On November 20, 2020, the Office of Prescription Drug Promotion (OPDP) hosted a webinar to announce a new process for review of “core launch” promotional materials.  Specifically, OPDP has added a five business day screening period to the beginning of core launch review to ensure that the submission meets the criteria for “core launch” as outlined in OPDP’s 2019 guidance document, Providing Regulatory Submissions in Electronic and Non-Electronic Format – Promotional Labeling and Advertising Materials for Human Prescription Drugs (OPDP Electronic Submissions Guidance).  OPDP also clarified what it considers to be core launch materials, for purposes of estimated review timing.

As background, firms have a voluntary option to submit promotional materials to OPDP for review prior to dissemination.  “Launch” materials are those draft promotional materials that firms intend to disseminate in the first 120 days that a new product indication, delivery system, formulation, dosage form, dosing regimen, strength, or route of administration is marketed to the public.  “Core launch” materials are the following key launch materials, as outlined in the OPDP Electronic Submissions Guidance:

• One comprehensive promotional labeling piece directed towards professionals (e.g., sales aid, detail aid), which is 12 or fewer pages;
• One advertisement directed toward professionals (e.g., journal advertisement), which is 4 or fewer pages not including prescribing information or brief summary;
• One comprehensive direct-to-consumer (DTC) labeling piece (e.g., patient brochure), which is 12 or fewer pages;
• One DTC advertisement (e.g., magazine ad), which is 4 or fewer pages not including brief summary; and
• A professional and/or DTC product website (12 printed legible pages each) or electronic sales aid if derivative of a comprehensive labeling piece that is also submitted for voluntary advisory comment.

OPDP has a goal of reviewing all core launch materials within 45 calendar days, and it tracks its performance in meeting this goal (see OPDP Metrics webpage).

During the November 20 webinar, OPDP explained that some recent core launch submissions have presented challenges for both OPDP and firms, prompting OPDP to make improvements to its process to help streamline review and ensure that OPDP can meet the 45-day turnaround time.  OPDP noted that there have been instances of lengthy comment letters from OPDP in sub-optimal timeframes for firms, core launch submissions with highly nuanced claims and presentations, and submissions with hundreds of pages of references requiring extensive review.

The purpose of the new five business day screening process is to ensure that the submission meets criteria for “core launch,” in that it is limited to the items listed in the OPDP Electronic Submissions Guidance and that the claims and presentations are based solely on information contained in the Prescribing Information, information from the pivotal trials, or publications directly related to those trials.  The screening process is also intended to ensure that the submission is administratively complete.  For example, firms must submit both clean and annotated versions of the draft promotional materials, and the annotated versions must be cross-referenced to annotated versions of the FDA-approved prescribing information.  FDA intends to notify firms via teleconference if the submission is not a core launch submission, exceeds the page limits, or otherwise does not satisfy the criteria for core launch review.  If no issues are identified, the firm will not be contacted, and FDA will proceed to the 45-day core launch review process.

The new process will help better frame expectations for industry as well as OPDP.  OPDP stated that it expects materials to “be a true representation of the core introductory messaging for the product” and not material that includes all potential claims the firm wants to make.  This is consistent with OPDP’s historical approach of reviewing pieces in totality to better understand format, context, and prominence of presentations.  Of particular interest, OPDP clarified that core launch materials may contain claims and presentations that are consistent with the drug’s prescribing information, per its CFL Guidance so long as those claims otherwise meet the criteria of a “core launch” claim (e.g., relates to the prescribing information or to pivotal trials).  While firms may provide a CFL analysis to support the presentation, one is not required and the example displayed during the webinar and as part of OPDP’s updated Frequently Asked Questions webpage is unhelpful in providing meaningful guidance to firms on information that supports the CFL analysis.  The example of a CFL analysis simply re-states the three-factor test articulated in the CFL Guidance, without specific analyses that would support the claim.

Despite the modified process, OPDP also emphasized that there are still circumstances when firms should expect a turnaround time longer than 45 days.  OPDP explained that if the submission of launch materials includes materials with claims that are not derived completely and directly from the prescribing information (e.g., it includes claims supported by clinical literature), OPDP may need to consult with other experts within FDA.  Any time necessary for consultation outside of OPDP is not counted within the 45-day clock and reviews that include consults may not be completed within 45 days.

The new core launch review process will go into effect starting January 1, 2021.

If your 2020 FDA BINGO card included the end to FDA’s Unapproved Drugs Initiative, then, BINGO!  Late last Friday, the Department of Health and Human Services—but not FDA—announced a forthcoming Federal Register Notice withdrawing both the 2006 (Docket No. FDA-2003-D-0030) and 2011 (Docket No. FDA-2011-D-0633) versions of FDA’s guidance document/Compliance Policy Guide (“CPG”), titled “Marketed Unapproved Drugs – Compliance Policy Guide Sec. 440.100, Marketed New Drugs Without Approved NDAs or ANDAs.”

According to the Notice and a Frequently Asked Questions document, “although [the CPGs] originated with the laudable goal of generating more clinical data about unapproved drugs, [they] are linked to prescription drug price increases and shortages.”  That alleged link comes from the results of a 2017 study published in the Journal of Managed Care and Specialty Pharmacy (“JMCP”), titled “The FDA Unapproved Drugs Initiative: An Observational Study of the Consequences for Drug Prices and Shortages in the United States.”  Another, more recent 2020 analysis also alleged prices increases as a result of FDA’s Unapproved Drugs Initiative.

It seems like it was just yesterday that we announced FDA’s September 2011 decision to ramp up enforcement on marketed unapproved drugs with the Agency’s revision to the 2006 Marketed Unapproved Drugs CPG, which is part of the Agency’s broader Unapproved Drugs Initiative.  And now it appears that it is on its way to the ash heap history.  (Though folks should keep in mind that someone’s trash is another’s treasure.  After all, the new administration may decide to reverse course.)

By way of background (and only some background, as the Marketed Unapproved Drugs CPG is rooted in the entirety of FDA law history), for a drug to be legally marketed in the United States, generally it must be approved by FDA as safe and effective for its intended use or comply with an FDA Over-the-Counter (“OTC”) drug monograph.  However, as a result of various changes to the law over the last 100+ years, certain drug products are marketed without approval.  FDA permits, subject to the Agency’s “enforcement discretion,” the marketing of certain unapproved drugs that are neither approved by FDA nor marketed under an OTC drug monograph.  They are, with some exceptions, considered “illegally marketed drug products,” but FDA, for myriad reasons, has generally not opted to take enforcement action against them.

The 2011 Marketed Unapproved Drugs CPG clarified FDA’s approach to prioritizing enforcement actions and exercising enforcement discretion with respect to marketed unapproved drug products.  For products marketed on or prior to September 19, 2011, FDA applied a historical risk-based enforcement approach.  FDA’s risk-based enforcement approach placed higher priority on actions involving unapproved drugs in the following categories:

• Drugs with potential safety risks;
• Drugs that lack evidence of effectiveness;
• Health fraud drugs;
• Drugs that present direct challenges to the new drug approval and OTC drug monograph systems;
• Unapproved new drugs that violate the FDC Act in other ways; and
• Drugs that are reformulated to evade an FDA enforcement action.

Unapproved drugs introduced to the market after September 19, 2011, have been subject to immediate enforcement action.  FDA stated in the 2011 Unapproved Drugs CPG that:

The enforcement priorities and potential exercise of enforcement discretion discussed in [the Unapproved Drugs CPG] apply only to unapproved drug products that are being commercially used or sold as of September 19, 2011.  All unapproved drugs introduced onto the market after that date are subject to immediate enforcement action at any time, without prior notice and without regard to the enforcement priorities set forth below.  In light of the notice provided by this guidance, we believe it is inappropriate to exercise enforcement discretion with respect to unapproved drugs that a company (including a manufacturer or distributor) begins marketing after September 19, 2011. [(Emphasis added)]

Although FDA states in the Unapproved Drugs CPG that “any product that is being marketed illegally is subject to FDA enforcement action at any time,” there is a general exception to this policy for marketed unapproved drugs subject to an ongoing proceeding under the Drug Efficacy Study Implementation (“DESI”) program.  There are very few pending DESI proceedings under the DESI program, which started nearly 50 years ago.  FDA explains this exception in the Unapproved Drugs CPG as follows:

Some unapproved marketed products are undergoing DESI reviews in which a final determination regarding efficacy has not yet been made.  In addition to the products specifically reviewed by the NAS/NRC (i.e., those products approved for safety only between 1938 and 1962), this group includes unapproved products identical, related, or similar [(“IRS”)] to those products specifically reviewed (see 21 CFR 310.6).  In virtually all these proceedings, FDA has made an initial determination that the products lack substantial evidence of effectiveness, and the manufacturers have requested a hearing on that finding.  It is the Agency’s longstanding policy that products subject to an ongoing DESI proceeding may remain on the market during the pendency of the proceeding.  See, e.g., Upjohn Co. v. Finch, 303 F. Supp. 241, 256-61 (W.D. Mich. 1969). [(Emphasis added)]

In addition, some companies market drug products without approval under the premise that they are so-called “grandfathered” drugs, and, therefore, are not “new drugs” subject to the FDC Act’s approval requirements.  To qualify for exemption from the statutory “new drug” definition, a drug product must have been subject to the Federal Food and Drugs Act of 1906 prior to the enactment of the FDC Act on June 25, 1938, and at such time its labeling must have contained the same representations concerning the conditions of its use.  See FDC Act § 201(p)(1).  Thus, for FDA to determine that a drug product is not a new drug under the grandfather exemption, the following two questions must be answered affirmatively:

1. Was the drug product marketed between January 1, 1907 (the effective date of the 1906 Federal Food and Drugs Act) and June 25, 1938?; and
2. Is the drug product at issue the same drug product that was marketed between January 1, 1907 and June 25, 1938, and does its labeling describe the same conditions of use?

Further, a drug product is not a “new drug” if: (1) its composition is such that the drug product is Generally Recognized As Safe and Effective (“GRASE”) by qualified experts under the conditions of use for which it is labeled; and (2) it has been used “to a material extent or for a material time under such conditions.”  See Weinberger v. Hynson, Westcott & Dunning, Inc., 412 U.S. 609, 631 (1973); Premo Pharmaceutical Labs., Inc. v. United States, 629 F.2d 795, 801 (2d Cir. 1980).

Both of these grandfathered drug exemptions have been construed narrowly by courts and FDA.  The burden of proof falls on the party seeking grandfathered status to prove the drug qualifies for such status, and that showing may be difficult to make.  In a 2010 district court decision, the court explained:

Unless the evidence produced by plaintiffs establishes that there have been no changes whatsoever in the formulation, dosage form, potency, route of administration, indication for use, or intended patient population for their 20 mg/ml morphine sulfate oral solution since 1938, plaintiffs’ drug does not qualify for the 1938 grandfather clause exemption. . . .  Plaintiffs admit that they have only been marketing their drug for the past five years and have failed to produce any pre-1938 labeling for their drug.  Thus, it is impossible for plaintiffs to demonstrate that their drug’s “labeling contained the same representations concerning the conditions of its use” in 1938 that it presently contains.

Cody Laboratories, Inc. v. Sebelius, No. 10-DC-00147-ABJ, 2010 WL 3119279 at *13 (D. Wyo. filed July 26, 2010).  Further, FDA has stated, “the Agency believes it is not likely that any currently marketed prescription drug product is grandfathered or is otherwise not a new drug.  However, the Agency recognizes that it is at least theoretically possible.”  Unapproved Drugs CPG at 12 (italics in original).

According to the forthcoming Federal Register Notice, the concern with FDA’s Unapproved Drugs Initiative stems from a passage in the 2011 Marketed Unapproved Drugs CPG concerning so-called “de facto market exclusivity.”

The September 2011 Marketed Unapproved Drugs CPG states that when a company obtains approval of a drug previously marketed without approval, other similar drug products on the market without approval become “[d]rugs that present direct challenges to the new drug approval and OTC drug monograph systems.”  Thus, they become a target for FDA enforcement action.  But that enforcement action is not immediate (or certain).  Here’s how FDA explains the situation in the 2011 Marketed Unapproved Drugs CPG:

When a company obtains approval to market a product that other companies are marketing without approval, FDA normally intends to allow a grace period of roughly 1 year from the date of approval of the product before it will initiate enforcement action (e.g., seizure or injunction) against marketed unapproved products of the same type.  However, the grace period provided is expected to vary from this baseline based upon the following factors: (1) the effects on the public health of proceeding immediately to remove the illegal products from the market (including whether the product is medically necessary and, if so, the ability of the holder of the approved application to meet the needs of patients taking the drug); (2) whether the effort to obtain approval was publicly disclosed; (3) the difficulty associated with conducting any required studies, preparing and submitting applications, and obtaining approval of an application; (4) the burden on affected parties of removing the products from the market; (5) the Agency’s available enforcement resources; and (6) any other special circumstances relevant to the particular case under consideration.  To assist in an orderly transition to the approved product(s), in implementing a grace period, FDA may identify interim dates by which firms should first cease manufacturing unapproved forms of the drug product, and later cease distributing the unapproved product.

The length of any grace period and the nature of any enforcement action taken by FDA will be decided on a case-by-case basis.  Companies should be aware that a Warning Letter may not be sent before initiation of enforcement action and should not expect any grace period that is granted to protect them from the need to leave the market for some period of time while obtaining approval.  Companies marketing unapproved new drugs should also recognize that, while FDA normally intends to allow a grace period of roughly 1 year from the date of approval of an unapproved product before it will initiate enforcement action (e.g., seizure or injunction) against others who are marketing that unapproved product, it is possible that a substantially shorter grace period would be provided, depending on the individual facts and circumstances.

The shorter the grace period, the more likely it is that the first company to obtain an approval will have a period of de facto market exclusivity before other products obtain approval.  For example, if FDA provides a 1-year grace period before it takes action to remove unapproved competitors from the market, and it takes 2 years for a second application to be approved, the first approved product could have 1 year of market exclusivity before the onset of competition.  If FDA provides for a shorter grace period, the period of effective exclusivity could be longer.  FDA hopes that this period of market exclusivity will provide an incentive to firms to be the first to obtain approval to market a previously unapproved drug.  [(Emphasis added)]

Latching on to this last paragraph, the HHS Notice states:

Through a guidance document issued in 2006 and later revised in 2011, and without conducting notice-and-comment rulemaking, FDA launched a program called the Unapproved Drugs Initiative (UDI).  The UDI sprang from a laudable objective, namely to reduce the number of unapproved drugs on the market.  To achieve this end, FDA provided in its 2011 UDI Guidance that “the first company to obtain an approval [of a previously unapproved drug] will have a period of de facto market exclusivity before other products obtain approval.”  The agency “hope[d] that this period of market exclusivity will provide an incentive to firms to be the first to obtain approval to market a previously unapproved drug.”  Ultimately, manufacturers of older drugs previously thought to be exempt from the FDA approval requirement obtained market exclusivity for those products after FDA took unapproved versions off the market.  An unintended consequence of the “period of de facto market exclusivity” provided by the UDI allowed manufacturers an opportunity to raise prices in an environment largely insulated from market competition.

This proffered basis for ending the Unapproved Drugs Initiative seems to this blogger like a bunch of malarkey.

Here are the results and conclusions from the 2017 JMCP article:

RESULTS: Between 2006 and 2015, 34 previously unapproved prescription drugs were addressed by the UDI.  Nearly 90% of those with a drug product that received FDA approval were supported by literature reviews or bioequivalence studies, not new clinical trial evidence.  Among the 26 drugs with available pricing data, average wholesale price during the 2 years before and after voluntary approval or UDI action increased by a median of 37% (interquartile range [IQR] = 23%-204%; P < 0.001).  The number of drugs in shortage increased from 17 (50.0%) to 25 (73.5%) during the 2 years before and after, respectively (P = 0.046).  The median shortage duration in the 2 years before and after voluntary approval or UDI action increased from 31 days (IQR = 0-339) to 217 days (IQR = 0-406; P = 0.053).

CONCLUSIONS: The UDI was associated with higher drug prices and more frequent drug shortages when compared with the period before UDI action, while the approval process for these drugs did not necessarily require new clinical evidence to establish safety or efficacy.

Buried in the article is a short discussion of “de facto exclusivity” as one of the “several possibilities that may account for why the UDI was associated with increased drug prices and shortages” (emphasis added).  And even then, the study authors suggest alternative ways to address the issue:

Our findings suggest several ways to mitigate the unintended consequences of the FDA’s regulation of unapproved drugs through the UDI.  First, the FDA views a short grace period as a way to incentivize manufacturers to be the first to obtain approval of a previously unapproved drug, since it may establish a period of de facto exclusivity for the first manufacturer.  However, grace periods should only be granted when the manufacturer guarantees supply and sets a fair price.  Grace periods should also be made longer to allow time for additional manufacturers to obtain approval.

