Can A State Impose Civil Penalties On A Drug Or Device Company For Using A Federally-Approved Label?

Overview

States have increasingly brought actions under Medicaid fraud or consumer protection statutes seeking civil penalties and restitution from the makers of prescription drugs. Many top-selling drugs have been subject to such suits by individual States: Avandia, Depakote, Plavix, Risperdal, Seroquel, Vioxx, and Zyprexa. In a typical action, a State alleges every use of the FDA-approved label was a violation of state law, because the label was misleading or deceptive.

Where the basis for the State's claim is that the label did not disclose an alleged safety risk or overstated efficacy, these State actions amount to an attack on the FDA-approved labeling. The imposition of a penalty for every use of the federally-approved label has the same impact as the State ordering the manufacturer to take off the FDA-approved label when the containers of the tablets arrive in the State and to affix a different label, thereby displacing the FDA as the decision-maker on the labeling of prescription drugs. The notion that a State could bring such an enforcement action raises the specter of a prescription drug having to have 50 different labels- one for every State.

The Food, Drug, and Cosmetic Act (FDCA) and its regulations address whether a drug label is "false or misleading" and Congress gave the FDA exclusive authority to enforce the FDCA. A State should not be able to usurp this authority. Moreover, under the doctrine of implied or conflict preemption, any attempt by a State to penalize a prescription drug manufacturer for use of a federally-approved label would conflict with the FDA's role as the arbiter of drug labels.1 The Supreme Court's decision in Wyeth v Levine addressed state-law claims only for compensating an injured plaintiff, and the decision has no application to a State's attempt to fine a company and to award restitution for every use of a federally-approved label. This article examines the legal principles that apply when a State seeks to penalize use of a federally-approved label.

Federal Regulatory Regime

The FDCA empowers the FDA to regulate the safety and efficacy of pharmaceuticals through an extensive drug approval process. But Congress also intended the FDCA to protect consumers' financial interests.2 Before a drug can be put on the market, a manufacturer must first submit a New Drug Application (NDA) for the FDA's review and approval.3 The NDA must include a draft label for the medication;4 full reports of investigations showing whether the drug is safe and effective;5 and "a discussion of why the benefits exceed the risks [of the medication] under the conditions stated in the labeling."6 The FDA may refuse to approve an NDA if the drug label "is false or misleading."7 To determine whether a label is "misleading," the FDA considers representations made or suggested on the label and whether the label fails to reveal facts that are (a) material in light of such representations, or (b) material with respect to potential consequences of using the drug under the conditions set forth in the labeling.8 The FDA may also deny approval if it determines that the NDA "contains an untrue statement of a material fact."9

Thus, FDA approval means the agency has "determine[d] that drug meets the statutory standards for safety and effectiveness ... and labeling."10 Following approval, the manufacturer may distribute the medication only with the FDA-approved label.11

The FDA can withdraw approval of a drug if new information reveals that the label "is false or misleading in any particular."12 Any unapproved changes to the label may render the product "misbranded" under federal law, subjecting the manufacturer to substantial fines and other penalties.13

The FDA Has an Exclusive Enforcement Role

The first problem for a State's claim that it can impose penalties for use of an allegedly misleading or deceptive drug label is that it is the FDA that has authority to determine whether a prescription drug label is "false or misleading."14 Congress granted the FDA sole authority to penalize violations of the drug approval process, including labeling violations, under the FDCA.15 The FDA may also investigate suspected fraud or misrepresentations by the manufacturer.16

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