Getting What You Paid For: Acquisition Claims Considerations
June 27, 2023
Acquisitions are very common in the medical device and pharmaceutical industry. For the seller, it is often the opportunity to find a partner who can take the target technology to the next level. For the buyer, it is an opportunity to bolster a portfolio and impact more patients. Any potential impact is bound by the marketability of the medical product.
Click below to see an on-demand webinar on this topic at Gardner Law's Navigating the M&A Waters of FDA-Regulated Companies program.
ADVERTISING AND PROMOTION 101
The marketability of a medical product depends on the claims that can lawfully be made. FDA and FTC regulate the promotional labeling companies use to market their medical device or drug. 21 U.S. Code § 352 broadly prohibits misbranding drugs and medical devices. Any statement made about the medical product that is false or misleading may violate this statute. Outcomes due to promoting false or misleading information can range from bad publicity up to severe criminal consequences.
ACQUIRING THE CLAIMS
The marketability of a medical product depends on the claims that can lawfully be made. FDA and FTC regulate the promotional labeling companies use to market their medical device or drug. 21 U.S. Code § 352 broadly prohibits misbranding drugs and medical devices. Any statement made about the medical product that is false or misleading may violate this statute. Outcomes due to promoting false or misleading information can range from bad publicity up to severe criminal consequences.
BEFORE THE ACQUISITION
When beginning due diligence of a target, it is imperative the buyer understands the regulatory status of the product. Has the seller engaged in pre-submissions with FDA? If so, what feedback has FDA provided and does the feedback relate to any desired claims? Is the product approved or cleared? If so, understand the "risk tolerance" of the seller and what claims have been made regarding the product prior to the acquisition. If the product has yet to be approved or cleared, understand the general timing of approval/clearance and whether FDA has raised any concerns. Ultimately, buyers need to focus on the indication and whether the indication is specific or general. If you are buying a product with a general indication, be aware of the messaging limitations that will bring. If you are buying a product with a specific indication, you will have focused messaging, but the population you can market to may be limited.
AFTER THE ACQUISITION
While the ability to market medical products is bound by the claims that can be lawfully made, it does not mean the claims available at acquisition are all your company will have. Consider developing a plan to create additional claims, but keep in mind the following. Does the desired new claim require a labeling change? Relying on FDA's June 2018 guidance, Medical Product Communications That Are Consistent With the FDA-Required Labeling - Questions and Answers, will help answer the first question. Next, consider the type of evidence needed, will pre-clinical evidence give you the claim you seek, or is a full clinical trial necessary? If there is uncertainty regarding any of this, consider a pre-submission with FDA to provide more clarity. New claims will allow you to reach more customers but understanding what it will take to actually receive that claim will provide predictability for your company.
When working through an acquisition, it is important to understand the claims you can make, not just the claims you want to make. Proper due diligence before an acquisition and a solid plan for after the acquisition will provide predictability for your business. The ultimate goal is to have claims that are both compelling and compliant that allow you to impact patient lives. For additional insight on this topic, watch our recording from this recent program.
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