While FDA’s forthcoming Federal Register Notice states that “[n]othing in this Notice otherwise limits FDA’s authority to take action against manufacturers of unapproved drugs that meet the statutory definition of a ‘new drug’ (such as, for example, an unapproved drug that claims to mitigate, treat, or cure COVID-19) or violate the FD&C Act in other ways,” one has to wonder whether there will now be a return to the Wild West of marketed unapproved drugs instead of companies deciding to seek FDA approval.  Curiously, FDA has been silent on the HHS announcement.

A new administration always brings with it the excitement of new political appointees, briefing books and never-ending speculation about forthcoming changes in the direction of various agencies.  It also brings the opportunity for meetings with incoming government officials for an airing of the grievances.  While Festivus will soon be upon the rest of us (we will save the Feats of Strength for another blogpost), we are referring to the First Amendment: the right of all persons to “petition the government for redress of grievances.”

Companies oftentimes meet with the government entities alone, or under the auspices of a trade association.  But similar-minded competitors collaborating on lobbying, advocacy, comments and other types of “petitioning” as part of a formal or ad hoc coalition is also common.  Regardless of the form the group takes, if two or more competitors are in a room together with or without government officials, all involved should be aware of the antitrust laws.

The law provides a limited exemption from antitrust liability for certain actions by individuals or groups that are intended to influence government decision-making, called the “Noerr-Pennington doctrine.” The purpose of the Noerr-Pennington doctrine is to protect the fundamental right to petition the government, including filing litigation in the courts.  It also seeks to support the flow of information to the government.  Noerr-Pennington immunity developed from two cases in the 1960s: Eastern Railroad Conference v. Noerr Motor Freight, 365 U.S. 127 (1961) and United Mine Workers of America v. Pennington, 381 U.S. 657 (1965).  But like most immunities from the antitrust laws, Noerr-Pennington is narrowly construed and has its limits—parties can’t just point to some potential future political impact of their actions to benefit from Noerr-Pennington immunity.  You can read more about the applicability and limits of the Noerr Pennington doctrine in Federal Trade Commission, Enforcement Perspectives on the Noerr-Pennington Doctrine: An FTC Staff Report (2006).

The bottom line here is any sharing or discussion among competitors regarding pricing, output, business strategies and likely responses to government action can be a minefield unless you carefully establish procedures to prevent the improper use of the information.  Before speaking with competitors, consider a few key antitrust guidelines:

DOs

• Set the ground rules for any competitor meeting, and clearly define the purpose of the meeting. There are many legitimate and laudable purposes for competitors to work together. Identify them and limit discussion accordingly.
• Involve antitrust counsel at the outset to identify potential competition concerns and develop procedures to mitigate risk. Have in-house or outside counsel for at least one party attend industry meetings to ensure that meetings stay appropriately focused and to document what transpires.
• Ensure that all petitioning efforts are focused on obtaining government relief, and not on how individual firms will behave in the market, either independent of such government actions or in response to them. Prospective government petitioning is generally protected activity but agreeing on how to react to existing laws and regulations is not.

DON’Ts

• Avoid exchanging competitively sensitive information. Information exchanges can be pro-competitive and lawful if done correctly. Among other things, data should generally be anonymized, collected by a third party and aggregated.
• Do not have discussions among the competitors about how they will price or compete among each other AFTER they achieve the requested relief from the government.
• Do not use the process of working together as an industry to seek relief from the government as an opportunity to have discussions or enter into agreements that could harm competition that are unrelated, or merely tangentially related, to the requested relief.

On Monday, the Office of Inspector General (OIG) at the U.S. Department of Health and Human Services (HHS) issued a Special Fraud Alert highlighting “some of the inherent fraud and abuse risks” associated with in-person speaker programs, a widely used channel to educate physicians and other health care professionals (HCPs) that prescribe the products of pharmaceutical and medical device manufacturers. According to the OIG, drug and device companies reported paying nearly $2 billion to HCPs for speaker-related services in the past three years.  While most companies have switched to virtual programs due to the COVID pandemic, OIG seems to be taking advantage of the pause in the action to fire what is likely the opening salvo in their renewed focus on speaker programs.

The alert noted OIG’s “significant concerns” that company-sponsored speaker programs that remunerate external HCPs to speak about the company’s drug or device product on behalf of the company may violate the Federal health care program anti-kickback statute (AKS). A party violates that AKS if, among other things, it knowingly and willfully makes an offer, payment, solicitation, or receipt of any remuneration (defined as the transfer of anything of value) to induce purchasing, ordering, recommending, or arranging for the use of items payable by a Federal health care program such as Medicare and Medicaid. See Social Security Act 1128B(b)(1)-(2), 42 U.S.C. § 1320a-7b(b)(1)-(2). The alert warned that all parties involved in speaker programs may be subject to increased scrutiny, including any “drug or device company that organizes or pays remuneration associated with the program, any HCP who is paid to speak, and any HCP attendees who receive remuneration,” such as free food and drink.

The OIG expressed skepticism whether such programs have any educational value, referring to its large number of investigations where speaker programs were allegedly organized with the intent to induce HCPs to prescribe or order (or recommend the prescribing or ordering of) the companies’ products paid for by Federal health care programs. The OIG provided examples of practices that are common in violative speaker programs: tying sales targets to HCP speaker recruitment or remuneration; holding programs at non-conducive venues or events; providing expensive meals; repeat attendance by HCPs at substantially similar trainings; and attendance by the HCP friends or families. According to the OIG, these examples “strongly suggest that one purpose of the remuneration to the HCP speaker and attendees is to induce or reward referrals.” The OIG noted that “[t]he availability of [educational and training] information through means that do not involve remuneration to HCPs further suggests that at least one purpose of remuneration associated with speaker programs is often to induce or reward referrals.”

The alert acknowledged that companies may engage in “meaningful HCP training and education” programs, and a remunerative arrangement may be lawful, depending on the particular facts and circumstances and the intent of the parties. Nevertheless, it presented a non-exhaustive list of “suspect characteristics” that may indicate whether a speaker program arrangement could violate the AKS. Many of the suspect characteristics mirrored the OIG’s examples of violative behavior (no substantive information presented; expensive meal; non-conducive venue for an education event; repeat attendees or attendance by HCP family or friends). Some additional “suspect characteristics” mentioned were the following:

• The company’s sales or marketing business units influence the selection of speakers or the company selects HCP speakers or attendees based on past or expected revenue that the speakers or attendees have or will generate by prescribing or ordering the company’s product(s) (e.g., a return on investment analysis is considered in identifying participants);
• The company sponsors a large number of programs on the same or substantially the same topic or product, especially in situations involving no recent substantive change in relevant information;
• There has been a significant period of time with no new medical or scientific information nor a new FDA-approved or cleared indication for the product;
• Alcohol is available or a meal exceeding modest value is provided to the attendees of the program (the concern is heightened when the alcohol is free);
• The company pays HCP speakers more than fair market value for the speaking service or pays compensation that takes into account the volume or value of past business generated or potential future business generated by the HCPs.

The OIG acknowledges in the Fraud Alert that many in-person activities have been curtailed by the pandemic, but cautions that the risks of these programs will increase once in-person programs resume, and encourages companies to consider less risky means of conveying information to HCPs.

Requirements to correct some of OIG’s “suspect characteristics” were incorporated into a Corporate Integrity Agreement (CIA) that the OIG entered into with Novartis as part of a July 2020 settlement agreement. The settlement resolved a qui tam False Claims Act case targeting Novartis’ speaker programs under the AKS.  Under the CIA, the OIG put strict restrictions on the company’s speaker programs, including prohibitions on holding any speaker events at restaurants and on serving or allowing the sale of alcohol. The CIA also limited the speaker program budget to $100,000 per product or indication (no more than $10,000 per speaker per drug or indication) and only permitted the company to hold such events within eighteen months of approval of such product or indication.  The Novartis settlement is the latest in a long line of settlements involving drug company speaker programs.

The OIG has historically used Special Fraud Alerts to put providers on notice of what it considers to be potentially violative of the AKS.  These alerts are rare—there have been only five such alerts issued in the last twenty years. They often suggest the general direction in which the government intends to focus its enforcement and litigation strategies. The Fraud Alert together with recent DOJ enforcement against speaker programs, specifically the Novartis CIA, which required all External Speaker Programs to be “conducted in a virtual format meaning that the External Speakers shall be remote and shall not be in the same location as any audience member,” indicate that the government will be continuing to scrutinize speaker programs, especially once in-person programs resume after the pandemic.

