Skip to main content
Premium Trial:

Request an Annual Quote

Q&A: Lawyer Jeff Gibbs Discusses Implications of Veterinary Drug Case on FDA's LDT, RUO Guidances


Originally published Jan. 17.

By Turna Ray

A federal district court decision in a veterinary drug case may serve as a precedent for those in the life sciences industry who wish to challenge the US Food and Drug Administration's use of guidances to regulate lab-developed tests and the marketing of research-use-only in vitro diagnostic products, a recently issued legal brief suggests.

In the case, US v. Franck's Lab, the FDA sued Paul Franck and his pharmacy after a medication error resulted in the death of 21 horses. The agency alleged that Franck's Lab's practice of compounding veterinary preparations of drugs with active pharmaceutical ingredients was illegal, since the practice results in the creation of new drugs that aren't reviewed and approved by the agency.

Last September, a Florida federal district court ruled that the FDA does not have authority to regulate compounded medications dispensed by a pharmacy, as long as that pharmacy is not manufacturing drugs. Importantly, the court decided that the FDA could not use its Compliance Policy Guidelines for veterinary compounding, issued in 2003, as the basis for enforcement action.

In November, the government appealed the federal district court's decision to the Court of Appeals for the Eleventh Circuit.

Even though the case is still ongoing, according to Karla Palmer and Jeffrey Gibbs, healthcare lawyers at Hyman, Phelps & McNamara, the federal district court's decision in US v. Franck's Lab may have repercussions for FDA's decision to regulate LDTs and RUO IVDs through guidances in lieu of more rigorous and transparent notice-and-comment rule making.

"If FDA were to pursue regulation of LDTs, the Franck’s Lab case probably would be cited in any defensive proceeding or laboratory-initiated suit," wrote Palmer and Gibbs in a recent Washington Legal Foundation white paper.

Palmer and Gibbs believe there are a number of similarities between FDA’s efforts to regulate compounding and its move to regulate LDTs and RUO products. "The lack of clear statutory authority; the broad assertion of jurisdiction; the stance that a medically necessary procedure is inherently unlawful under the [Food, Drug, and Cosmetic Act] (all LDTs are devices and virtually all would need FDA approval or clearance to be compliant with the FDCA); the long delay between enactment of the statute and FDA’s initial assertion of the regulatory authority (16 years for labs); and FDA’s decision to pursue the guidance document route, not rulemaking," are all parallels between US v. Franck's Lab and the agency's stance on LDTs and RUO products, the lawyers wrote.

Last year, the agency issued a draft guidance on the development and marketing of RUO and investigational-use only IVDs, which many IVD makers have challenged as overly burdensome (PGx Reporter 6/8/2011).

FDA's RUO/IUO draft guidance places the onus on the manufacturers of such tests to ensure their products aren't being used for clinical decision making. "This limitation would be highly disruptive to manufacturers, customers, and researchers," Palmer and Gibbs wrote. "Significantly, even though this is a draft guidance, FDA officials have stated it represents existing policy … The draft guidance typically offers no explanation for why the change was needed, or an analysis of the effects – positive or negative – on affected parties."

With regard to LDTs, the agency has yet to issue regulations, but is planning to release a series of guidances and has held a public meeting to gauge industry views. Still, FDA's expressed decision to regulate LDTs has been a divisive issue within the life sciences industry, with most labs holding that oversight of such products should remain with the Centers for Medicare and Medicaid Services as it has traditionally been, and drug developers and diagnostics companies pushing for the agency to have a more consistent policy for all tests, regardless of where they are performed.

The agency has already taken regulatory action against certain tests it believes are erroneously being marketed as LDTs and RUO products, leading some industry players to argue that the agency lacks statutory authority to take such enforcement action. The agency, meanwhile, believes it has authority under the FDA Modernization Act of 1997 to regulate these tests. Moreover, despite industry requests that FDA utilize notice-and-comment rulemaking provisions to advance its regulatory policy in this regard, the agency has maintained its decision to issue guidances, a pathway it claims provides more flexibility to address the changing needs of the rapidly growing diagnostics industry.

Nevertheless, the agency's growing dependence on guidance documents is of concern to those who object to FDA's enforcement action over such products. Palmer and Gibbs noted that in 1999 the FDA issued 82 guidance documents, but by 2009 this number had ballooned to 169. They believe that FDA chooses to issue more guidance documents instead of going through the rulemaking process so that it doesn't have to address industry objections to its regulatory practices.

"When FDA issues guidance documents, it tends not to acknowledge the negative comments. The agency typically offers no explanation for why it has opted to stick with its proposed language, rather than making changes to address adverse comments," the lawyers wrote. "This failure to respond to comments is not permitted for agencies when they engage in rulemaking."

Although the agency isn't required to respond to industry comments when issuing guidances, it does have the ability to do so. In fact, given the contentious nature of the LDT oversight issues, FDA officials have said publicly that the agency will respond to industry comments to any guidances on LDT regulations.

