All Hands Meeting — November 6 -7 2014

All Hands Meeting - November 6 -7, 2014 FDA UPDATE: Essential Knowledge Pharmaceutical and Medical Device Companies Need for 2015 Presenters: Ellen Darling +1. 949. 623. 3540 Ellen. Darling@klgates. com © Copyright 2014 by K&L Gates LLP. All rights reserved. Carol Pratt +1. 503. 226. 5762 Carol. Pratt@klgates. com

Agenda § FDA Guidance on Social Media/Advertisements § New Preemption Implications § Proposed Regulation of Software Used in Healthcare IT § Mobile medical applications, medical device data systems, medical image storage/communication devices § Proposed Regulation of Laboratory Developed Tests klgates. com 1

FDA Guidance on Social Media/Advertisements klgates. com

FDA Guidance on Social Media/Advertisements Evolution of Direct-to-Consumer (“DTC”) Advertising Before 1906, there were no regulations relating to the marketing of drugs. A drug company, or really anyone, could concoct crazy formulas, patent them and say anything they wanted about their invention. klgates. com 3

Evolution of DTC Advertising klgates. com 4

Evolution of DTC Advertising By the mid-1980’s, the FDA declared that it had regulatory jurisdiction over DTC ads and required, among other things: § A fair and balanced account of risks and benefits § A summary of potential side effects klgates. com 5

Evolution of DTC Advertising Meeting these requirements in print ads was doable, but accomplishing this in radio and TV ads posed problems for the industry. As a result, companies started relying more on other types of ads as a way to get around the rules: § Reminder Ad § Help-Seeking Ad klgates. com 6

Evolution of DTC Advertising Traditional DTC advertising is expensive. In 2007, industry spent $5 billion on DTC ads. DTC advertising is controversial. § Opponents argue: § Leaves patients misinformed and sometimes overwhelmed § Overemphasizes the benefits of the drug § Leads to over-utilization of drugs § Short-circuits important discussions between a patient and a physician klgates. com 7

Evolution of DTC Advertising § Proponents argue: § Helps educate patients about different medical conditions and drug therapies § Causes them to do more research about a potential condition or drug option § More likely to reach out to their doctors with questions klgates. com 8

Evolution of DTC Advertising Our research indicates that only two countries, the U. S. and New Zealand, allow DTC advertising. klgates. com 9

DTC Ads Via Social Media Our industry has been relatively slow to utilize social media despite statistics about the number of: § People with multiple devices using social media every day § § Facebook comments every minute Tweets generated weekly This form of advertising is inexpensive compared to traditional, DTC advertising. So why the delay? klgates. com 10

DTC Ads Via Social Media November 2009 - FDA held a hearing entitled “Promotion of Food and Drug Administration - Regulated Medical Products Using the Internet and Social Media Tools” to discuss, among other things: § § § What online communications are manufacturers, packers and distributors accountable for? How can manufacturers, packers and/or distributors fulfill regulatory requirements (e. g. , fair balance, disclosure information, and postmarketing submission requirements) in their internet and social media promotion? When is the use of links appropriate? klgates. com 11

DTC Ads Via Social Media What happened after the FDA hearing in 2009? § § The FDA initially received over 70 comments to the docket In 2009 alone, FDA issued over a dozen warning letters relating to promotion on social media klgates. com 12

June 2014 Notice of Draft Guidance klgates. com 13

June 2014 Notice of Draft Guidance The FDA states: “This draft guidance is intended to describe FDA’s current thinking about how manufacturers, packers, and distributors. . . of prescription human and animal drugs. . . and medical devices for human use. . . that choose to present benefit information should present both benefit and risk information within advertising and promotional labeling . . . of their FDA-regulated medical products on electronic/digital platforms that are associated with character space limitations—specifically on the Internet and through social media or other technological venues (Internet/social media)…. ” klgates. com 14

June 2014 Notice of Draft Guidance The FDA continues: “. . Examples of Internet/social media platforms with character space limitations include online microblog messaging (e. g. , messages on Twitter or “tweets, ” which are currently limited to 140 character spaces per tweet) and online paid search (e. g. , “sponsored links” on search engines such as Google and Yahoo, which have limited character spaces as well as other platform-imposed considerations. ” klgates. com 15

