promotion generally, but off-label promotion using published, peer reviewed materials, clearly labeled as involving unapproved uses.

After Western States, the likelihood isn’t great that someone complying with the proposed guidance could be constitutionally prosecuted for truthful off-label promotion. Even in the recent Caputo case (discussed here), where the facts were quite bad for the defendants, the court nevertheless gave the government a shot across the bow – warning prosecutors that lumping truthful off-label promotion together with false and fraudulent promotion raised serious constitutional questions. See United States v. Caputo, 517 F.3d 935, 938-40 (7th Cir. 2008).

Thus, even dropping the FDA’s proposed guidance altogether at this point would not prevent some brave soul from following it as a form of constitutionally protected commercial speech.

More fundamentally, we have to believe that one reason for the claimed industry “abuses” described in the comments opposing the FDA’s proposed guidance is the lack of any legal way, at present, to conduct off-label promotion. If the Agency were to provide industry with an avenue for off-label promotion, both legal and practical, that provided physicians with truthful information about off-label use, the industry would be foolish not to use it.

We know this industry – it is not foolish.

Coverage of Yesterday's Preemption Hearing

Point of Law has this report (linking in turn to others) describing some of the action at yesterday's hearing on Capitol Hill about federal preemption of claims against drug and device manufacturers.

Huge Texas Vioxx Verdict Reversed

Bexis represents Merck, and Herrmann is on a plane right now, so we can't discuss substance, but the Wall Street Journal has reported that the $32 million Garza Vioxx verdict has been overturned by a Texas appellate court. Here's a link to the opinion for anyone interested.

Video of Today's Preemption Hearing In Congress

We're too busy to watch ourselves (Herrmann's on the road and Bexis is prepping for an appellate argument), but here's a link to what's supposed to be an online video feed of today's congressional hearing on preemption. Drop us a comment if you like once it's over so we'll know what we missed.

According to Pharmalot Congressman Waxman, a long-time plaintiff-side ally and thus preemption opponent has pretty well stacked the deck at this hearing with speakers opposed to preemption. Surprise, surprise. According to Pharmalot, not a single industry representative has been invited to testify.

Congressional Hearing on Drug and Device Preemption

The House Committee on Oversight and Government Reform will hold a hearing on Wednesday, May 14, 2008, titled, “Should FDA Drug and Medical Device Regulation Bar State Liability Claims?”

Here's the announcement of the hearing and names of the witnesses scheduled to testify.

The Pythagorean Integrity of the Law

We don't know what that title means; we just wanted to draw some mathematicians to our blog.

Well, no.

Actually, we just read United States v. Endotec, No. 6:06-cv-1281-Orl-18KRS, 2008 U.S. Dist. Lexis 35427 (M.D. Fla. Apr. 30, 2008), and two things about the opinion struck us as noteworthy.

This was an enforcement action brought by the FDA seeking to enjoin Endotec and certain of its officers from selling specified medical devices and seeking disgorgement of amounts that Endotec had been paid.

You can almost feel the tension in this decision as a company struggling to market new medical devices -- ankle, knee, and TMJ implants -- kept banging its head against the FDA's regulations. The company had submitted six 510(k) submissions seeking permission to sell its ankle devices. Those submissions had either been withdrawn by the company or rejected by the FDA. The company obtained an Investigational Device Exemption for one of its ankle devices, but the clinical study of the device had reached full enrollment, so patients could no longer be treated by that route. Surgeons, however, still wanted to implant the devices, and the evidence at trial convinced the court that the devices "provided greater benefits to patients than the alternatives available in the United States." Id. at *35-36.

The company should not sell devices illegally, of course. But you can feel in this decision a medical tension underlying the legal analysis.

Anyway, we'll start with the Pythagorean integrity that we noticed.

(The following discussion is phrased in very general terms. We're painting with a broad brush here, so please don't take the details of what we're saying as Gospel.)

Many judicial decisions explain that the Medical Device Amendments of 1976 required companies to conduct clinical studies of new medical devices before the devices could be sold. Companies finish the studies, submit the results to the FDA, and get approval to sell the products. That's the "premarket approval" process.

As of the date the Medical Device Amendments became law, however, those clinical studies had not yet been done. Conducting those studies would take time, and Congress didn't want to yank all existing medical devices off the market while manufacturers studied the devices for a few years. So Congress permitted devices that were already being sold in 1976 to stay on the market.

That posed a problem of its own: If existing devices stayed on the market and competitive devices had to go through the PMA process, the manufacturers of existing devices would have a temporary monopoly. The existing devices could be sold, but new, similar competitive devices would be gummed up in the PMA process.

To solve that problem, Congress created the premarket notification (or "510(k)") process, which allowed manufacturers to notify the FDA that they intended to sell devices that were "substantially equivalent" to predicate devices that had been on the market before 1976.

Presto! Revolutionary new devices would be judged for safety and efficacy; existing devices would remain on the market; and new devices that were similar to existing devices could also be sold, avoiding the monopoly problem.

That's PMA and 510(k).

A fair number of decisions also discuss the "Investigational Device Exemption" process.

That process allows a manufacturer to distribute medical devices for the purpose of conducting a clinical study to seek premarket approval. (Until the device is approved, the manufacturer can't distribute it. There has to be a way to distribute the device for the purpose of running the clinical study and thus seeking approval.)

Those are the big three: PMA, 510(k), and IDEs.

Decisions less frequently discuss "compassionate use" approval and the "custom device" exemption. Endotec nicely fills that void.