Furthermore, there are mechanisms in place, such as citizen petitions, through which industry can challenge FDA policies. In fact, FDA's efforts to lift its policy of "enforcement discretion" over LDTs was spurred by a Citizen Petition from Genentech, in which the drug developer urged the agency to regulate all diagnostic tests used to make treatment decisions (PGx Reporter 12/17/2008).

Hyman, Phelps & McNamara, the law firm that employs Palmer and Gibbs, also used the citizen petition mechanism in 1992 to challenge FDA's authority to regulate assays developed in clinical reference labs. FDA responded to the firm's petition several years later asserting that the agency did have the authority to regulate LDTs as medical devices. Since then, the Washington Legal Foundation in 2006 also submitted a citizen petition to FDA requesting that agency not regulate LDTs, and Hyman, Phelps & McNamara has submitted comments in support of this petition.

Palmer and Gibbs believe that if the district court’s ruling is upheld in US v. Franck's Lab, the court's interpretation of the FDA’s use of guidance documents "is likely to be cited in other FDA proceedings and legal challenges testing the agency’s right to enforce through guidance in lieu of regulations."

Gibbs, former associate chief counsel for enforcement at FDA and general counsel of the Food and Drug Law Institute's board of directors, recently spoke to PGx Reporter about the implications of US v. Franck's Lab for FDA's ongoing regulatory efforts around LDTs and RUO products.

Below is an edited transcript of the interview.

What was the federal district court's decision in US v. Franck's Lab?

What happened in that case was that the FDA took enforcement action against a pharmacy, and the pharmacy was compounding. The FDA took a very extreme view, and their view was that any time a pharmacist compounded an animal drug from a bulk product, that that was illegal. And, they started an injunction against Franck's Lab on that legal issue. It wasn't factual, it was a legal question.

What was the reasoning behind the court's finding that the FDA couldn't use guidance documents to regulate compounding pharmacies?

The FDA came out with a guidance document about 10 years ago, and they hadn't gone through rulemaking … and they had issued it in final without soliciting any comments. So the court said that the FDA couldn't really rely on the guidance document because it had never been tested by anybody … And I think the court also had grave doubts about the FDA's use of guidance documents to try to change requirements.

What does it mean for FDA, in terms of its work and internal processes, when it issues a guidance versus a rule?

There is a lot less [work,] which is why the FDA uses guidance documents much more.

Is there any requirement that FDA explain why a final guidance document includes the provisions it does?

No, there isn't. That's one of the striking things about [the US v. Franck's Lab decision] — that the court said the FDA never tested [the impact of its regulatory action against the pharmacy] by reviewing or considering comments. But even if they had gone through guidance documents they still wouldn't have tested it because [the FDA] doesn't [have to] respond to comments. Under rulemaking they have to.

[ pagebreak ]

Under the rulemaking process is there any requirement that says that the FDA has to explain why it didn't include certain industry recommendations over others?

Yes, under rulemaking they need to explain why they didn't do it. That's under the Administrative Procedure Act.

Do stakeholders then have mechanisms by which to challenge rules issued?

If an agency fails to comply with the Administrative Procedure Act then they are vulnerable to a challenge.

Then, under the guidance procedures, are there mechanisms in place to challenge those?


What does it mean for industry practices when there is a guidance instead of a rule? Does industry treat guidances as de facto rules?

Well, the FDA tends to treat guidances as de facto rules. Although guidance documents are not legally binding, the problem that often comes up is that the FDA often acts as if they are.

One of the common reasons cited by those who support guidances over rules is that guidances give FDA more flexibility. Especially in areas where the technology is advancing quickly, some believe guidances allow the agency to address the changing needs of a rapidly evolving industry. Might this be a valid argument for FDA taking the guidance route over the rulemaking path, in certain cases?

FDA might say that, but I'm not sure how valid that is, because once guidance documents are adopted they tend to stay in place. For example, [there was a compounding guidance for animals] and there was a companion one for humans that was adopted in 2002 … and they promised they would look at the comments and make changes. They never did. Once a guidance is issued, there's no pressure on FDA to make revisions. There's no force that compels them to do it.

[Editor's Note: In response to a query from PGx Reporter as to whether FDA finalized the above mentioned compounding guidances without accepting public comments, a spokesperson from the Center of Veterinary Medicine issued the following statement: "FDA always accepts comments. It's part of our good guidance practices regulations (21 CFR 10.115) … You can comment on any guidance document at any time … FDA will revise guidance documents in response to … comments when appropriate."]

The FDA hasn't issued guidelines for LDTs, but it has issued a draft guidance for RUO/IUO products. How would the Franck's Lab case impact FDA regulation in this regard?