June 2014 Notice of Draft Guidance The FDA stated that the general factors that should be considered in communicating benefit information on Internet/social media with character space limitations are: § “Benefit information should be accurate and non-misleading and reveal material facts within each individual character-space-limited communication (e. g. , each individual message or tweet). ” § Reveal material facts about the use of a product, such as limitations to an indication or the relevant patient population klgates. com 16

June 2014 Notice of Draft Guidance “Benefit information should be accompanied by risk information within each individual character-space-limited communication. ” § A company must assess whether, once benefit information is conveyed, there is enough room to “adequately convey required risk information” and any other required information § § Should communicate the most serious risks Provide a mechanism (i. e. , a hyperlink) to allow direct and exclusive access to a complete discussion of only the risks of the product klgates. com 17

June 2014 Notice of Draft Guidance What does the FDA say a company should do if it cannot fit all of this information in 140 characters? § Do not do it - consider some other mode of advertising klgates. com 18

What Did Industry Think About The Draft Guidance? § FDA’s guidance is contrary to its own conduct § Does not take into consideration certain search engines, such as Google, that state that there is no guarantee that links will be displayed § Precludes, as written, manufacturers, etc… of complex drugs with multiple indications and serious risks, or certainly boxed warnings, from using this form of advertising § FDA should consider following a guideline similar to the FTC’s social media guideline § Violates the First Amendment klgates. com 19

September 2014 Notice of Draft Guidance klgates. com 20

DTC Ads Via Social Media – Risks and Benefits Managing decisions relating to whether to advertise via the Internet/social media § Risks of advertising on social media: § Warning letters § Lack of control over re-tweets etc… § Litigation with competitors § Loss of control of messaging and brand image § Costs associated with monitoring and other regulatory issues klgates. com 21

DTC Ads Via Social Media – Risks and Benefits § Potential benefits of advertising on social media: § § § Statistics about social media’s effect on buying/decision making Increase market share? Reminder ads are not as impactful as product claim ads Sheer increase in the number of your potential audience Less expensive than traditional DTC ads klgates. com 22

New Preemption Implications

Impact of Preemption Decisions and the FDA’s 2013 Proposal Wyeth v. Levine, 555 U. S. 555 (2009) A state-law failure to warn tort action against a brand name drug manufacturer is not preempted. PLIVA Inc. v. Mensing, 131 S. Ct. 2567 (2011) FDA’s regulations preventing generic drug manufacturers from changing their labeling except to mirror the label of the brand-name manufacturer preempt statelaw failure-to-warn claims against generic drug manufacturers because it is impossible for generic drug manufacturers to comply with both federal and state duties to warn. klgates. com 24

Impact of Preemption Decisions and the FDA’s 2013 Proposal Mutual Pharm. Co. , Inc. v. Barlett, 133 S. Ct. 2466 (2013) State-law design defect claims that turn on the adequacy of a drug’s warnings are preempted by the FDC Act and under Mensing. klgates. com 25

Impact of Preemption Decisions and the FDA’s 2013 Proposal klgates. com 26

Impact of Preemption Decisions and the FDA’s 2013 Proposal klgates. com 27

FDA’s Proposal – The Aftermath FDA’s proposal spawned numerous comments and criticisms: § Several Republican members of Congress expressed “grave concerns” in a letter to FDA Commissioner Hamburg, M. D. : § Proposal conflicts directly with the statute § Thwarts the law’s purpose and objectives § Imposes significant costs on the drug industry and consumers § Generic Pharmaceutical Association’s concerns: § The proposal is unjustified and unwarranted § The proposal, if allowed, would result in an estimated $4 billion in U. S. health care costs annually § Unintended consequences affecting patient’s access to drug therapies FDA’s response to the criticism klgates. com 28

FDA’s Proposal – The Aftermath Views of the supporters of the proposal: § Will allow the public to be informed as soon as possible when new safety information becomes available § Assure labeling for a prescription drug remains up-to-date when the branded drug is no longer being marketed § Helps incentivize generic drug manufacturers concerns about tort liability klgates. com 29

The Dolin Decision Can a brand manufacturer be held liable to a plaintiff for injuries and/or death allegedly caused by ingestion of a drug manufactured and sold by a generic company. Yes. Dolin v. Smithkline Beecham Corp. , 2013 U. S. Dist. LEXIS 3211 | 2013 WL 120279 § § Patient only ingested generic version Negligence causes of action allowed to stand Causes of action that could not stand Court’s reasoning klgates. com 30

