Washington Update PTNPA Day in Washington Martin J. Hahn, Partner Hogan Lovells US, LLP. May 10, 2018

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1 Washington Update PTNPA Day in Washington Martin J. Hahn, Partner Hogan Lovells US, LLP May 10, 2018 a

2 Agenda 1. FDA Update 2. GE Disclosures 3. Prop 65 2

3 FDA Update

4 FSMA PC Inspections FY2017 Modernized GMP inspections Planned 450 Completed 450+ Preventive Controls inspections: Planned 300 (240 domestic/60 foreign); Completed 115, 24 in progress; includes 32 foreign Findings 77 No Action Indicated (NAI); 28 Voluntary Action Indicated (VAI); 10 Official Action Indicated (OAI) Trained 113 inspectors Inspectors reporting it takes hours to conduct a PC inspection Hogan Lovells 4

PC Inspections - FY2018 (Oct 1, 2017 Sept 30, 2018) States will begin inspections; only 4 states- MN, WI, FL, WA The states will conduct 23 inspections all together There has been resistance from

5 PC Inspections - FY2018 (Oct 1, 2017 Sept 30, 2018) States will begin inspections; only 4 states- MN, WI, FL, WA The states will conduct 23 inspections all together There has been resistance from the states regarding PC inspections because they are so resource intensive Training 240 more FDA inspectors Inspection targets: CSFAN will pick PC firms Districts will pick GMP firms Hogan Lovells 5

6 What To Expect with Inspections in 2018 Details, details, details FDA has access to records it historically could not review FDA expectations You do what you say you are going to do You document what you said you would do You know why you are doing it Hogan Lovells 6

FSVP Inspections FY17 Began summer 2017 How they typically work: Advance notice; which line items Hazard analysis, supplier s food safety plan FDA

7 FSVP Inspections FY17 Began summer 2017 How they typically work: Advance notice; which line items Hazard analysis, supplier s food safety plan FDA planned 325, conducted 290 FDA issued 138 inspection observations-483 s Mostly for failure to have an FSVP FY 18 Plan: 2, 275 FSVP inspections! Hogan Lovells 7

Not to be Overlooked: Program Alignment New organizational model for FDA with food-specific districts FDA aims for more uniformity in process and policy across the agency, more seamless and

8 Not to be Overlooked: Program Alignment New organizational model for FDA with food-specific districts FDA aims for more uniformity in process and policy across the agency, more seamless and coordinated interactions, and increased efficiency Will affect engagement with FDA on import and inspection issues Increased specialization will ultimately result in more uniform and consistent inspections and more knowledgeable inspectors Hogan Lovells 8

FSMA Outstanding Issues Intentional Adulteration Final Rule Final rule is prescriptive and could impose significant burdens and costs with questionable benefits FDA claims

9 FSMA Outstanding Issues Intentional Adulteration Final Rule Final rule is prescriptive and could impose significant burdens and costs with questionable benefits FDA claims it will address industry concerns through guidance Industry continues to engage with FDA on the issue To date, FDA has remained entrenched in their position Hogan Lovells 9

10 Labeling Update

11 Revamped Nutrition Facts Panel Format Compliance date originally July 2018; FDA extended to Jan Hogan Lovells 11

12 Restaurant Labeling May 7 th calorie labeling became final Vending labeling has been in effect since December 1, 2016 except calorie declaration satisfy requirements if 150% of the net weight statement Hogan Lovells 12

FDA s Final Determination on PHOs June 16, 2015 FDA finalized its determination that partially hydrogenated oils (PHOs), the primary dietary source of artificial trans fat in

13 FDA s Final Determination on PHOs June 16, 2015 FDA finalized its determination that partially hydrogenated oils (PHOs), the primary dietary source of artificial trans fat in processed foods, are not generally recognized as safe for use in human food FDA estimates that over 20 years removal of PHOs would have a net benefit of $5-430 billion dollars Hogan Lovells 13

14 PHO Facts FDA states it is aware of no level of trans fat from PHOs that are safe due to increased risk of CHD FDA estimates of trans fat from PHOs 2003: 5.8 g/person/day 2010: 1.3 g/person/day 2012: 1.0 g/person/day No intervention studies showing increased risk with this level of trans fat 14