Hyman Phelps & McNamara, P.C. is pleased to announce that Sara Koblitz has been promoted to Counsel at the firm.

Sara joined HPM in 2017 and advises clients on a broad range of FDA regulatory issues with a particular focus on Hatch-Waxman patent and exclusivity, biosimilars, and the Orange Book. Sara also counsels clients in various stages of product development and guides clients through applicable regulatory requirements with respect to applications and submissions, promotional issues and post-marketing requirements.  Sara’s full bio can be found here.

“Sara is an invaluable member of the firm and our clients rely on her expertise and judgment,” said HPM Managing Director J.P.Ellison.  “HPM is proud to recognize Sara’s significant contributions to the firm and its clients.”

Recently, the Drug Enforcement Administration (“DEA”) published a notice of proposed rulemaking (“NPRM”) that provides much needed clarity on the requirements for how emergency medical services handle controlled substances.  The NPRM would codify its regulations consistent with the Protecting Patient Access to Emergency Medications Act of 2017 (“the Act”).  Registering Emergency Medical Services Under the Protecting Patient Access to Emergency Medications Act of 2017, 85 Fed. Reg. 62,634 (Oct. 5, 2020). Electronic comments on the proposed rulemaking must be submitted, and written comments postmarked, on or before December 4, 2020.

The Act amends the federal Controlled Substances Act (“CSA”) allowing for a new DEA registration category of emergency medical services (“EMS”) agencies, establishing registration standards and controlled substance delivery, storage and recordkeeping requirements for EMS agencies.

Currently, EMS vehicles have generally obtained controlled substances pursuant to physician instructions under the hospital’s DEA registration.  An EMS vehicle owned and operated by a hospital handles controlled substances under the hospital’s registration and obtains controlled substances from the emergency room as an extension of the hospital pharmacy.  In the alternative, an EMS agency acts as the hospital’s agent under the hospital registration and the hospital supplies controlled substances to EMS vehicles.

Many EMS agencies utilize the ‘‘hub-and-spoke’’ model whereby they have a main, centralized location that manages satellite stationhouses located throughout an area to timely respond in medical emergencies.  DEA is proposing to allow EMS agencies to obtain a single registration in each state where they operate rather than requiring them to obtain a separate registration at every location within that state.  DEA also proposes to allow hospital-based EMS agencies to operate under the hospital’s registration to administer controlled substances without being separately registered.

The Act authorizes EMS agencies to designate unregistered locations where controlled substances could be delivered and stored, requiring registered EMS agencies to notify DEA at least 30 days before delivery.  DEA proposes requiring notification designated locations through the agency’s website.  (An EMS agency must still obtain a DEA registration for the location where it receives controlled substances from outside the agency).  An EMS agency that has identified designated locations to DEA may deliver controlled substances to the locations after notifying DEA unless DEA objects.

DEA is proposing to allow EMS agencies to identify stationhouses as designated locations.   Only an agency location meeting the definition of a stationhouse, i.e., an enclosed structure housing EMS vehicles in the state where the EMS is registered which are used for emergency response, can be a designated location.  A building housing public fire and rescue equipment constitutes a stationhouse and can be selected as a designated location by a DEA-registered EMS agency.

DEA is proposing to codify where registered-EMS agencies may store controlled substances.  Permissible locations include the agency’s registered and designated locations, as well as EMS vehicles.  The Act, and DEA’s proposed regulation, define EMS vehicles as ambulances, fire apparatus, supervisor trucks, and other EMS agency vehicles used to provide or facilitate emergency medical care, and that transport controlled substances to and from registered and designated locations.  Controlled substances can be supplied to, and stored in, EMS vehicles under the control of the consultant practitioner’s registration or hospital’s registration.  DEA proposes allowing registered EMS agencies to store controlled substances in EMS vehicles at the registered location, a designated location, traveling between those locations or responding to an emergency.

DEA proposes to require EMS agencies to maintain records of the EMS personnel whose state license authorizes them to administer controlled substances in compliance with state law.  DEA observes that as states have different requirements for the authority to handle controlled substances, maintaining records of employees authorized to handle controlled substances will assist DEA to identify the source of any diversion at EMS agencies.

Because EMS personnel may not have time after an emergency response to return to the stationhouse to restock their vehicle, DEA is proposing to allow nonhospital-based EMS agencies to receive controlled substances from a hospital.

DEA is proposing that EMS agencies maintain records at each registered and designated location where it receives, administers and otherwise disposes of controlled substances.  Delivery records must include controlled substance name, finished form, unit quantity in commercial containers, date, and agency location address where controlled substances are delivered.  EMS personnel must document each administration with drug, date and patient.  DEA notes that these requirements are necessary because EMS personnel lack independent authority to administer controlled substances.

DEA proposes that designated EMS agency locations notify the agency’s registered location within 72 hours of receiving controlled substances from a hospital for restocking an EMS vehicle following an emergency response.  EMS agencies operating under a hospital-based registration receiving restock from the hospital would be exempt from this requirement because the hospital would have a record of the controlled substances delivered to the EMS agency operating under the hospital’s registration.

Recognizing that EMS agencies have unique security concerns, DEA is proposing to implement physical security requirements for EMS agencies similar to requirements for practitioners.  DEA proposes to allow EMS agencies to store controlled substances in a securely locked, substantially constructed cabinet or safe that cannot be readily removed at a registered location, designated location or in an EMS vehicle.

DEA proposes to also allow EMS agencies to store controlled substances in automated dispensing system (“ADS”) machines.  An ADS machine is “a mechanical system that performs operations or activities, other than compounding or administration, relative to the storage, packaging, counting, labeling, and dispensing of medications, and which collects,

controls, and maintains all transaction information.” 21 C.F.R. § 1300.01.  An ADS machine at an EMS agency’s registered or designated location would serve as a storage container before controlled substances are placed into EMS vehicles, and would facilitate monitoring transactions.  Further, DEA proposes that an EMS agency can store controlled substances in an ADS machine if:

(1) The ADS machine is located at a registered or designated location;

(2) The agency does not allow any entity other than the registered agency to install and operate the ADS machine;

(3) The ADS machine cannot directly dispense controlled substances to an ultimate user; and

(4) The agency operates the ADS machine in compliance with state law.

While the Act allows for controlled substance deliveries between EMS registered and designated locations, DEA is proposing that deliveries to registered or designated locations can only be accepted by the agency medical director or a person the medical director designates in writing.  DEA is proposing to require the medical director or designated person receiving the controlled substances to maintain records with their signature, title, date and quantity received.

DEA proposes to allow EMS professionals of registered EMS agencies when providing emergency services to administer controlled substances outside the physical presence of the medical directors or authorizing medical professional under their state license.  EMS professionals outside the physical presence of a medical director or authorizing medical professional must have authority to administer controlled substances pursuant to a standing or verbal order issued and adopted by agency medical directors.

Agencies have given EMS personnel autonomy to administer controlled substances in emergencies by establishing standing orders.  Under the Act, a standing order is “a written medical protocol in which a medical director determines in advance the medical criteria that must be met before administering controlled substances to individuals in need of emergency medical services.” 21 U.S.C. § 823(j)(13)(M).  DEA proposes to incorporate that definition into its regulations.  The proposed regulation also allows standing orders developed by state authorities to be issued and adopted by an EMS agency medical director.  Only the medical director of an EMS agency has the authority to issue and adopt a standing order.  EMS agencies must maintain a record of the standing orders issued and adopted at their registered location.

In the absence of standing orders, EMS personnel can receive and administer under verbal orders.  A verbal order is an oral directive communicated directly to an EMS professional to contemporaneously administer a controlled substance to individuals in need of emergency medical services outside the presence of the medical director or authorizing medical professional.  21 U.S.C. § 823(j)(13)(N).  Authorizing medical professionals include emergency or other physicians, or other medical professionals (including advanced practice registered nurses or physician assistants) acting within the scope of their DEA registration whose practice under their state license includes authority to provide verbal orders.  21 U.S.C. § 823(j)(13)(A).

DEA is proposing consistent with the Act that an EMS professional can administer controlled substances outside of a practitioner’s presence when providing emergency medical services if authorized by state law and pursuant to a verbal order.  The authorization must be provided by a medical director or authorizing medical professional in response to an EMS professional’s request for a specific patient.

Of all scenarios for obtaining, administering and securing controlled substances within the CSA’s closed system, doing so by EMS agencies and personnel in emergency situations require the most flexibility.  The Act, and now DEA’s proposed regulations, provide adequate clarification and needed flexibility for EMS agencies in different scenarios to handle controlled substances in emergency situations without increasing risk that the drugs may be diverted.

