By Kayla Cristales, Randy Peak, and Suzie Trigg; Haynes Boone
On Aug. 6, 2021, the FDA informed the public of its plans to transition some drugs to device status and solicited public comments to facilitate its deliberations about potentially impacted products.1 FDA’s announcement follows the D.C. Circuit’s recent limitation of FDA’s discretion in a case in which the court stated that it was “especially troubled by the FDA’s inability to articulate a limiting principle with which to cabin its asserted discretion” over certain classification decisions. More specifically, in Genus Med. Techs., LLC v. FDA,2 the D.C. Circuit held that the FDA does not have carte blanche to classify a medical product as a drug if such product meets the statutory definitions of both drugs and medical devices under the Federal Food, Drug, and Cosmetic Act (FDCA).
FDA’s intended implementation of Genus marks a shift in the agency’s product-classification policy after 24 years of exercising unfettered discretion to classify certain products as drugs, despite also meeting the “device” definition. Thus, FDA’s intended implementation will affect not only new products meeting both drug and device statutory definitions in connection with the approval process but also existing products on the market that may have been improperly classified as drugs. Accordingly, industry should watch closely for further guidance and communications from FDA regarding which product categories may be affected, its plans to transition certain “drugs” to the regulatory scheme governing devices, and any other classification issues that may come to light in connection with the reexamination of FDA’s use of discretion in determining product classification. Additionally, pharma/biotech companies that feel their commercial products are incorrectly classified, as well as those currently developing product candidates that could meet more than one regulatory definition, should prepare to advocate on behalf of their desired classifications, as it is now clearer than ever that FDA is not immune from challenge in this context.
The Genus Decision
The Genus case arose following the FDA’s issuance of a warning letter to Genus Medical Technologies, LLC alleging that Genus’ contrast imaging agents are drugs under the FDCA and that, consequently, Genus is violating the FDCA by introducing unapproved new drugs into interstate commerce.3 Genus argued that the products at issue are devices, not drugs, to which the FDA explained that, although the products appear to meet the definition of “device,” they also meet the definition of “drug” and “[b]ecause not all contrast agents meet the definition of a drug, [the Agency] has, for many years, regulated [all such] products as drugs in order to regulate them consistently under the same authority [of the Center for Drug Evaluation and Research (CDER)].”4 After failing to convince the FDA of its position, Genus filed suit.
Conceptually, all FDA-regulated medical products meet the definition of “drug” under Section 201(g) of the FDCA, which, in relevant part, includes “articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in man or other animals [and] articles (other than food) intended to affect the structure or any function of the body of man or other animals . . . .”5 For a medical product also to meet the more restrictive definition of “device” under Section 201(h) of the FDCA, it must (i) “not achieve its primary intended purposes through chemical action within or on the body of man or other animals;” and (ii) “not [be] dependent upon being metabolized for the achievement of its primary intended purposes.”6 Given that the definition of device mirrors the broader definition of drug, but is limited by the “mode-of-action” qualifiers above, the court sided with Genus, holding that products meeting the definition of “drug” must be regulated as drugs, unless they also meet the definition of “device,” in which case they must be regulated as devices to avoid rendering the mode-of-action distinction in the device definition essentially meaningless.7
The Aftermath: FDA’s Plans to Implement Genus
Four months after the Genus decision, the FDA published a Federal Register notice outlining its updated approach to products meeting both drug and device definitions as follows:
Going forward, in accordance with Genus, FDA intends to regulate products that meet both the device and drug definition as devices, except where the statute indicates that Congress intended a different classification, and we further intend to bring previously classified products into line with the Genus decision. Accordingly, FDA will examine product classifications, paying particular attention to those products that have been regulated as drugs even though they may satisfy the device definition. We expect the determining factor in many cases to be whether the product achieves its primary intended purposes through chemical action within or on the body or is dependent upon being metabolized for the achievement of its primary intended purposes. Historically, FDA has not always examined these factors in determining how to regulate certain types of medical products -- e.g., imaging agents  -- because the Agency believed it had discretion to regulate such products as drugs even if they met the device definition. In determining product classification in the future, FDA will consider these factors. FDA will also examine whether other statutory provisions--beyond the drug and device definitions--indicate Congress intended a type of product to be regulated under either the drug or device authorities.8
FDA requested comments from the public regarding categories of products currently regulated as drugs that may be required to transition to devices under Genus and the amount of time that would be necessary to effect such a transition (given the differences in the regulatory requirements to which drugs and devices are, respectively, subject). Comments must be submitted by Oct. 8, 2021, and, sometime thereafter, FDA intends to publish a list of affected product categories that the FDA tentatively determines should transition to device status under Genus and then solicit comments on such tentative determinations, along with a proposed transition timeline.9
Considerations For Potentially Implicated Pharma/Biotech Companies
For those companies with commercial products that will be transitioning from drugs to devices in connection with FDA’s implementation of Genus, the transition process is likely to require focused attention on meeting different FDA requirements and, potentially, on fundamental business relationships. For example, companies with transitioning products may need to bring facilities into compliance with the Quality System Regulation (QSR). Affected companies will likely also need to update labeling, register as device establishments and list all applicable products, and take other steps to comply with all applicable device regulations. Beyond the costs associated with making the necessary changes to transition companies’ products and operations to be compliant with applicable device regulations, companies with products likely to be implicated by Genus must also be aware of potential risks that may arise in connection with this transition. Importantly, while the FDA will, presumably, build in a reasonable amount of time before companies with transitioning products could be subject to enforcement for noncompliance with applicable FDA device regulations, no such grace period will be guaranteed for other potential sources of liability. For example, after the transition is official, a company with transitioning products could be subject to liability in connection with its contractual arrangements under the following scenarios (among others):
- The pharma/biotech company’s existing contract manufacturers may only be compliant with applicable drug current good manufacturing practices (cGMPs) and not the QSR. If this remains the case after the company’s products transition to devices,
- The company could face the risk of at least technical, but perhaps more material, breach of contractual representations and warranties;
- The company’s customers may have grounds to amend or end certain contracts, introducing financial and reputational uncertainty;
- The company may be forced to terminate the agreement with the applicable contract manufacturer(s), which could disrupt the supply chain and have negative downstream effects, such as, for example, the company’s inability to fulfill its obligations under agreements with customers; and
- In the event of a defect or quality issue that causes consumer harm, the company may face increased liability risk under applicable consumer-protection laws, as many (if not all) states recognize noncompliance with law in circumstances like these as negligence per se.