15 Compliance Date Three year compliance date: June 18, 2018 FDA says the three year timeframe will allow companies to either reformulate products without PHOs or petition the FDA to permit specific uses of PHOs We encourage submission of scientific evidence as part of food additive petitions under section 409 of the FD&C Act for one or more specific uses of PHOs for which industry or other interested individuals believe that safe conditions of use may be prescribed. We are establishing a compliance date of June 18, 2018 for this order to allow time for such petitions and their review. Based on our experience and on the changes we have already seen in the market, we believe that 3 years is sufficient time for submission and review and, if applicable requirements are met, approval of food additive petitions for uses of PHOs for which industry or other interested individuals believe that safe conditions of use may be prescribed. For this reason, we are establishing a compliance date for this order of June 18, Hogan Lovells 15

Shelf-Life of PHO-Containing Products Many products that have historically contained PHOs as ingredients have long shelf lives Stability of PHOs is one of the reasons manufacturers of long shelf-life

16 Shelf-Life of PHO-Containing Products Many products that have historically contained PHOs as ingredients have long shelf lives Stability of PHOs is one of the reasons manufacturers of long shelf-life foods historically formulated products with PHOs This means that products containing PHOs may remain on store shelves long after June 18, even if they were manufactured or initially shipped into interstate commerce well before the compliance date Hogan Lovells 16

17 How is the Compliance Date Interpreted? Does the June 18 compliance date apply to the Date the food is introduced into interstate commerce? (e.g., shipping date?) Date the food is manufactured? Date the food is on the market? Hogan Lovells 17

18 FDA Statements Creating Confusion Among Retailers In preamble FDA responds to a comment seeking clarification that the compliance date applies to the manufacturer that first introduces into commerce a PHO-containing product and not to distributors: Although we are mindful of the need to focus our enforcement efforts, those needs do not change the underlying law or FDA's legal authority. Food that is adulterated may be subject to seizure and distributors, manufacturers, and other parties responsible for such food may be subject to injunction. We recognize that manufacturers who have previously added PHO to food, rather than other parties such as distributors who merely receive and sell finished foods, are the members of the food industry who will be most directly affected by this order, and we intend to focus our outreach and enforcement resources accordingly. However, we remind distributors and other members of the food industry that they have an obligation to ensure that the food they manufacture, distribute, sell, or otherwise market complies with the FD&C Act. Hogan Lovells 18

Conflicting Statements from FDA https://blogs.fda.

19 Conflicting Statements from FDA Hogan Lovells 19

20 Conflicting Statements from FDA By June 18, 2018, human food must no longer contain partially hydrogenated oils for uses that have not been otherwise authorized by FDA. FoodAdditivesIngredients/ucm htm Hogan Lovells 20

21 Conflicting Statements from FSIS no FSIS product containing PHOs should be in the marketplace after June 18, 2018 or it may be deemed to be adulterated Private askfsis response, April 2018 Hogan Lovells 21

22 Statement by FDA Commissioner Gottlieb -April 26, 2018 statement to the Senate appropriations subcommittee Hogan Lovells 22

23 Why Does This Matter? Class action litigation risk Suit already filed suit against companies using PHOs in foods based only on the tentative determination Class action litigation has largely been held at bay until the compliance date, based in part on language included in the appropriations bills: No partially hydrogenated oils as defined in the order published by the Food and Drug Administration in the Federal Register on June 17, 2015 (80 Fed. Reg et seq.) shall be deemed unsafe within the meaning of section 409(a) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 348(a)) and no food that is introduced or delivered for introduction into interstate commerce that bears or contains a partially hydrogenated oil shall be deemed adulterated under sections 402(a)(1) or 402(a)(2)(C)(i) of this Act by virtue of bearing or containing a partially hydrogenated oil until the compliance date as specified in such order (June 18, 2018). What about after June 18? Hogan Lovells 23

Industry Ask Industry associations, including PTNPA, asked FDA to Clarify products in commerce, such as in warehouses, on retail shelves, or in consumers pantries, on compliance date (June 18) may