Hyman, Phelps & McNamara, P.C. (“HP&M”) has been named the FDA Law “Law Firm of the Year” by the folks over at U.S. News & World Report, who teamed up with Best Lawyers for the 2021 “Best Law Firms” rankings.  We’re truly honored!  But the honors don’t stop there.  HP&M was also once again ranked as a “Tier 1” law firm in the area of “FDA Law” (both nationally and in Washington, D.C.).

“The 2021 rankings are based on the highest lawyer and firm participation on record, incorporating 8.3 million evaluations of more than 110,000 individual leading lawyers from more than 22,000 firms. . . .  This year we reviewed 15,587 law firms throughout the United States – across 75 national practice areas – and a total of 2,179 firms received a national law firm ranking,” according to U.S. News.  The “Best Law Firms” rankings are based on a combination of client feedback, information provided on the Law Firm Survey, the Law Firm Leaders Survey, and Best Lawyers peer review.

As we blogged about last week, DEA published its long-anticipated Notice of Proposed Rulemaking (“NPRM”) addressing suspicious orders of controlled substances.  The Proposed Rule is intended to (finally) “clarify” the procedures that DEA registrants must follow for what DEA now deems “orders received under suspicious circumstances” (“ORUCS”).  In particular, DEA sets forth exactly what registrants are supposed to report to DEA’s centralized reporting database if they determine, through the exercise of due diligence, that the order is indeed “suspicious” as defined in 21 C.F.R. § 1301.74(b).  DEA states that the reporting requirement is one of the five “closely related legal obligations contained in the CSA and DEA regulations,” relating to the obligation to identify and report suspicious orders of controlled substances.

DEA elaborates on the five “requirements” as follows: (1) The obligation to maintain effective controls against diversion; (2) to conduct due diligence; (3) to design and operate a system to identify suspicious orders for the registrant; (4) to report suspicious orders (the reporting requirement); and (5) to refuse to distribute controlled substances that are likely to be diverted into illegitimate channels (the shipping requirement).  DEA also notes that Congress’ inclusion of the phrase “may include, but not be limited to” in the definition of “suspicious order” as part of the Preventing Drug Diversion Act (“PDDA”) of 2018 clarified that an order for controlled substances may be “suspicious” for reasons of its size, pattern or frequency, including reasons “related to the customer selling the order.”  While this “clarification” is indeed welcome, it surely was not readily ascertainable from either the PDDA’s, or Section 1301.74(b)’s definition of “suspicious order.”  DEA’s suspicious order regulation itself had left registrants guessing on what exactly to report — and DEA second guessing those reports — for years.

Under the Proposed Rule’s clarified framework for reporting suspicious orders after their identification, registrants have two options: (1) immediately file a suspicious order report (and maintain a record of the same), or (2) conduct due diligence concerning the suspicious circumstances surrounding the ORUSC (and maintain a record of the same).

DEA states that all suspicious order reports must be entered in the DEA’s centralized database within a seven calendar day time period “upon discovering” a suspicious order.  Importantly, the reports must contain certain required information, as follows:

• The DEA registration number of the registrant placing the order
• The date the order was received
• The DEA registration number of the registrant reporting the suspicious order
• The National Drug Code number, unit, dosage strength, and quantity of the controlled substances ordered
• The order form number for Schedule I and II controlled substances
• The unique transaction identification number for the suspicious order, and
• What information and circumstances render the order actually suspicious.

Readers may remember that one year ago, on October 23, 2019, DEA announced the availability of the Suspicious Orders Report System (“SORS”) Online for reporting of suspicious orders, as required by the PDDA.  DEA made this announcement, however, without providing the industry any advance notice or opportunity for comment (likely because DEA was facing a statutory deadline under the PDDA to make this portal available).  Importantly, SORS Online established more than just an online reporting method because DEA also for the first time required registrants to provide a “reason code” in the electronic suspicious order report.  Now — a year later — it appears DEA is trying to put some context around its expectations for documenting the basis for reporting a suspicious order.

Notwithstanding this proposed “new” requirement, which seems extremely costly and burdensome if the registrant does not already have such an electronic data capture and reporting system in place, DEA states that reporting to the DEA centralized database “is estimated to impose no additional burden” on registrants.  Hmmmm.  DEA notes that it believes that it is further “reasonable to estimate virtually all affected registrants have information systems capable of completing, submitting, and retaining electronic suspicious order reports at minimum additional cost.”  However, DEA admits that there are 15,974 practitioners and NTPs that distribute pursuant to the DEA’s “5 percent rule” that would now be required to identify and report suspicious orders.  In our opinion, few of these entities have previously established comprehensive SOM policies and procedures as DEA is now requiring.  Our continued review of the NRPM also raises concerns that DEA significantly underestimates the Rule’s regulatory impact and financial burden. The regulatory impact and financial burden will be addressed in a subsequent blogpost.

DEA adds that it “welcomes any comments” regarding the cost of complying with the reporting requirement, especially for those registrants that may not have access to broadband internet access.  Interestingly, in continuing to address its understanding and belief this is not a significant burden on registrants, DEA also says reporting of this information is a “codification of content expected of current suspicious order reports or content subsequently requested by DEA if not reported in a suspicious order report.”  Again,  hmmmm.  This may also leave numerous registrants (and their counsel) scratching their heads, because DEA (in its regulations, guidance or even less formal communications) never before has articulated any expectation — clear or otherwise — concerning “what” suspicious order information must be reported.  It is our understanding that, contrary to DEA’s claim that this is the type of information DEA requested from registrants in follow-up communications, we know of few, if any, registrants that received follow-up communications from DEA concerning an earlier suspicious order report.  In any event, such DEA follow-up was likely quite rare relevant to the number of reports the Agency received.

The comment period for the proposed rule ends on January 4, 2021, so time is ticking if for those registrants that find some (or all) of the new requirements inappropriate or otherwise unworkable.   And, stay tuned for another post soon on what DEA wants to hear about in industry comments.

On November 5, the Maryland Federal District Court dismissed a Federal False Claims Act qui tam suit alleging that Forest Laboratories knowingly reported inflated best prices under the Medicaid Drug Rebate Program (MDRP), resulting in underpayment of rebates.  United States ex. rel. Sheldon et al. v. Forrest Laboratories, LLC et al. The case, in which the Department of Justice and numerous state attorneys general had declined to intervene, addressed the question whether discounts provided to different customers on a single unit of drug must be added together – or “stacked” – when determining best price.

The relator alleged that Forest provided rebates to both third party payors on one hand and purchasers (pharmacies and GPO members) on the other, so that a single unit of drug could be subject to both types of rebates.  The relator claimed that the statute, regulations, and CMS guidance unambiguously required Forest to add the rebates to different customers together in determining best price, because they all affected the price that Forest “actually realized” on a unit of drug.  The relator relied primarily on statements in the former version of the Medicaid Rebate Agreement and in CMS Manufacturer Releases from the 1990s that best price must be adjusted “if cumulative discounts, rebates, or other arrangements subsequently adjust the prices actually realized.”  Forest countered that best price aggregates only discounts to a single customer.

The Court first found that the language used by CMS to address cumulative discounts has not been clear or consistent, because the best price regulation initially published in 2007, unlike the former Medicaid Rebate Agreement or the Releases, required best price to be adjusted if cumulative discounts adjust prices “available from” – not “realized by” – the manufacturer.  (The 2007 regulatory text remains the same today.)  The Court went on to find that the statute, legislative history, regulations, manufacturer comments on rulemakings, and other sources demonstrate ambiguity, rather than unequivocal guidance on this point.  The court noted that the relator had not pointed to a single example where CMS had explicitly stated that manufacturers must aggregate discounts to different customers along the supply chain on a given unit.  Since Forest’s interpretation was found to be objectively reasonable, the Court decided that Forest’s best price reports could not qualify as objective falsehoods, and furthermore, that Forest could not have acted with the requisite knowing intent since it had not been warned away from its interpretation by CMS.