Suppose a device is not yet PMA- or 510(k)-approved for sale. A patient needs the device, but the patient is not (or cannot be) enrolled in a clinical study. How does the law permit the device to be supplied for that patient's benefit?

The manufacturer petitions the FDA for compassionate use approval, and the FDA can then authorize use of the device in a particular patient.

That leaves only one situation unaccounted for: What about medical devices that are unique -- manufactured for one specific patient or for use by one particular physician? To conduct a clinical study of a medical device, you need a bunch of devices that are all basically the same. There's no way to run a clinical study of a device that is custom-designed for one particular person.

The "custom design exemption" addresses that situation. Devices that are tailored for individual use, and so can't be studied in clinical trials, can be sold under the custom device exemption.

That's the first thing we liked about Endotec. It nicely describes the routes for selling devices outside of the standard PMA, 510(k), and IDE routes, and thus lets readers see that the law makes sense: If patients need medical devices, the law theoretically allows manufacturers to provide those devices.

We're not sure if that's precisely "Pythagorean integrity," but it's pretty cool.

Here's the second thing we noticed about Endotec: The court that conducted the bench trial tried to be practical and not to punish people who were trying to do some good.

Endotec didn't have PMA or 510(k) approval for its various devices, and its clinical study for an ankle device was fully enrolled. But physicians were still asking for the devices, and the company was still selling them.

At trial, the FDA insisted that the sales were unauthorized and illegal. Endotec responded that all of the sales were permitted, either as custom sales, compassionate uses, minor modifications of approved devices, authorized under certain interpretations of IDE study protocols -- whatever!

Maybe we're wrong -- we weren't there, and we're reading between the lines here -- but we get the sense that the trial judge leaned over backwards to try to do what was right. The evidence showed that Endotec's devices actually helped patients. The FDA did not allege "that Defendants have harmed any individual by manufacturing or distributing medical devices and has not alleged that any of Defendants' devices are dangerous or that their use poses any risk." Id. at *31. The "Government did not present any evidence to indicate that the ankle devices were potentially dangerous." Id. at *33.

In that situation, the court chose not to throw the book at anyone. The court found that the disputed ankle devices were all custom devices, so Endotec did not break the law. But the court did enjoin Endotec from advertising the devices and noted that the devices could be used by prescription only. The court also instructed Endotec to strictly adhere to the FDA's requirements for monitoring clinical trials.

The court found that Endotec did violate the law by selling its knee devices, and the court enjoined further sale of the devices until Endotec obtained PMA, 510(k), or IDE approval.

Endotec did not violate the law by selling its TMJ devices. Two sales were permissible under the IDE's investigational plan and another TMJ device was a custom device.

Finally, the court denied the government's request for an order of disgorgement -- the monetary sanction.

In addition to lecturing Endotec to be more careful and keep better records, the court also lectured the FDA: "[I]n the field of medical devices, the FDA might ask Congress to revise 21 U.S.C. Secs. 360a-360k to speed up procedures, so that citizens of the United States can benefit sooner from the fast-moving technology of the twenty-first century." Id. at *41.

What does Endotec teach?

First, the law makes sense: As a theoretical matter, the Medical Device Amendments permit devices to be distributed to all patients who need them.

Second, the FDA should be cautious: If it looks as though the Agency is acting too slowly and thus keeping helpful medical devices off the market, courts will be less willing to help the Agency in its enforcement efforts.

Third, manufacturers should be smart: They should obey the law. If they're operating near the edge of the law, they'd better be darn sure that the devices they sell help people and do no harm, as was apparently true of Endotec's devices.

Finally, society should get its act together: Let's fund the FDA sufficiently to permit it to do its job, and let's get beneficial drugs and devices on the market as quickly as reasonably possible. That would reduce -- or perhaps eliminate -- the tension between companies struggling to help patients and the letter of the law.

The Profs Have It!

Practitioners love to complain about the growing chasm between the academy and the practice of law.

It ain't so, Joe!

Just this weekend, we saw three posts from different sites on the Law Professors Network that were well worth reading.

First, over at Torts Prof, we learned that Provost Umphrey hired MOST Health Services, Inc., to screen 161 people for potential silicosis injuries. But MOST didn't comply with the Pennsylvania state regulations governing x-ray screenings. The Pennsylvania Environmental Hearing Board upheld an $80,500 fine that the Department of Environmental Protection levied on MOST. Torts Prof also links to the decision by the Hearing Board, in case you just can't resist.

Second, the Mass Torts Litigation Blog alerted us to Margherita Saraceno's recent article, "Group Litigation, Access to Justice and Deterrence." Professor Saraceno explains that assembling a group for purposes of litigation "is costly for victims to organize and reduces the injurer's liability costs by facilitating settlement and creating scale economics at trial. The combined effect might be a reduction, rather than an increase, in the deterrent effect of tort law."

We're not sure we like the route that the professor takes, but we kind of like the uses to which you could put her conclusion.

Finally, Civil Procedure Prof Blog turned us on to Elizabeth Thornburg's recent contribution to the academic literature, "Judicial Hellholes, Lawsuit Climates, and Bad Social Science: Lessons from West Virginia." The title, however, grabbed us more than the thesis. Professor Thornburg is not much of a fan of the American Tort Reform Association's annual list of "Judicial Hellholes."

Hats off to the law profs this weekend.

We thought those posts were a whole lot more interesting than typical academic fare -- you know, "Poetry, Granola, and the Law."