- The pharma/biotech company’s agreements with customers (and others) may contain representations and warranties that the company and its products are in compliance with the more burdensome drug regulations and quality standards that no longer apply.
- To the extent a company utilizes third-party distributors, such distributors are currently required to be licensed as wholesale drug distributors in applicable states. After the transition, the company may need to require its distributors to obtain the appropriate licenses to distribute its devices or terminate its arrangements with such distributors (both of which may prove difficult and/or costly); otherwise, the company may be in breach of agreements in which the company represents and warrants compliance with applicable laws, as many states prohibit regulated entities from providing restricted devices to, or receiving restricted devices from, distributors that are not properly licensed by the governing state agency.*
As the FDA prepares to implement Genus, companies with drug products should, first and foremost, reevaluate their products to determine whether (i) the product does not achieve its primary intended purposes through chemical action within or on the body of man or other animals, and (ii) the product is not dependent upon being metabolized for the achievement of its primary intended purposes.10 If a company finds that the features described in (i) and (ii) apply to one or more of its drug products, it should begin to plan for the potential transition of such product(s) from drugs to devices. Additionally, potentially affected companies are encouraged to engage with FDA early and often and may want to submit comments and/or questions to the agency’s latest Federal Register notice11 (by the Oct. 8, 2021, deadline). At the very least, companies should watch closely for relevant updates and announcements from the FDA and should carefully review all subsequent Federal Register publications on this matter.
In addition to assessing what elements of a company’s relevant operations may need updating to bring the affected products (and the company itself) into compliance with applicable device regulations if one or more of the company’s products are, in fact, identified by the FDA on the list of drugs to be reclassified, companies with products likely to be implicated by Genus should also be mindful of the types of liability risks described above (and evaluate relationships, arrangements, and practices for other potential risks) and begin reconsidering and/or renegotiating existing arrangements with contract manufacturers, distributors, and customers (among others, as applicable) to ensure that all facets of the company’s supply chain are updated and in compliance with applicable device regulations and that the company is not exposed to any additional liability in connection with its relevant contractual arrangements.
* The risk described in this hypothetical scenario assumes that the company’s product will be reclassified as a restricted device (i.e., a device that can only be sold on oral or written authorization by a licensed practitioner or under conditions specified by regulation), as states typically only require device distributors to be licensed if they are distributing restricted devices.
- 86 Fed. Reg. 43553 (Aug. 9, 2021).
- Genus Med. Techs., LLC v. FDA, 994 F.3d 631 (April 16, 2021)
- Id.; FDA Warning Letter to Genus Medical Technologies (May 2, 2017), https://www.fda.gov/inspections-compliance-enforcement-and-criminal-investigations/warning-letters/genus-medical-technologies-506486-05022017.
- Id. at *636.
- 21 U.S.C. § 321(g).
- 21 U.S.C. § 321(h) (emphasis added).
- 2021 U.S. App. Lexis 10928.
- 86 Fed. Reg. 43554 (Aug. 9, 2021).
- See 21 U.S.C. § 321(h).
- 86 Fed. Reg. 43553 (Aug. 9, 2021).
About The Authors:
Kayla Cristales is an associate in the Healthcare and Life Sciences Practice Group of Haynes Boone. Her practice focuses primarily on transactional and regulatory healthcare and FDA matters, including advising companies engaged in the manufacture, distribution, marketing, sale, promotion, or purchase of pharmaceuticals, biologics, or medical devices.
Randy Peak is a partner in the Healthcare and Life Sciences Practice Group, Pharmaceuticals Practice Group, and Precision Medicine and Digital Health Group of Haynes Boone. Randy has served as a practical and strategic legal advisor in the healthcare, life sciences, and technology sectors for decades, representing clients ranging from multinational Fortune 100 enterprises to start-ups on a broad range of healthcare regulatory compliance and transactional matters.
Suzie Trigg is a partner and co-chair of the Healthcare and Life Sciences Practice Group of Haynes Boone. Suzie helps companies lawfully market FDA-regulated consumer products, including foods, dietary supplements, cosmetics, and over-the-counter drugs. She reviews the use of specific ingredients and product claims to reduce potential challenges and advises on strategies intended to reduce the risk of a product recall or potential enforcement.