FDA warning letters lack preclusive effect

State ex rel. McGraw v. Johnson & Johnson, -- S.E.2d ----, 2010 WL 4709084 (W.Va.)

West Virginia sued J&J and Janssen Pharmaceutica Products, L.P. under the West Virginia Consumer Credit and Protection Act for disseminating false and misleading information to healthcare providers in West Virginia about two drugs, Risperdal (an antipsychotic) and Duragesic (a narcotic pain reliever). The circuit court granted the state partial summary judgment on falsity/misleadingness and then assessed a civil penalty of $4,475,000. The Supreme Court of Appeals (state supreme court) found that the circuit court erred in treating FDA warning letters as dispositive on the issue of falsity and misleadingness.

With Risperdal, the FDA concluded that all atypical antipsychotics required a warning of an increased risk for hyperglycemia and diabetes, and that all patients receiving them should be monitored for symptoms of hyperglycemia. Defendant Janssen mailed healthcare providers a revised warning label with a cover letter denying any increased risk for hyperglecemia and diabetes and omitting to mention the need to monitor patients. DDMAC, unamused, sent a warning letter indicating that the Risperdal letter was false and misleading; it failed to disclose material information, minimized risks, failed to recommend regular monitoring, and misleadingly claimed superior safety to other atypical antipsychotics. Janssen disagreed but went several rounds with the FDA and finally sent out another letter, "IMPORTANT CORRECTION OF DRUG INFORMATION," which recited DDMAC's concerns with the earlier letter and set forth the previously omitted material information concerning the increased risk of diabetes and hyperglycemia. DDMAC then closed the matter.

DDMAC also sent a warning letter to Janssen based on insufficient or inappropriate substantiation for its claims (here, in a form of marketing material known as a file card) that Duragesic had a lower potential for abuse compared to other narcotics, had a "favorable side-effect profile," and improved social and physical functioning or work activity. The same process of disagreement and a corrective letter ensued.

The state’s claim for violation of the Consumer Protection Act was based entirely on the marketing that was the subject of the DDMAC warning letters. After concluding that the defendants had, as a matter of law, made false and misleading statements, the circuit court conducted a bench trial on whether the statements were made repeatedly and willfully, as required under the Consumer Protection Act for the assessment of a civil penalty, and if so, the number of violations that occurred and the appropriate penalty for each violation. The defendants argued that their evidence showed that their statements were not actually false or misleading and, therefore, that they had not willfully disseminated false and misleading information. The circuit court disagreed, finding that each communication constituted a separate violation of the Act. This led to a $5000 penalty for each phone call and a $500 penalty for each item mailed, for a total of $4,475,000.

The key question was whether the statements and omissions were false and misleading. Under the CPA, courts are to be guided by the interpretation given by the federal courts to the various federal statutes dealing with the same or similar matters. The circuit court therefore looked to the FDCA, which prohibits misbranding, including any false or misleading labeling. The FDA has very detailed guidelines, including bans on statements that a drug is better than the approved labeling says, use of studies that are inadequate to support the claims, and use of statistical significance to make a claim not shown to have clinical significance. Here, the circuit court found that whether the defendants had made false and misleading statements under the FDCA could be decided as a matter of law. (Only the US can enforce the FDCA, but a claim under the Consumer Protection Act is not a preempted action to enforce the FDCA as long as it’s premised on conduct that would give rise to liability under traditional common law principles. Here, the alleged false and misleading claims are traditionally subject to state law liability; the state didn’t simply allege a violation of the FDCA through a failure to provide mandated warning information, but further alleged that this resulted in the dissemination of false and misleading information.)

The circuit court found that Janssen could have administratively appealed the FDA's determination but chose not to do so. Instead, it issued corrective letters, thus waiving its opportunity to contest the FDA's ruling. Moreover, the circuit court concluded that the corrective letters--which restated the FDA’a allegations from the warning letters--constituted "mandatory FDA action and the FDA's official judgment as to the matters addressed in the letters" because the FDA had ordered Janssen to issue them and because they became part of the drugs' official "labeling" once they were publicized. Thus, the circuit court deferred to the FDA’s findings.

The Supreme Court of Appeal concluded that this was error. Under the FDA’s own guidelines, warning letters are merely "informal and advisory" and do not constitute a final judgment of the FDA. Moreover, defendants did not in fact have the ability to administratively appeal the warning letters. Under principles of issue preclusion, the FDA didn’t render a final adjudication on the merits, nor did the defendants have an opportunity to fully and fairly litigate the question. Although collateral estoppel may be applied to quasi-judicial determinations of administrative agencies, West Virginia has always been wary of doing so. At a minimum, the relevant decision must be rendered pursuant to the agency’s adjudicatory authority, procedures substantially similar to judicial procedures must be applied, and the issues must be identical.

The warning letters here didn’t qualify. The FDA doesn’t consider warning letters to be final agency action (which would subject it to suit based on a warning letter). Instead, failure to comply allows, but doesn’t require, the FDA to proceed with an enforcement action. In issuing warning letters, “the FDA is not acting pursuant to any adjudicatory authority, nor does it employ any due process procedures similar to those accorded defendants in courts of law.” Instead, it’s acting pursuant to its regulatory authority and informally. There’s no hearing or prior notice of the alleged violations: the warning letters themselves provide the notification, giving the target an opportunity to resolve the problem before any actual adjudication.

Nor did defendants have an opportunity to fully and fairly litigate the issue, and the circuit court clearly erred in finding that they could have formally appealed the findings in the letters, because the regulations provide for petitions for reconsideration of decisions of the Commissioner, not decisions of the Director of DDMAC, and only the latter was present here. Plus, because the letters aren’t final agency action, they’re not subject to judicial review for want of ripeness.

In the end, “the FDA's belief, as expressed in the warning letters and subsequent corrective letters, that Janssen violated the FDCA is not sufficient to establish, as a matter of law, that the Appellants' communications to healthcare providers were actually false and misleading in violation of the Consumer Protection Act.” Instead, the falsity and misleadingness of defendant’s statements are questions of fact.