The Regulators Are Watching: Avoid Communications Sanctions

FDA officials often attend tradeshows to check out the latest in medical technology. But did you know they’re also listening for violative discussions of unapproved and uncleared products?

That warning came from Julie Tibbets, partner at Alston & Bird’s food, drug & device/FDA group, during a recent FDAnews webinar on how companies can discuss their product pipelines without falling afoul of federal regulations. She was joined by colleague Matthew Mamak, partner within the firm’s financial services and products group, who detailed the U.S. Securities and Exchange Commission’s views on the topic.

Under FDA regulations, sponsors and investigators are barred from promoting an investigational device until the agency has approved it for commercial distribution. In addition, they may not represent that the product is safe or effective. The FDA does not, however, put any restrictions on the scientific exchange of information. That’s where some confusion has come in.

“Unfortunately, FDA has never expressly defined the full range of what scientific exchange would include,” Tibbets explained. However, based on experience, it would appear that dissemination of information in medical publications, as well as medical education and scientific presentations and posters at medical congresses, would pass FDA muster.

“With that being said, FDA’s emphasis here is on science and avoiding promotion or marketing of investigational products or uses,” she stressed, adding that employees with a scientific background — such as medical officers — should offer this information, rather than sales or marketing personnel.

In terms of products with a pending 510(k) application, the FDA allows companies to display information on that medical device as long as no orders for purchase are taken. Tibbets also recommended that companies ensure that all display or promotional items make clear that the product’s application is pending at the agency.

Tibbets noted that the agency enforces compliance in a number of ways, including through reviewing newspapers and social media, listening into conversations at tradeshows and collecting materials and at company booths. Competitors also may serve as sources of intelligence.

In addition, the FDA utilizes the “Bad Ad” program, through which healthcare providers may report violations related to printed literature and communications that may have occurred.

Devicemakers making inappropriate communications risk receiving an untitled or warning letter. For example, Advanced Magnetic Research Institute International was hit with a warning letter in 2014 for marketing a device as safe and effective before it was approved or cleared. Violative statements included: “The rate of healing can be accelerated to be much faster than the typical healing rate of the human body,” and “The safety of the induction of high strength magnetic fields was well established during toxicity studies performed for the FDA approval of the MRI.” However, it wasn’t a competitor or healthcare professional who reported the activity, but rather FDA inspectors who were looking to see whether the clinical trials activities and procedures related to the device complied with applicable federal laws.

Some general rules of thumb companies should keep in mind include the following:

• Always include the word “investigational” when describing an unapproved or uncleared product;
• Don’t make unsupported statements regarding safety and effectiveness; and
• Don’t use promotional terminology.

SEC Requirements

As Mamak noted, the main job of the SEC is to protect investors. To that end, it requires companies to disclose information that is material and could influence investors.

“Something material is information that would be important to a reasonable person in deciding whether or not to buy shares in the company,” he said. “I think that’s simpler to understand and difficult to apply.”

Mamak agreed that sometimes it is difficult to determine what to do when information is material.

Many times, the answer is to immediately issue a press release and file an 8-K with the commission. However, if a company wants to wait to disclose the information, he said companies can offer stock answers to investors and analysts ahead of time to stay in compliance.

If a company does decide to make information public during a future conference, rather than in a press release, Mamak advised companies to limit the number of people who know what’s in the disclosure ahead of time and to prepare a script so the presenter knows what to say at the event.

If someone within the company makes an inadvertent disclosure, that information must be made public within 24 hours or the next trading day. — Elizabeth Hollis