This lawsuit involved conduct that occurred before February 2016, when CMS amended its MDRP regulations.  The relevant text about cumulative discounts subsequently adjusting the price available from the manufacturer remains identical to the pre-2016 text, but the 2016 preamble did contain a discussion of “stacking” that was not considered by the Court in Forest.  Unfortunately, that discussion did not clear up the ambiguity regarding stacking.  CMS stated that “multiple price concessions to two entities for the same drug transaction” should be considered in best price, but then addressed only an example where a rebate paid to a PBM is designed to adjust prices at the pharmacy level and a discount is also provided to pharmacies.  81 Fed. Reg. 5170, 5253 (Feb. 1, 2016). In that scenario, it is not unreasonable to view the pharmacy as receiving two discounts on the same unit.  However, CMS did not address other situations, such as the one at issue in Forest, where discounts are given to two different customers and the discount to one does not affect the price to the other – e.g., a formulary discount to a third party payor and a discount to a GPO or pharmacy chain.  Therefore, ambiguity persists on the question of stacking.  The Forest case is the most recent in a long line of cases holding that a reasonable interpretation of an ambiguous statute or regulation is not actionable under the FCA.  After Forest, it will be especially difficult for the government or a relator to successfully prosecute an FCA claim alleging inflation of best price due to a failure to stack discounts.

The Priority Review Voucher (“PRV”) program is a powerful incentive to encourage sponsors to develop treatments for conditions that are not ordinarily priorities for industry, such as infectious diseases for which there is no significant market in developed nations (tropical disease) or rare pediatric diseases.  These vouchers can be sold and historically have been worth up to hundreds of millions of dollars.  As we explained back in May, Congress, in the 2016 Cures Act, added medical countermeasures to the list of available PRVs in an effort to incentivize development of FDA-regulated product to assist in the “event of a potential public health emergency.”  The catch is that a medical countermeasure (“MCM”) PRV is available only if the Department of Homeland Security (DHS)—in consultation with Health and Human Services (HHS)—issues a determination that the potential public health emergency is a “material threat” under 42 USC 247d–6b(c)(2).  A “material threat” is defined as a threat “sufficient to affect national security.”  Yet, even as the world is facing the biggest public health emergency it has seen since 1918, and even as products to treat COVID-19 have been declared “security countermeasures,”  DHS has not made such a determination for COVID-19, rendering them ineligible for a material threat MCM PRV.  At least, that’s what we thought until October 2020.

On October 22, 2020, FDA announced the approval heard round the world (or at least the country): Veklury (remdesivir), for use in adult and pediatric patients 12 years of age and older and weighing at least 40 kilograms (about 88 pounds) for the treatment of COVID-19 requiring hospitalization.  Buried at the end of that FDA press release, in a single sentence, FDA noted that the product had been awarded a material threat MCM PRV.  Such an award is . . . interesting.  When we checked in with DHS and HHS in April, they confirmed that COVID-19 had not been designated a material threat, and a Congressional Research Services Report from September 2020 explaining medical countermeasures for COVID-19 made no mention of COVID-19’s designation as a material threat.  Indeed, a search of Federal Register notices shows DHS and HHS’s announcement of a Material Threat Determination for Ebola and Anthrax, which appear in a list of designated material threats in April 2007 (though no Federal Register notice was released for the initial determination for Ebola in September 2006).  EUAs issued in the Federal Register for Ebola and Anthrax also specifically refer to related “material threat determinations.”  No similar announcement or EUA including such specific language was published for COVID-19.  Nor have we been able to locate any other announcements from DHS or HHS, and our follow-up inquiry to the agencies as to the date of the Material Threat Determination has yet to receive a response.  All of this raises the question of whether such a designation was ever formally made.

Though no law expressly requires the publication of a material threat designation, section 319F–2(c)(3)(B) requires HHS to make publicly available its assessment of the ongoing availability of appropriateness of specific countermeasures to address the “specific threats identified” under section 319F–2(c)(2)(A)(ii) – or “material threats.”  Though the provision allows the withholding of some information that may “reveal public health vulnerabilities” or is otherwise confidential under FOIA (like the existence of specific pending applications), such a publicly available assessment should at least provide notice that a Material Threat Designation has been issued.  Historically HHS announces its statutorily-mandated assessments in its annual Public Health Emergency Medical Countermeasure Enterprise (PHEMCE) Strategic Implementation Plan, but a new version of that Plan has not been released since December 2017, precluding its utility for publicizing current material threat determinations.

As mentioned, COVID publicly has been declared a “security countermeasure” in the Federal Register since March 2020, but “material threats” under 319F-2(c)(2)(B) of the PHS Act are expressly distinct from “security countermeasures” under 319F-2(c)(1)(B).  If the “security countermeasure” declaration intended to suffice for a 319F-2(c)(2)(B) Material Threat Determination, HHS and DHS would not have stated back in April that “At this time, a Material Threat Determination (MTD) has not been issued for SARS-CoV-2 (COVID-19).”  Though there are some vague references to “material threat” in almost all of the Federal Register EUA announcements, nothing published since April suggests that HHS issued any formal Material Threat Determination under 319F-2(c).  Indeed, the language in EUAs related to “material threats” has not changed since April.  As such, even if a Material Threat Determination was made after April or May, it certainly wasn’t publicized.

And therein lies the real issue: As FDA explains in guidance, “Section 565A of the FD&C Act was designed to encourage development of new drug and biological MCMs, by offering additional incentives for obtaining FDA approval of certain MCMs.”   (After all, Congress did entitle the provision “Priority review to encourage treatments for agents that present national security threats,” and the statute itself refers to a PRV as an “incentive program” and a “supplement” to “any other provisions . . . that encourage the development of medical countermeasures.”)  But if a “material threat determination” – necessary to obtain that incentive – is not public, how can such a material threat Priority Review Voucher encourage development?  It’s unclear how a reward can serve as motivation when it remains a secret.

And there is no reason to believe that this is a problem that will be limited to COVID treatments, as the statute does not mandate the publication of the Material Threat Determination in the Federal Register; rather, the statute requires only a vague “assessment,” which apparently HHS has not published in three years.  With no way to request a Material Threat Determination and no knowledge of a preexisting Material Threat Determination, small drug development companies—particularly those that focus on rare diseases—have no incentive to even consider whether a drug could be repurposed to treat a material threat or whether exploring development of a material threat could provide any return on investment.

Further, FDA requires sponsors to request a material threat MCM PRV at time of application submission.  This suggests that FDA expects some sort of announcement, such as a published Material Threat Determination, to be public.  Otherwise, how could a sponsor know to request the MCM PRV?    Perhaps FDA informs a sponsor of a Material Threat Determination at a meeting, but, if that were the case, the material threat MCM PRV does not serve as an incentive for other companies to develop treatments, as Congress clearly intended.  Reviewing FDA’s Material Threat MCM PRV Guidance, it is apparent that the Agency expected HHS to publicize “identified material threat agents that may qualify an MCM application for a PRV,” and it even directs sponsors to reach out to HHS for confirmation during development.  If the goal is to broadly encourage development of such therapies, informing sponsors of a material threat determination at the soonest opportunity would seem to be the most efficient approach to achieving that objective

Regardless, now that the world knows that a Material Threat Designation has been made, and because a PRV is not limited to the first treatment for a Material Threat MCM, other sponsors have the opportunity to obtain such a voucher.  As long as an additional treatment is a new active moiety and otherwise eligible for Priority Review – it’s for a “Serious Condition” and demonstrates potential to be a significant improvement in safety or effectiveness – other Material Threat MCM PRVs should be available for COVID-19 treatments.  But those companies who are planning to invest in COVID-19 treatments are likely already doing so, rendering our new-found knowledge of the Material Threat Designation relatively useless for purposes of encouraging innovation.  Perhaps, as we said in May, if DHS and HHS had made an early Material Threat Determination and actually publicized it—whenever it may have been issued—maybe some of the companies that really could have used the incentive to develop a treatment for COVID-19 would have jumped into the game.

Moreover, the Material Threat Designation has potentially created a different issue that companies should think about: dilution of the incentive.  Many companies are investing in COVID-19 therapeutic products.  If all or most of them are eligible for a PRV, the resulting supply of PRVs on the market may be expected to decrease the value of all PRVs—even those unrelated to COVID-19—such as those awarded for the approval of a drug to treat an infectious disease for which there is no significant market in developed nations (tropical disease), or a rare pediatric diseases.  Much of the value of a PRV is that it can be sold as a commodity; an oversupply would inherently decrease its market value.  Without significant market value – especially for small companies that may not have other products in the pipeline to utilize the PRV internally – will a PRV still serve as incentive?

In sum, the government’s approach to the material threat MCM PRV does not seem to further Congressional intent to provide incentives for the development of drugs to treat material threats.  And, to be clear, the problem with the lack of Material Threat Determination publication is bigger than COVID.  Veklury just put a spotlight on the problem, which ultimately is whether an incentive program can really function as an incentive if important information is not public.