24 Industry Ask Industry associations, including PTNPA, asked FDA to Clarify products in commerce, such as in warehouses, on retail shelves, or in consumers pantries, on compliance date (June 18) may remain in commerce and don t need to be recalled Grant additional time because food additive regulation has not issued FDA states last week the agency will make it clear products in commerce do not need to be recalled Hope may be on the horizon.. Hogan Lovells 24

25 Bioengineered Food Disclosures

Bioengineered Foods National Bioengineered Food Disclosure Standard Signed into law July 30, 2016 The law: Preempts state and local GE labeling laws Provides a mandatory

26 Bioengineered Foods National Bioengineered Food Disclosure Standard Signed into law July 30, 2016 The law: Preempts state and local GE labeling laws Provides a mandatory national disclosure standard for bioengineered foods, to be implemented by USDA USDA must establish the mandatory disclosure standard within 2 years of the bill s enactment 26

27 Definition of Bioengineering Statutory definition: The term bioengineering is defined to refer to a food that (A) contains genetic material that has been modified through in vitro recombinant deoxyribonucleic acid (DNA) techniques; and (B) for which the modification could not otherwise be obtained through conventional breeding or found in nature. A key issue for AMS to determine: Does the definition cover refined ingredients that are derived from a BE crop but have been processed and may no longer contain modified DNA? e.g., sugar from BE sugar beets, high fructose corn syrup from BE corn In July 2016, USDA stated that it interprets the statutory language as providing authority to require disclosure for such refined ingredients In comments to AMS, the food and agriculture industries were split on whether refined ingredients should require disclosure 27

28 Quick Highlights Crop-based approach disclosure is required when a food is, contains, or is derived from a crop on one of two lists developed by AMS Highly adopted BE crops: canola, field corn, soybean, sugar beet Non-highly adopted BE crops: apple (non-browning cultivars), sweet corn, papaya, potato, summer squash AMS has not addressed whether highly refined ingredients will require disclosure focus is on whether the ingredient or food contains modified DNA from the BE crop 3 potential thresholds under consideration: 5% inadvertent, 0.9% inadvertent, or 5% intentional Text = bioengineered food with a few variations Symbol = 3 options proposed Additional disclosure option: text message disclosure! Compliance date = Jan. 1, 2020 (or Jan. 1, 2020 for smaller manufacturers with < $10M in annual food sales) same as NFP compliance dates Comments due July 3 Hogan Lovells 28

6-Step Proposed Process to Determine Whether Disclosure is Needed 1. Who is responsible for the disclosure? 2. Is the product a food? 3. Does the food fall within the scope of the standard? 4.

29 6-Step Proposed Process to Determine Whether Disclosure is Needed 1. Who is responsible for the disclosure? 2. Is the product a food? 3. Does the food fall within the scope of the standard? 4. Is the food a bioengineered food requiring disclosure? 5. Does the amount of a bioengineered substance that may be present in the food exceed the threshold for disclosure? 6. Do any exemptions apply? Hogan Lovells 29

30 4. Is the food a BE food? The term bioengineering is defined to refer to a food that (A) contains genetic material that has been modified through in vitro recombinant deoxyribonucleic acid (DNA) techniques; and (B) for which the modification could not otherwise be obtained through conventional breeding or found in nature. AMS incorporates this statutory definition directly into the proposed rule In the proposed rule, AMS does not reach a decision on a key question of whether highly refined ingredients will be considered bioengineered foods AMS focuses on whether the food contains modified genetic material AMS does not propose definitions for conventional breeding or found in nature AMS suggests that whether a plant modification has IP protection could be one factor relevant to whether the modification is found in nature (because products of nature are not patentable subject matter) Hogan Lovells 30

4. Is the food a BE food? Does the food appear on either of the two AMS lists of BE foods that are commercially available in the U.S.? Commercially available BE foods (highly adopted in the U.S. 85% adoption) Canola Corn, field Cotton Soybean Sugar Beet Commercially available BE foods (less than 85% adoption in the U.

