On September 27, 2024, in U.S. v. California Stem Cell Treatment Center, Inc., a Ninth Circuit panel unanimously held that a stem cell clinic’s Stromal Vascular Fraction (SVF) procedure constitutes a “drug” under the Food, Drug and Cosmetic Act (FDCA) and does not meet the “same surgical procedure” (SSP) exception to FDA’s regulation of human cells, tissues, and cellular and tissue-based products (HCT/Ps) contained in 21 C.F.R. Part 1271. The District Court in this case, which came to the opposite conclusion and is now reversed, was a notable outlier in a string of cases in other circuits upholding FDA’s authority to regulate stem cell clinics on similar grounds as the Ninth Circuit did here. See U.S. v. Regenerative Sciences, LLC, 741 F.3d 1314 (D.C. Cir. 2014); U.S. v. U.S. Stem Cell Clinic, LLC, 998 F.3d 1302 (11th Cir. 2021). The case was remanded to the District Court for further proceedings, which could include consideration of whether Defendants’ SVF procedure is eligible for lighter-touch regulation under section 361 of the Public Health Service Act (PHSA) or, instead, Defendants must obtain approval of a Biological License Application (BLA) for the SVF prior to its marketing and use. Defendants may also seek en banc review of the decision from the full Ninth Circuit.

Facts

Defendants in this case are two licensed physicians and the stem cell clinics they founded. At the clinics, Defendants offer treatments that consist of extracting fat tissue from patients and, through a multi-step process, turning that tissue into a liquefied mixture of stem cells, other cells and cell debris known as Stromal Vascular Fraction (SVF). The resulting SVF is then administered to the same patient by injection, intravenous drip, or inhalation. There are two varieties of the procedure: one where the fat tissue extraction and reimplantation of SVF is completed on the same day and another where the tissue is sent to a cell bank for processing and cell expansion for later use by the patient.  (Note we do not discuss the cell expansion variety of this treatment further in this blog as the court quickly dispensed of it as obviously not subject to the SSP exception.)  These procedures are offered to treat a variety of conditions, including Alzheimer’s, arthritis, asthma, cancer, etc., no doubt with varying degrees of scientific support for their safety and efficacy in treating these conditions.

Regulatory Background

FDA regulates and generally requires premarket approval of all new drugs, which are defined as “articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease,” or “intended to affect the structure or any function of the body.” 21 U.S.C. § 321(g)(1). FDA also regulates HCT/Ps, defined as “articles containing or consisting of human cells or tissues that are intended for implantation, transplantation, infusion, or transfer into a human recipient,” including bone, ligament, skin, cornea, stem cells derived from blood, and reproductive tissue. See 21 C.F.R. § 1271.3(d).

FDA has a tiered, risk-based approach to regulating HCT/Ps, with three levels of oversight depending on the category of HCT/P. The lowest risk category, which is not subject to any oversight by FDA, includes HCT/Ps removed from an individual that are implanted into the same individual during the “same surgical procedure.” 21 C.F.R. § 1271.15(b). HCT/Ps that meet the four criteria under 21 CFR 1271.10(a), such as being “minimally manipulated,” and that do not meet the SSP exception fall in the middle of the hierarchy and are regulated solely under section 361 of the PHSA, aimed at preventing the spread of infectious disease. The highest risk category of HCT/P are those that do not meet the criteria under 21 CFR 1271.10(a) or the SSP exception. HTC/Ps in this last category are regulated as drugs or medical devices under the FDCA, or biological products under section 351 of the PHSA, which typically require premarket approval and compliance with the full panoply of FDA regulation.

Court Opinion

One of Defendant’s primary arguments was that its SVF treatments constituted the practice of medicine, not the manufacture and administration of a “drug” and were, therefore, not subject to FDA regulation. The Court rejected this argument, finding instead that the SVF mixture itself was a drug (favorably citing the prior Regenerative Sciences case).

The Court also found that the SVF treatment did not meet the SSP exception and was, therefore, not wholly exempt from FDA regulation on that basis. The SSP exception requires that the HCT/P implanted into the patient be the same “such HCT/P” that was originally removed from the patient. The Court interpreted this provision to mean that the HCT/P removed from the patient had to be viewed as a whole (not its constituent parts), before any significant processing. Although the cells in the SVF mixture were present in the fat tissue originally removed from the patient, the Court found that the relevant HCT/P for purposes of the SSP exception was the fat tissue itself and, therefore, the significantly processed SVF was not the same “such HCT/P”.

Although the holding was unanimous, one judge concurred with respect to the SSP exception analysis. The concurrence found the language of the SSP exception genuinely ambiguous, but would have reached the same conclusion as the majority because FDA was owed Auer deference on its interpretation of the regulation (citing Auer v. Robbins, 519 U.S. 452 (1997); see also Kisor v. Wilkie, 588 U.S. 588, 566 (2019)).

Conclusion

The Court did not consider the question whether the SVF treatment required an NDA/BLA or, instead, met the criteria under 21 C.F.R. 1271.10 to be regulated solely under section 361 of the PHSA. This could be the subject of further proceedings at the District Court level on remand. Additionally, Defendants may also seek en banc review of the decision from the full Ninth Circuit. In the meantime, FDA now has three different circuit courts that have upheld its authority to regulate stem cell clinics performing the sort of procedures at issue in these cases.