The Alcoholic Beverage Labeling Act of 1988 (ABLA) directs the Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau (TTB) to notify Congress if science shows that the required warning statement on alcoholic beverages must be updated.  Specifically, the ABLA provides that TTB “shall promptly report such information to the Congress together with specific recommendations for such amendments to this subchapter as the Secretary determines to be appropriate and in the public interest.”  Currently, the ABLA and TTB’s regulation require the following warning statement:

GOVERNMENT WARNING: (1) According to the Surgeon General, women should not drink alcoholic beverages during pregnancy because of the risk of birth defects. (2) Consumption of alcoholic beverages impairs your ability to drive a car or operate machinery, and may cause health problems.

On October 21, several public health and consumer group advocates filed a Petition with TTB requesting that the warning be updated.  Petitioners assert that there is consensus that alcohol consumption is linked to cancer.  Among other things, they cite statistics from the American Cancer Society indicating that, in 2014, 6.4% of all cancers in women and 4.8% of all cancers in men were linked to alcohol consumption.  They claim that drinking alcohol is the third most important modifiable cancer risk in women and the fourth in men.

In light of this evidence, they request that TTB report to Congress that available scientific information (accrued since 1988) shows that alcohol consumption causes cancer.  Petitioners request that TTB recommend that Congress amend the current health disclosure to state:

GOVERNMENT WARNING: According to the Surgeon General, consumption of alcoholic beverages can cause cancer, including breast and colon cancers.

In addition, they request that TTB report to Congress the available scientific evidence in support of rotating health disclosures, as opposed to a single static warning. They suggest that the new requirements would require rotating the three different warnings, i.e.,

(1) GOVERNMENT WARNING: According to the Surgeon General, women should not drink alcoholic beverages during pregnancy because of the risk of birth defects.

(2) GOVERNMENT WARNING: Consumption of alcoholic beverages impairs your ability to drive a car or operate machinery and may cause health problems.

(3) GOVERNMENT WARNING: According to the Surgeon General, consumption of alcoholic beverages can cause cancer, including breast and colon cancers.

Welcome to the latest edition of HP&M’s monthly wrap up of food, beverage and supplement news, including regulations, guidances, events, and whatever else is catching our eye.

Food & Beverage

• Are your cows happy? Check out Karin’s blog post on corporate social responsibility claims.
• Is it a Sugar? Riëtte and Ricardo wrote about FDA’s request for information pertinent to nutrition labeling of sugars that don’t act like traditional sugars.
• Cell-Based Meat and Seafood Labeling: The North American Meat Institute and the Alliance for Meat, Poultry and Seafood Innovation joined forces to back a mandatory labeling requirement for cell-based meat and poultry products. Meanwhile, FDA published a constituent updateand Federal Register notice asking for comment by March 8, 2021 on a number of questions pertaining to labeling of “foods comprised of or containing cultured seafood cells.”  More details can be found in Ricardo’s blog post on the notice.
• Some processes preclude a “100% natural” claim. The National Advertising Review Board recommended that GSK discontinue a “100% natural” claim for a product consisting solely of wheat dextrin because consumers “would likely conclude that the manufacturing exceeded minimal processing” compatible with that claim. The panel held out the possibility that a qualified use of “natural” might be supportable.
• Gluten Free Alcoholic Beverages: TTB has updated its guidance on gluten content statements for wines, distilled spirits, and malt beverages in response to the August 2020 FDA final rule on verifying “gluten-free” labeling claims for fermented or hydrolyzed foods.
• The Incredible, Edible Egg: The HAACP and sanitation SOPs for egg producers final rule was just published in the Federal Register.
• Take Me to the Pilot: The FDA is launching a voluntary pilot program to evaluate alignment of private third-party food safety audit standards with the food safety requirements in Preventive Controls for Human Food and the Produce Safety rules.
• Ingredient safety assessments under fire: A late September 2020 citizen petition asks FDA to enforce the FDC Act requirement regarding the cumulative effect of food substances as part of safety assessment. See Riëtte’s blog post for more details.
• Boring but important: FDA is issuing guidance establishing a U.S. Agent Voluntary Identification System (VIS) for food facility registration, which is intended to be used in conjunction with the food facility registration database to streamline and expedite the U.S. agent verification process.
• Also boring but important: Don’t forget to renew your food establishment registration.

Supplements

• DMAA out. The Supreme Court rejected a request to review a case involving the legality of DMAA (1,3-dimethylamylamine), a once-prevalent ingredient marketed in sports supplements, leaving in place a 2019 ruling by the 11^th Circuit – which you can read about in our blog posting on that ruling.
• Branched chain amino acids? Natural Products Association Petitions FDA on Nutrition Facts and Supplement Facts Labeling Regulations Pertaining to Caloric Values.
• Challenge to DEA’s Clarification of the Farm Bill: Should intermediates containing in excess of 0.3% THC that have been derived from hemp be regulated as controlled substances by DEA? Not if plaintiffs in these lawsuits

Some Things We Are Monitoring:

• 2020-2025 Dietary Guidelines: Expected by year end.
• A hemp case where HIA and RE Botanicals filed a lawsuit against the DEA in the D.D.C., seeking a declaration that the definition of hemp in Section 1639o, includes “intermediate hemp material” (IHM) and “waste hemp material” (WHM) and that the THC in IHM and WHM is not a controlled substance. You can read about that litigation in our colleagues’ blog posting.
• Supreme Court oral arguments on December 1 on the application of the Alien Tort Statute to ethical sourcing claims in Nestlé v. Doe I and Cargill v. Doe I.
• Interesting perspectives on the possible direction of the FTC’s consumer protection mission under a Biden administration, particularly when it comes to consumer redress and civil penalties.

Upcoming Events:

• FDA public meeting on ‘‘CBD and Other Cannabinoids: Sex and Gender Differences in Use and Responses.” November 19, 2020
• FDA public meetings on the proposed rule for “Requirements for Additional Traceability Records for Certain Foods.” November 6, 2020, November 18, 2020, and December 2, 2020.
• The Center for Research on Ingredient Safety at Michigan State University will host a virtual CBD Science Symposium on November 11-12. Ricardo will present a primer on key issues in the regulation of hemp-derived CBD.

Today, more than two years after Congress passed the Preventing Drug Diversion Act of 2018 (PDDA) and after more than a decade of industry requests for regulations addressing the Drug Enforcement Administration’s (DEA) interpretation of suspicious order requirements under 21 C.F.R. § 1301.74(b), DEA has finally spoken, with its proposed rule “to revise its regulations relating to suspicious orders” and “clarify the procedures a registrant must follow” to identify and report suspicious orders.  Suspicious Orders of Controlled Substances, Notice of Proposed Rulemaking, 85 Fed. Reg. 69,282 (Nov. 3, 2020).

DEA’s New Definitions

DEA’s proposed rule establishes three new definitions: (1) “orders received under suspicious circumstances (ORUSC),” (2) “order,” and (3) “due diligence.”  DEA’s existing regulations only define a “suspicious order,” which the PDDA codified in 2018 as including orders, or a “series of orders” of unusual size, pattern or frequency.  DEA’s new definition of an “order received under suspicious circumstances” is essentially a prequel to a suspicious order determination permitting registrants to identify an order as “potentially suspicious.”  The regulatory definition of ORUSC is critical for DEA to establish the two-option order review framework summarized below.

DEA defines the term “order,” to standardize what is a controlled substance order, which definition is far broader than considered before.  DEA proposes the following “order” definition:

[A]ny communication by a person to a registrant proposing or requesting a distribution of a controlled substance, regardless of how it is labeled by the person or the registrant, and regardless of whether the distribution is made by the registrant, except that simple price/availability inquiries, standing alone, do not constitute an order.

(Emphasis added.)

DEA’s definition raises questions when one considers the logistical and financial differences in the way that the regulated industry engages in distribution of controlled substances.  And, speaking of the “regulated” industry, DEA clarifies that proposed suspicious order reporting requirements will apply to practitioners when such distributions are made pursuant to the five percent rule.  The rule also will apply to “all registrants authorized to distribute controlled substances: distributors, manufacturers, importers, pharmacies, hospital/clinics teaching institutions, practitioners, Mid-level Practitioners (MLP), MLP- Ambulance Services, Researchers, Analytical Labs and NTPs,” but not reverse distributors.