31 4. Is the food a BE food? Does the food appear on either of the two AMS lists of BE foods that are commercially available in the U.S.? Commercially available BE foods (highly adopted in the U.S. 85% adoption) Canola Corn, field Cotton Soybean Sugar Beet Commercially available BE foods (less than 85% adoption in the U.S.) Apple, non-browning cultivars Corn, sweet Papaya Potato Squash, summer varieties Hogan Lovells 31

32 4. Is the food a BE food? Does the food appear on either of the two AMS lists of BE foods that are commercially available in the U.S.? If a food is on the list, or contains an ingredient on the list, or is/contains a derivative of a food on the list it is presumed a BE food, unless the regulated entity can provide records demonstrating otherwise e.g., testing demonstrating absence of BE material, a supplier attestation that the food is identity preserved and not from a BE crop For example, corn starch, corn meal, corn syrup, grits, corn chips, corn tortilla, and corn cereal are derivatives of field corn and are presumed to be BE foods, unless a regulated entity has records demonstrating otherwise (or unless an exception applies) Hogan Lovells 32

33 5. Does the amount of a BE substance that may be present in the food exceed a designated threshold? Statute directs AMS to determine the amounts of a BE substance that may be present in order for a food to be considered a BE food BE substance = a matter that contains modified genetic material e.g., BE soy in wheat flour would be a BE substance AMS proposes 3 alternative thresholds: 1. 5% and inadvertent or technically unavoidable A food in which an ingredient contains a BE substance that is inadvertent or technically unavoidable, and accounts for no more than 5 percent of the specific ingredient by weight, would not be subject to disclosure as a result of that one ingredient % and inadvertent or technically unavoidable Same as above, but with a lower percentage threshold 3. 5% (not inadvertent or technically unavoidable) a regulated entity could use ingredients it knew were bioengineered, and not have to disclose under the NBFDS, as long as the total amount of all BE ingredients used in the products were not greater than 5 percent of the total weight of the product Hogan Lovells 33

34 Disclosure Options (Proposed Rule) Disclosure Must Be: 1. A text disclosure 2. Symbol 3. An electronic or digital link (can t use URL) 4. A text message and text [number] for more food information What would text say? For high-adoption BE food: Bioengineered food (for raw agricultural commodities or food that contains only BE food ingredients) or Contains a bioengineered food ingredient (for all other products) For non-high adoption BE food, regulated entities could choose between any of the following: Bioengineered food, Contains a bioengineered food ingredient, May be bioengineered food, or May contain a bioengineered food 34

35 Disclosure Options (Proposed Rule) Disclosure Must Be: 1. A text 2. Symbol AMS proposes 3 options Black and white versions may be used AMS seeks comments on whether Bioengineered or May be should be incorporated into the design 3. An electronic or digital link (can t use URL) 4. A text message and text [number] for more food information 35

36 Disclosure Options (Proposed Rule) Disclosure Must Be: 1. A text 2. Symbol 3. An electronic or digital link (can t use URL), or 4. A text message and text [number] for more food information 36

37 Electronic Disclosure Requirements On-package language must accompany disclosure, limited to: Scan here for more food information or equivalent language that only reflects technological changes For example: Scan anywhere on package for more food information, Scan icon for more food information No specific requirements for how link is to appear (other than general prominence and placement requirements) The electronic or digital link must provide the disclosure on the product information page, which must be the first screen to appear on the device after the link is accessed, and it must exclude marketing and promotional material Disclosure must also be accompanied by a phone number that provides access to the disclosure at any time of day, and the statement Call for more food information Disclosure may not collected, analyze, or sell any personally identifiable information about the consumers or the devices of consumers 37

38 Disclosure Options (Proposed Rule) Disclosure Must Be: 1. A text 2. Symbol 3. An electronic or digital link (can t use URL), or 4. A text message and text [number] for more food information AMS proposing this option in the event the agency concludes, upon its review of the study on access to digital disclosures, that consumers would have insufficient access while shopping to the disclosure through electronic or digital disclosure methods Number would be a telephone number or short code that immediately responds with the disclosure using the disclosure text required under option 1 38