The issue with RUO products is that the FDA issued a draft guidance, and there are many comments that criticized the agency for going through the draft guidance process, saying that the agency needs to go through rulemaking and the guidance document process is not the appropriate vehicle.

But what about RUO products makes these inappropriate for regulation through the guidance process?

FDA is changing policies in a way that is substantive and has a material impact on companies. And that's not something that should be done through guidance documents. For example, the idea that you should stop selling to a customer because you are aware that a RUO customer is using the products for diagnostics is, as far as I know, unprecedented.

Alberto Gutierrez [director of the Office of In Vitro Diagnostic Device. Evaluation and Safety at FDA's Center for Devices and Radiological Health] has said in a public forum that this is longstanding agency policy. There are no guidance documents that say that, there are no rules that say that. It's a change from policy as virtually everyone has understood it, and it's quite different from the way FDA regulates off-label use of all other products. That's a major change in the way business is conducted, and it's very significant because if the FDA is saying, 'You need to stop selling RUO products to a company that's using it as a diagnostic,' the agency is in effect saying it is illegal to sell it [in this way]. That makes it a criminal act. Although they never use these words, the FDA is essentially saying, 'A diagnostic company providing an RUO product to a laboratory is committing a crime by selling it to someone they know or have reason to know is using it as a diagnostic.' That's a dramatic change in law.

When it comes to LDTs, the FDA has been saying for years now that it intends to issue guidelines, but it hasn't done so. If the agency had used the rulemaking process, would it have been quicker?

No. Rulemaking processes are not quicker, and that's why FDA [uses guidances]. But rulemaking processes are fairer, and they lead to an outcome where you know the FDA has considered your comments.

For example, in the guidance document issued [in 2007] by the FDA on analyte-specific reagents, there were a lot of comments objecting to what the agency was doing with ASRs. And if you look at the guidance document that came out, you would never know that there were those who disagreed or identified problems with the guidance. There is nothing in there at all that rejects comments, explains comments or, in any case, even reacts to comments.

As a counter to that, the FDA issued two draft guidances on regulation of so-called in vitro diagnostic multivariate index assays, and even held a public hearing on its intent to regulate such tests a few years ago. There were plenty of industry objections to those guidances, and now the agency has put a hold on issuing further guidelines on IVDMIAs and has said that maybe it will address the regulation of this subset of tests in its overarching LDT guidelines. One can argue that in that instance, the agency did address industry objections, even though it was using the guidance pathway.

What happened in the case of [IVDMIAs] is that the FDA wanted to go through [with issuing guidances] but it was blocked by government officials outside of FDA. That is not a reflection in any way of FDA having considered the objections of industry. The FDA had not agreed with those objections. It was other officials outside of FDA who reviewed it and who realized it was a flawed idea and did not allow it to go forward. But the FDA deserves no credit for the decision to not to issue a [guidance] on IVDMIAs. None.

[Editor's Note: In response to an e-mailed query after this interview, Gibbs said that the Office of Management and Budget had objections to the IVDMIA guidance. An FDA spokesperson said that this assertion is speculation on Gibbs' part but did not elaborate further.]

And what were the objections of these other government officials?

There are a lot of them and these were things that companies had articulated. It had to do with lack of clarity, the lack of a transition time, and that the regulations weren't risk based.

So, back to the Franck's Lab case. Even though the outcome isn't settled, can objectors to FDA's use of guidances to regulate LDTs or RUO products use the federal district court's decision as precedent?

The decision may be overturned or it may be upheld. But as it stands now, [the federal district court's decision] is the decision, and it can be used as precedent in other lawsuits.

Do you know of any diagnostic industry players that are considering challenging FDA's practice of using guidances to establish regulations for industry in courts?

Until FDA comes out with something on LDTs, there's nothing to challenge. For RUOs it's a draft guidance, and you can't effectively challenge a draft guidance unless FDA were to cite that [document] in taking enforcement action.

The FDA will argue it's not a guidance document, it's not binding, it only presents their point of view. But as we have talked about, it represents a little bit more than that. For example the FDA, in a September warning letter [to International Immuno-Diagnostics], referenced the draft RUO/IUO guidance. If the FDA continues to say that the RUO draft guidance represents its position [and] … if there is a final guidance document, it would be subject to a lawsuit.

In such a case, the first issue would be determining whether this is a ... challenge or do you have to wait for FDA to bring a lawsuit against somebody else. With Franck's Lab, the pharmacy was sued by the FDA. Once that happens, there is no question that you can raise the issue of the guidance document in the defense. The question would be, if you haven't been sued can you go to court and challenge a guidance document?

I think here, you have a very good argument that you could because you could argue that it's going to have a direct, present effect on companies … Such a challenge could come from a lab industry group, or an individual company, a doctor, a lab [worker], a manufacturer. There could a lot of potential plaintiffs.

Have topics you'd like to see covered in Pharmacogenomics Reporter? Contact the editor at tray [at] genomeweb [.] com.