The Two-Option Framework for Orders

After years of telling the regulated industry that it would not approve any particular method for identifying and reporting suspicious orders, DEA is now establishing a “two-option framework.”  The NPRM states that, upon receipt of an ORUSC, registrants will have a choice: (1) immediately file a suspicious order report through the DEA centralized database, decline to distribute the order, and maintain a record including any due diligence conducted related to the suspicious order; or, (2) before distributing pursuant to the order, conduct due diligence to investigate each suspicious circumstance surrounding the ORUSC, and maintain a record of its due diligence regarding the ORUSC.  The two options proposed by DEA are consistent with the D.C. Circuit’s 2017 Masters Decision and a recognition that, in the absence of sorely needed guidance from DEA over the past decade, most manufacturers and distributors have adopted some variation of these two options, otherwise known as a “Flag and Terminate,“ or  “Order of Interest” systems.

In regard to the second option, the DEA is establishing a deadline of seven calendar days for the registrant to determine if all of the suspicious circumstances for the held order have been resolved.  If the registrant is able to resolve all suspicious circumstances, then the order is not considered a suspicious order.  The registrant must maintain a record of its due diligence (thus likely leaving registrants’ due diligence subject to DEA scrutiny and second-guessing in the future).

Due Diligence Requirements

DEA defines its expectations for “due diligence” that a registrant must follow — within a seven calendar-day time period — before clearing an order to ship.  The expansive definition of “due diligence” includes: a “reasonable and documented investigation” and “examination of all facts and circumstances.”  And, concerning another “broad” definition, DEA’s new regulation will require the following concerning the system to identify suspicious orders:

In addition, the system shall be designed and operated to identify suspicious orders based on facts and circumstances that may be relevant indicators of diversion in determine whether hat person (or a person submitting an order) is engaged in, or is likely to engage in the diversion of controlled substances.

The failure to conduct sufficient due diligence has been at the heart of a number of civil and criminal settlements, and litigated cases over the years.  It will be interesting to see how these new requirements compare to already well-established industry procedures.  For example, DEA states that, “regarding recordkeeping, the proposed rule would require more than just a ‘check the box’ type of documentation.”  DEA also footnoted “rigid formulas” (using the terms “algorithm,” “blocked,” “flagged,” “held,” “order of interest,” “pended,” or “threshold”) that may not identify suspicious orders.  The new rule instead would require the registrant’s “record” to include:

(1) how the registrant handled such orders;

(2) what information and circumstances rendered the order actually or potentially suspicious;

(3) what steps if any the registrant took to investigate the order;

(4) if the registrant investigated the order, what information it obtained during its investigation;

(5) where the registrant concludes that each suspicious circumstances had been dispelled the specific basis for each such conclusion.

Of course, the significant irony here is that the rulemaking comes more than 15 years since DEA first announced its “Distributor Initiative,” which resulted in hundreds of millions of dollars in civil penalties, administrative suspensions and revocations of registrations, and several criminal charges — all based on DEA’s claims that the industry failed to comply with the requirement to identify and report suspicious orders.  Like the play, the regulated industry has been waiting for guidance from DEA concerning what “is” a suspicious order, other than an order of unusual size, pattern or frequency; and what to do about a suspicious order once detected.  As a result of its waiting, industry has engaged in all sorts of philosophical (and likely quite expensive) interpretations of DEA’s vague order monitoring requirements.  And while waiting, registrants have moved forward developing policies, procedures and elaborate monitoring systems without clear guidance from DEA as to its expectations.  Industry generally relied instead on two DEA “guidance” letters to industry dated in 2006 and 2007, and two cases referenced in the NPRM, Southwood and the fairly recent Masters decision, in developing “systems” to report to the registrant orders of unusual size, frequency and pattern.

More to Come

The NPRM provides additional background and detail as to how DEA arrived at the proposed rule, which will be the subject of further posts in the coming days, including, but not limited to, a post on the content of reports that must be submitted to DEA once an order is deemed suspicious, and a  post on industry comments on the proposed rule.  So, while the wait is over, we are just beginning another act in DEA long-running suspicious order saga.

Identification of and comparison to a Reference Listed Drug (“RLD”) and Reference Standards (“RS”) are the lynchpin of generic drug development and approval.  It’s therefore no surprise that, upon significantly updating the Orange Book in January 2017, FDA dedicated an entire guidance to fundamental definitions and procedures relating to RLDs and RSs.  Now, on the 40th anniversary of the Orange Book, FDA has updated and finalized this guidance, formally titled Referencing Approved Drug Products in ANDA Submissions, as part of its ongoing Drug Competition Action Plan.

Admittedly, very little has changed between the draft and final versions of the guidance Referencing Approved Drug Products in ANDA Submissions.  Subtle changes dominated, including a shift in the language used to discuss ANDAs approved under section 505(j): the draft guidance generally referred to ANDAs as drugs that are “the same” as their RLDs while the new version chose the much more precise word, “duplicates.”  Given that FDA has shifted its interpretation of the PDUFA exception for “same product as another product” from therapeutic equivalence to pharmaceutical equivalence, it could be that the use of “duplicate” rather than “same” was intended to avoid revisiting discussions of whether same drug, in this case, means therapeutic equivalents or pharmaceutical equivalents.  Regardless, this choice of language makes it very clear when FDA is referring to true ANDAs rather than suitability petition ANDAs or pharmaceutical equivalents approved as 505(b)(2) NDAs.

The most notable change in the guidance document is practical.  Previously, sponsors seeking designation of an additional RLD or RS were required to submit a Citizen Petition; a Controlled Correspondence could be used for such a request only when no RLD or RS was designated.  Because, unless a Citizen Petition is subject to Section 505(q) of the FDC Act, FDA responds at a snail’s pace, Citizen Petitions for new RLDs or RSs languished for years.  Now, the final guidance directs all requests for new RLDs and RSs through the Controlled Correspondence pathway, subjecting them to GDUFA response deadlines of 60 days for non-complex questions and 120 days for complex questions.  Theoretically, designation of RLDs and RSs should not be complex, but even if such requests are considered complex, a 120 day response timeline is significantly preferred to no discernable timeframe.  A question remains, however, of how and when FDA will deal with the many outstanding Citizen Petitions requesting a new RLD or RS, particularly because Controlled Correspondence GDUFA goals do not apply when the Controlled Correspondence is related to a pending Citizen Petition; in such a case, the GDUFA timeline starts only after FDA has responded to the Citizen Petition in question.

There are some other small but notable changes in the final version of the guidance.  In the final version, FDA explains that it can move a listed drug product to the Discontinued Section of the Orange Book if the “listed drug is not available for sale.”  Previously, FDA would only move a listed drug to the Discontinued Section after an applicant notifies FDA that it is withdrawing the listed drug from sale or if FDA determines that the listed drug has been withdrawn; the final guidance appears to change the policy so that FDA can merely determine that a product is “not available for sale.”  Whether this means that FDA will move a product of its own volition based on an inability to obtain the product on the open market is yet to be seen, but it certainly seems as though FDA is giving itself more leeway to proactively move products to the Discontinued List.  Similarly, FDA previously had stated that it would select a new RS based, among other elements, on “units sold,” but the final guidance revises this factor to “commercial data,” which, again, provides FDA more flexibility to interpret the term “commercial data” so that it is not bound to select an RS based specifically on “units sold.”

FDA included a few other revisions.  The final guidance also notes that authorized generics can be used as an RS, but suggests that additional documentation may be required; sponsors are directed to contact Office of Generic Drugs for more information.  The guidance suggests that all in vitro testing be performed in the RS, even though not specifically required under FDA regulations.  And, even though the 2017 guidance made clear that only NDAs approved under 505(c) are eligible as RLDs, the final version made it expressly clear that ANDAs cannot serve as RLDs (so please stop asking!).

In sum, the revised guidance isn’t game changing, but the procedural elements should help facilitate the designation of additional RLDs or RSs.  The little changes throughout will likely have minimal effect, but to the extent that they do, they provide FDA more flexibility than the draft version.  Regardless, both versions are certainly helpful for generic manufacturers navigating the generic drug approval system to do what they do best – making copies.

We have a free Election-eve presentation for you to download!  On October 28th, 2020, Hyman, Phelps & McNamara, P.C. Director Jeffrey K. Shapiro presented a webinar, titled “The Potential Life Sciences Implications of the Election.”  Mr. Shapiro explored the role politics plays at FDA and analyzed the potential impact of upcoming U.S. presidential election, with a special focus on the medical device industry.  It was an engaging discussion with lots of questions at the end.  MedMarc has now made the entire webinar available for free download in order to allow a broad audience to access it.  You can access the webinar at either of these places: Landing page or YouTube.