39 Disclosure Options (Proposed Rule) Disclosure Must Be: 1. A text 2. Symbol 3. An electronic or digital link (can t use URL), or 4. A text message and text [number] for more food information Small businesses (at least $2.5M but less than $10M in annual receipts) get two more options: 5. A telephone number and language, or Call [number] for more food information Telephone number would need to provide the disclosure at any time of day 6. A website URL & Visit [URL] for more food information Additional flexibility proposed for small and very small packages 39

40 Litigation Update

41 Food Industry Remains Target of Class Action Lawyers Hundreds of natural challenges still pending No preservative and organic claims are being challenged 41

42 What is Natural? Natural and nothing artificial or no artificial ingredients continue to be a source of new revenue for class action lawyers Minimally processed, no pesticides, humane agricultural practices? Superhealthykids.com 42

43 Slack Fill Cases Are the Latest Craze Class action lawyers are focusing on slack fill and arguing products with too much empty space are misleading consumers Spices, theater box candies, snack foods 43

44 Slack Fill Cases in the Making Class action lawyer goes to Dollar General or some other thrift-type store Class action lawyer fondles packages looking for partially filled products in flexible packaging or shakes product in inflexible packaging Class action lawyer pays $0.99 for the product, opens and finds less than 80% fill, sues companies, seeks thousands (hundreds of thousands) for damages 44

45 California s Proposition 65 Requires the state to revise and republish at least once per year the list of chemicals known to the State to cause cancer or reproductive toxicity Over 950 chemicals listed Requires a warning/notice in instances when a product contains a listed chemical 45

46 California s Proposition 65 Warning is not required if within a safe harbor: OEHHA publishes many safe harbors Company can calculate safe harbor but bears risk OEHHA would disagree Safe harbor is reported in micrograms per day 46

47 Listed Substances of Interest to PTNPA Acrylamide and furfuryl alcohol Both form during Maillard Reaction when food is heated Roasted nuts or caramelized nuts Bounty hunters have targeted roasted nuts for acrylamide and furfuryl alcohol could be next 47

48 Keep Your Eye on Coffee Coffee industry being sued for failing to warn of acrylamide Court rejected industry argument for an alternative risk assessment Stay tuned 48

49 Keep your eye on Glyphosate Feb 28, 2018 federal District Court grants motion for preliminary injunction precluding California from requiring glyphosate cancer warning Will it survive appeal? 49

50 New California Regulation on Warnings Effective Augustin 2018 Provides options 1. Label 2. Providing specific written notice to the agent or retailer 3. Electronic (active) What happens if retailer does not provide the notice? 50

51 Example of New Warning Language WARNING: Consuming this product can expose you to chemicals including acrylamide, which is known to the State of California to cause cancer and birth defects or other reproductive harm. For more information go to 51

52 Conclusion Possible federal solutions to Prop 65 and other burdens on the industry Need to continue to work together 52

53 Questions? Martin J. Hahn Partner (202) (202) (m) 53

54 "Hogan Lovells" or the "firm" is an international legal practice that includes Hogan Lovells International LLP, Hogan Lovells US LLP and their affiliated businesses. The word partner is used to describe a partner or member of Hogan Lovells International LLP, Hogan Lovells US LLP or any of their affiliated entities or any employee or consultant with equivalent standing.. Certain individuals, who are designated as partners, but who are not members of Hogan Lovells International LLP, do not hold qualifications equivalent to members. For more information about Hogan Lovells, the partners and their qualifications, see Where case studies are included, results achieved do not guarantee similar outcomes for other clients. Attorney advertising. Images of people may feature current or former lawyers and employees at Hogan Lovells or models not connected with the firm. Hogan Lovells All rights reserved

USDA s AMS Issues Proposed Rule on National Bioengineered Food Disclosure Standard

USDA s AMS Issues Proposed Rule on National Bioengineered Food Disclosure Standard Hogan Lovells US LLP Columbia Square 555 Thirteenth Street, NW Washington, DC 20004 T +1 202 637 5600 F +1 202 637 5910 www.hoganlovells.com MEMORANDUM From: Martin J. Hahn Veronica Colas Date: May 7,