Impact on the Generic and Brand Industry § Safety department’s evolving role § Monitoring adverse events of other companies § Management of new labeling issues klgates. com 31

Proposed Regulation of Software Used in Healthcare IT

Congressional Mandate to FDA Explosion of Health IT § Lack of coherent FDA regulatory framework uncertainty in industry (interferes with innovation) Food and Drug Administration Safety and Innovation Act (FDASIA) of 2012 § Required FDA to develop and post on its website a proposed strategy and recommendations on: § An appropriate, risk-based regulatory framework for healthcare information technology that: § § § Promotes innovation Protects patient safety, and Avoids regulatory duplication klgates. com 33

Congressional Mandate - FDASIA FDA required to develop strategy and recommendations with federal partners: § Office of the National Coordinator for Health Information Technology (ONC) § Federal Communications Commission (FCC) April 2014 – FDASIA Health IT Report § “Proposed Strategy and Recommendations for a Risk-Based Framework” § Authored by FDA, ONC and FCC klgates. com 34

April 2014 – FDASIA Health IT Report klgates. com 35

FDASIA Health IT Report – April 2014 Three Categories of Health IT Functionality 1. Administrative Health IT § Billing, claims processing, scheduling, etc. 2. Health Management Health IT § Health information and data management, data capture and encounter documentation, electronic access to clinical results, most clinical decision support software § Health IT with Medical Device Functionality § An instrument, apparatus, implement, machine … including any component, part, or accessory, which is … intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease” klgates. com 36

FDASIA Health IT Report – April 2014 Health IT with Medical Device Functionality § Current focus of FDA oversight § Regulate under FDA’s current regulatory framework for medical devices § If Health IT meets statutory definition of a “medical device, ” then subject to FDA oversight § No need for new statutory category or regulations – can regulated under existing medical device framework klgates. com 37

FDASIA Health IT Report – April 2014 Principles for Regulatory Framework § Narrowly tailored approach to FDA regulation of Health IT § Recognizes limited FDA resources § Oversight driven by patient risk § Employ a risk-based approach to appropriately mitigate patient safety risks while avoiding unnecessary regulatory oversight § Medical devices: Class I, III § Leverage industry standards and best practices § Facilitate innovation klgates. com 38

September 2013 Notice of Draft Guidance klgates. com 39

What’s New? FDA Regulation of Healthcare IT Mobile Medical Applications – DRAFT Guidance (6/25/13) § “Mobile application” § Software that runs on a mobile platform, or § Web-based software executed on a server but tailored to a mobile platform § FDA will focus regulatory oversight on mobile medical apps that § are “medical devices” and § could pose risk to patient safety if the mobile app did not function as intended klgates. com 40

FDA Regulation of Medical Devices § Class I devices: General Controls § Establishment registration and medical device listing § Quality System (QS) regulation § Labeling requirements § Medical Device Reporting § Premarket notification - 510(k) (unless exempt) § Reporting Corrections and Removals § Class II devices: General Controls + Special Controls + (usually) Premarket Notification (510(k)) § Class III devices: General Controls + Premarket Approval (PMA) klgates. com 41

FDA Regulation of Mobile Medical Apps FDA intends to exercise enforcement discretion on low risk software intended to: § § § Help patients self-manage their disease or conditions without providing specific treatment or treatment suggestions Provide patients with simple tools to organize and track their health information Provide easy access to information related to patients’ health conditions or treatments Help patients document, show, or communicate potential medical conditions to health care providers Automate simple tasks for health care providers Enable patients or providers to interact with Personal Health Record (PHR) or Electronic Health Record (EHR) systems. klgates. com 42

FDA Regulation of Mobile Medical Apps Examples of apps for which FDA intends to exercise Enforcement Discretion § § § Allow asthmatics to track inhaler usage, asthma attacks, location of user at the time of an attack, or environmental triggers of attacks Provide periodic educational information, reminders, or motivational guidance to smokers trying to quit, patients recovering from addiction, or pregnant women Enable a patient or caregiver to create and send an alert or general emergency notification to first responders Allow a user to collect (electronically or manually entered) blood pressure data and share this data through e-mail, track and trend it, or upload it to a personal or electronic health record Allow user to log, record, track, evaluate, or make decisions or behavioral suggestions related to developing or maintaining general fitness, health or wellness klgates. com 43

