Judge Gorsuch Could Be Pharma Ally In FDA Disputes

Judge Neil Gorsuch's appointment to the Supreme Court would be beneficial to the biopharmaceutical sector given his opposition to giving deference to administrative agencies when laws are ambiguous and his criticism of securities class actions.

Trump nominated Gorsuch to fill the high court's vacancy on Jan. 31. The Senate Judiciary Committee is to begin a hearing on his nomination March 20. Gorsuch was confirmed to the U.S. Court of Appeals for the Tenth Circuit Tenth Circuit by the US Senate in 2006 without opposition.

Attorneys have pored over Gorsuch's opinions and writings to assess how he would rule on cases that come before the Supreme Court. In one decision that could be significant for the pharmaceutical industry, he opposed the "Chevron deference" doctrine, under which courts first determine if a statute is ambiguous and if they find that it is, defer to an agency's interpretation of it. The doctrine is named for the Supreme Court's 1984 decision in Chevron U.S.A. Inc. v. Natural Resources Defense Council Inc.

Attorney James Beck, counsel at Reed Smith, said Gorsuch's views on the doctrine could potentially have an impact on the "intended use" final rule FDA issued in the last days of the Obama Administration. Under the rule, which is included in a final rule on tobacco-derived products, FDA will look at the "totality of evidence" of a manufacturer's intended use of a product. Industry groups asked the agency to stay and reconsider the rule, saying it creates a new legal standard that would allow any evidence to be used to bring a criminal misbranding action against a company. (Also see "‘Intended Use’ Rule: Industry Urges US FDA To Revoke ‘Totality Of Evidence’ Standard" - Pink Sheet, 12 Feb, 2017.)

"Judge Gorsuch is highly unlikely to let FDA get away with [this] based on his views on administrative deference," Beck stated.

Gorsuch questioned Chevron deference in a 2016 concurring opinion in Gutierez-Brizuela v. Lynch, an immigration case

"There's an elephant in the room with us today," he wrote. "We have studiously attempted to work our way around it and even left it unremarked. But the fact is Chevron and [the 2005 Supreme Court decision] Brand X permit executive bureaucracies to swallow huge amounts of core judicial and legislative power and concentrate federal power in a way that seems more than a little difficult to square with the Constitution of the framers' design. Maybe the time has come to face the behemoth."

Judicial deference to FDA is at issue whenever someone challenges an agency decision, such as its decision to pursue an enforcement action or award or deny a product marketing exclusivity. The agency does not always prevail. For example, the court ruled FDA failed to satisfy the Chevron test in rejecting the agency's rationale for denying Amarin Pharmaceuticals Inc.'s fish oil pill Vascepa (icosapent) five years of marketing exclusivity as a new chemical entity. (Also see "Legal Briefs: Courts On Exclusivity; Namenda ‘Hard Switch’ Deemed Coercive; Acorda Fights Bass Patent Petition" - Pink Sheet, 1 Jun, 2015.)

'Vast Social Costs' Of Securities Fraud Class Actions

On another issue of importance to drug makers, Gorsuch has been vocal in criticizing securities fraud class actions. While a partner at Kellogg, Huber, Hansen, Todd, Evans & Figel, Gorsuch wrote an amicus brief for the US Chamber of Commerce in the securities fraud case Dura Pharmaceuticals v. Broudo, which the Supreme Court decided in 2005.

In a 2005 paper on settlements in securities fraud class actions published by the Washington Legal Foundation, Gorsuch and co-author Paul Matey described the pressure corporations face to settle meritless suits and the incentives to bring them. The paper was among Gorsuch's extra-judicial writings and speeches compiled by Scotus Blog.

While securities class actions have offered some social benefits, "experience has shown that, like many other well-intended social experiments, they are not exempt from the law of unintended consequences, having brought with them vast social costs never imagined by their early promoters," Gorsuch and Matey wrote.

The life sciences sector is routinely hit with these actions. The law firm Dechert just issued an analysis of the litigation against US-based life sciences companies in 2016. It found that plaintiffs filed 67 class action securities lawsuits against life sciences companies last year, a more than 70% increase from the 39 filed in 2014. About half of them were against companies with a market capitalization of $500m or less. The firm found that nearly 50% of the cases complained of misrepresentations or omissions regarding product efficacy, product safety and/or the likelihood of FDA approval. And several cases alleged misrepresentations about regulatory hurdles and the timing and prospects of FDA approval.

The Supreme Court has issued several rulings on securities fraud cases involving the pharmaceutical industry. In 2010, in Merck & Co. Inc. v. Reynolds, the court clarified when the statute of limitations for filing a suit begins to run and specified that intent to deceive is crucial in determining if a violation occurred. (Also see "Supreme Court Lets Vioxx Securities Suit Against Merck Stand" - Pink Sheet, 27 Apr, 2010.)

In 2011, the court ruled in [Matrixx Initiatives Inc.] v. Siracusano that companies can be sued for failing to disclose adverse event reports about their products even if the reports are not statistically significant. (Also see "Adverse Events Disclosures May Increase After Supreme Court Ruling Against Matrixx, But "Total Mix" Matters" - Pink Sheet, 22 Mar, 2011.) And in 2013, the court held in Amgen Inc. v. Connecticut Retirement Plans and Trust Funds that plaintiffs do not need to prove that a company's misrepresentations were material at the class certification stage. (Also see "Securities Fraud Class Action Suits Could Grow After Amgen’s Supreme Court Loss" - Pink Sheet, 27 Feb, 2013.)

Possible Impact On Product Liability

Lawyers have also commented on Gorsuch's views on issues pertaining to product liability cases, which often involve the question of whether state tort claims are preempted by federal law. There are two types of preemption, express preemption, in which the law expressly states that a federal law is intended to preempt state legislation, and implied preemption, in which state law conflicts with federal law, or the federal government intended its laws to completely occupy the field it regulates. Express preemption applies to medical devices while implied preemption pertains to pharmaceutical cases.

Gorsuch addressed the issue of express preemption in his 2015 decision Caplinger v. Medronic Inc., which held that a state tort suit alleging defective design and failure to warn regarding the off-label use of a medical device was preempted. Beck said that what this portends for pharmaceutical cases "is up in the air."

Perkins Coie partner Eric Wolff noted in an online post that as a textualist – someone who considers only the words of the law and not the legislators' intent – and defender of the separation of powers, Gorsuch may believe that it is Congress's job to say expressly whether there should be preemption. He said Gorsuch is likely to have a significant effect on the development of law in the admissibility of expert testimony, personal jurisdiction and federal preemption.

Regarding expert testimony, Wolff said Gorsuch appears interested in the gatekeeping role of district courts and has said that courts should not admit speculation just because it comes from a credentialed person. "Gorsuch's views regarding the admissibility of expert testimony may affect product liability litigation because expert testimony is commonplace," Wolff stated.

Prior to his appointment to the Tenth Circuit, Gorsuch had a year stint as principal deputy associate attorney general in the Department of Justice. From 1995 to 2005 he was an associate and partner at Kellogg, Huber. He clerked for Supreme Court Justice Byron White and Justice Anthony Kennedy.

OpenSecrets.org, the website of the Center for Responsive Politics, reports that according to his 2015 financial disclosure statement, Gorsuch has an estimated net worth between $3.2m and $7.3m, not counting things like his Denver-area home. It notes that he earned $217,600 as an appeals court judge and will make $251,800 as an associate justice.