FDA Regulation of Mobile Medical Apps FDA will enforce compliance on mobile medical apps that: § Connect to one or more medical devices for the purpose of controlling the device(s) or displaying, storing, analyzing, or transmitting patient-specific medical device data § Transform the mobile platform (hand held) into a regulated medical device by using attachments, display screens, or sensors or by including functionalities similar to those of currently regulated medical devices § Perform patient-specific analysis and providing patient-specific diagnosis, or treatment recommendations klgates. com 44

Examples of Mobile Medical Apps That Must Meet Regulatory Requirements Mobile medical apps that connect to existing medical devices to control the device(s) or display, store, analyze, or transmit patient-specific, including apps that: § alter the function/settings of an infusion pump § control or change settings of an implantable neuromuscular stimulator § calibrate, control, or change settings of a cochlear implant § act as wireless remote controls or synchronization devices for computed tomography (CT) or X-Ray machines klgates. com 45

Examples of Mobile Medical Apps That Must Meet Regulatory Requirements Mobile medical apps that transform a mobile platform into a medical device, including apps that: § § § use a sensor or lead connected to a mobile platform to measure and display the electrical signal produced by the heart (electrocardiograph or ECG) or blood glucose levels use tools within the mobile platform (e. g. , speaker) to produce controlled levels of test tones and signals intended for use in conducting diagnostic hearing evaluations use an attachment to the mobile platform (e. g. , light source, laser) to treat acne, reduce wrinkles, or remove hair klgates. com 46

Examples of Mobile Medical Apps That Must Meet Regulatory Requirements Mobile medical apps that perform patient-specific analysis and providing patient-specific diagnosis, or treatment recommendations, including apps that: § connect to a nursing central station and display medical device data to a physician’s mobile platform for review (e. g. , a medical device data system) § connect to a perinatal monitoring system and transfer uterine contraction and fetal heart rate data to another display to allow for remote monitoring of labor progress § connect to bedside (or cardiac) monitors and transfer the data to a central viewing station for display and active patient monitoring klgates. com 47

June 2014 – FDA Expands Enforcement Discretion of Health IT klgates. com 48

June 2014 DRAFT Guidance FDA expanded scope of Health IT devices subject to FDA’s enforcement discretion § Three categories of medical devices § Medical device data systems (MDDS) [21 CFR 880. 6310] § Medical image storage device [21 CFR 892. 2010] § Medical image communications device [21 CFR 892. 2020] klgates. com 49

Medical Image Devices Medical image storage device § Provides electronic storage and retrieval functions for medical images Medical image communications device § Provides electronic transfer of medical image data between medical devices klgates. com 50

Medical Device Data Systems (MDDS) MDDS are: § Hardware or software products § That transfer, store, convert formats, and display medical device data § Do not modify the data § Do not control the functions or parameters of any connected medical device § Are not intended to be used in connection with active patient monitoring klgates. com 51

Medical Device Data Systems (MDDS) § February 2011 – FDA down-classified from class III (PMA) to class I (general controls) § June 2014 – FDA does not intend to enforce any regulatory requirements § “This means that for [these] devices …, the FDA does not intend to enforce compliance with the regulatory controls, including registration and listing, premarket review, postmarket reporting and quality system regulation for manufacturers of these types of devices. ” § Applies also to mobile medical apps that are MDDS klgates. com 52

FDA Regulation of Health IT – Practice Tips § § Know whether your software is/is not a medical device § Subject to FDA’s enforcement discretion? § Subject to FDA’s medical device requirements? Set limits on functionality Even class I medical devices require more time and $$ to develop § Monitor upgrades & improvements Ensure marketing claims/strategy are consistent with intended regulatory category § Monitor ‘claims creep’ Watch for FDA to finalize guidances § FDA is regulating by guidances, not formal rulemaking § § § klgates. com 53

Proposed Regulation of Laboratory Developed Tests

Proposed Regulation of Laboratory Developed Tests (LDTs) What is an LDT? § An in vitro diagnostic (IVD) that is intended for clinical use and designed, manufactured and used within a single laboratory § Made and used by the same lab § Device is not sold; test results are sold § Also known as “home brew” assays or devices § IVDs are included in the FDA definition of medical device § FDA has exercised enforcement discretion for LDTs since 1976 klgates. com 55

Proposed Regulation of LDTs § § LDTs have been regulated by CLIA since 1988 § CLIA requirements focus on testing process – ability to perform test in an accurate and reliable manner FDA has been asserting the need for more FDA regulation of LDTs for several years § LDTs have evolved from “traditional” LDTs § Typically manufactured in small volumes by local labs § Used commercially available components, legally marketed for clinical use § Were interpreted by physicians and pathologists at treating facility klgates. com 56

Proposed Regulation of LDTs Modern LDTs are: § manufactured with components that are not legally marketed for clinical use and/or not made by the testing lab § offered beyond local populations and manufactured in high volume § used widely to screen for common diseases rather than rare diseases § used to direct critical treatment decisions (e. g. , prediction of drug response) § highly complex (e. g. , automated interpretation, multisignal devices, use of non-transparent algorithms and/or complex software to generate device results) klgates. com 57

October 3, 2014 FDA Proposed Regulation of LDTs 2 Draft Guidances klgates. com 58

LDT Framework Guidance Rationale for FDA regulation of LDTs § FDA regulation of safety and efficacy needed to fill gaps in CLIA oversight § Clinical validity § Accuracy of test to measure or detect the clinical condition for which it is intended § Analytical validity § Analytical specificity and sensitivity, accuracy and precision § Not evaluated by CLIA before test is used Post-market surveillance § § Adverse event reporting klgates. com 59

LDT Framework Guidance – Proposed Regulation § Continued full enforcement discretion § LDTs forensic use § LDTs used in CLIA-certified, highcomplexity histocompatibility laboratories for organ, stem cell, and tissue transplantation klgates. com 60

LDT Framework Guidance – Proposed Regulation § Partial enforcement discretion § Regulatory requirements Yes - General controls, registration & listing, AE reporting § No - premarket review, QS § Applies to: § Low-risk (class I) LDTs § § LDTs for rare diseases § “Traditional” LDTs § LDTs for Unmet Needs” when no FDAapproved or cleared equivalent device is available klgates. com 61

LDT Framework Guidance – Proposed Regulation § No enforcement discretion § Requirements: premarket review, QS, registration & listing, AE reporting § Moderate risk (class II) LDTs § 510(k) § FDA aims to use third party review for premarket review § High risk (class III) LDTs § PMA § FDA will do premarket review klgates. com 62

LDT Framework Guidance – Proposed Regulation Classification of LDTs § Risk based § FDA will use expert advisory panels § Factors (not exclusive list) § Level of risk of disease/condition or patient population § Screening or diagnosis use § Nature of the clinical decision based on the test result § Other data available to MD (in addition to the LDT result), § Potential consequences/impact of erroneous results § FDA will issue draft guidance within 18 months of finalizing Framework Guidance klgates. com 63

LDT Framework Guidance – Timelines Requirement Registration & Listing Premarket Review Class After Final Guidance All 6 months (except exempt) III Begin - 12 months Complete - within 5 years II Begin – 5 years (after completion of class III reviews) Complete - within 9 years klgates. com 64

LDT Notification Guidance Notification to FDA § § Who: manufacturer of any LDT – no exceptions What: must notify FDA and provide basic information about LDT § Data will be used to classify LDTs § Will be made publically available on FDA website § Enforcement discretion depends on notification When: § Within 6 months of final Framework Guidance § Prior to significant changes to notified LDTs How: FDA website klgates. com 65

Proposed Regulation of LDTs – Practice Tips § § Increased FDA regulation of LDTs is coming Question is when and how much Comment period on draft guidances ends 1/30/15 § Will take FDA time to review and address comments In 2015, prepare for: § Notification to FDA § § § Registration and listing (unless exempt) Look for draft classification guidance In 2016, prepare for: § Premarket review of prioritized class III LDTs klgates. com 66

Questions? Ellen L. Darling Carol Pratt Orange County Office Portland Office +1. 949. 623. 3540 +1. 503. 226. 5762 Ellen. darling@klgates. com Carol. pratt@klgates. com 67