The Rare Pediatric Disease Priority Review Voucher program has had a bit of a tumultuous history in its 12 short years of existence.  Designed to incentivize the development of drugs for pediatric rare diseases where such development may not otherwise have occurred, vouchers may be granted for drugs for serious or life-threatening rare diseases where the serious or life-threatening manifestations primarily affect individuals aged from birth to 18 years.  Once granted, the vouchers may be used by the recipient or sold to another company for use with an application that may not otherwise qualify for priority review.  A very important aspect of the program is that it costs FDA, and the government, no additional dollars, though we do not wish to minimize the additional resources a priority review demands over the standard review that such an application might otherwise receive.  The value to industry for receiving a speedier review depends on the specific circumstances of the application, but it is clear that they are valued highly.  The dollar prices of the vouchers themselves have fluctuated, recent sales have been in the neighborhood of $100 million.

Over 50 rare pediatric disease priority review vouchers have been awarded to date.  We have heard over and over again how the potential for a priority review voucher has allowed small companies with limited resources to invest in the development of drugs for rare pediatric diseases.  Although the program has not been without its critics (including as documented in two GAO reports from 2016 and 2020), there is ample evidence that the program has been successful at accomplishing its goals, which has become more evident with time.  A recent analysis from NORD showed that among the 39 rare pediatric diseases for which vouchers were awarded, only three had any FDA-approved products on the market before the program’s enactment.  Even FDA officials, who have historically been hesitant, at best, to support the program (this opposition was documented in the GAO reports), have recently issued statements of support.  This also appears to be the administration’s position at this time, as it was included in the government’s “anomalies” list for purposes of inclusion in a continuing resolution.

The program, however, has always had a scheduled sunset date.  Notably, it was reauthorized in 2016 (until 2020) and in 2020 (until 2024).  We watched as the days ticked away as we crept closer to the first scheduled sunset date in the amended law, September 30, 2024.  After this date, without action by Congress, FDA’s authority to grant rare pediatric disease designations would expire, and no vouchers could be granted unless previously granted such a designation.  No rare pediatric disease vouchers could be awarded even to designated applications after September 30, 2026.

We heard and felt the anxiety from many of our clients about the uncertainty this caused.  It is extremely difficult, if not impossible, to do the long-term planning and substantial fundraising required for drug development without knowing whether such an important and valuable incentive will be there.  After all, this is what incentives are for.  While the dates have been written in the law, the previous extensions provided a reasonable hope that the program would continue.

Nearly at the last minute, Congress acted to kick the can down the road just a little bit.  On September 26, as part of a continuing resolution to keep the government funded, the President signed an extension into law that allows rare pediatric disease designations to be granted until December 20.

That brings us to today, where we are halfway through October without a longer-term fix.  After coming so close to the brink, we were relieved to see the last-second short-term extension.  However, this is only a brief reprieve, leaving substantial uncertainty for stakeholders as to what might happen in the coming months.  Adding to the difficulty is that Congress is not scheduled back in session until mid-November, following Election Day.

However, there has been movement.  A few days before the continuing resolution, on September 23, 2024, the House of Representatives passed H.R. 3433, the Give Kids a Chance Act of 2024.  It was shortly thereafter introduced in the Senate and referred to the Committee on Health Education, Labor, and Pensions, where it remains.  This bill would extend the designation deadline until September 30, 2029, a five-year extension (and would require yet another GAO report).

While we were heartened to see this movement, finally, we remain in an uncertain position, watching as the days tick away until December this time.  With so much support from stakeholders, we are hopeful that Congress will recognize the immense value of this program, primarily for pediatric rare disease patients, the ultimate beneficiaries of the program, and authorize an extension.  Hopefully, this can be accomplished without coming quite so close to the brink this time.

It took only 3 months.  In June, the Supreme Court ruled that the SEC cannot use its administrative authority to impose civil penalties for securities fraud on the ground that these penalties violate the U.S. Constitution’s Seventh Amendment right to a jury trial.  See SEC v Jarkesy, 144 S. Ct. 2117 (2024).  The Court reasoned that the SEC’s civil penalties “are designed to punish and deter, not compensate,” and that they are a remedy “that could only be enforced in courts of law.”  At the time we posted about the Jarkesy decision, we predicted that it would impact FDA-regulated industry:

The impact on FDA matters could be significant.  FDA has civil money penalty authority relating to clinical trials, devices, foods, drugs, and tobacco; although with the exception of tobacco, FDA has not recently exercised that authority with regularity.  If FDA is prohibited from pursuing the relatively small dollar value tobacco penalty cases administratively, it could affect enforcement.  Bringing an administrative claim is typically much less demanding in time and resources than litigating a jury trial.

Sure enough, the first challenge to FDA’s civil money penalty authority was filed last week in the Central District of California.  In Huff and Puffers v. U.S. Food and Drug Administration, No. 8:24-cfv-02110 (C.D. Cal. filed Sept. 27, 2024), the plaintiff H&P challenged an FDA administrative complaint assessing a civil money penalty of $20,678 for H&P sale of an electronic cigarette without FDA authorization.  In its administrative complaint, FDA alleged that H&P sold unauthorized tobacco products through its online website despite FDA notification through a Warning Letter that H&P’s tobacco products are adulterated and misbranded.  FDA alleged that H&P shipped an unauthorized tobacco product from California and Virginia, in violation of the law, and thus sought an order assessing a civil money penalty against H&P.   Under the Federal Food, Drug & Cosmetic Act (FD&C Act), retailers who violate a requirement of the Act related to tobacco products shall be liable for a civil money penalty up to $20,678 for each such violation, not to exceed $1,378,541 for all violations adjudicated in a single proceeding. 21 U.S.C. § 333(f)(9)(A); 21 C.F.R. § 17.2.   H&P timely responded to the administrative complaint with several defenses, and specifically stated that it did not waive its Seventh Amendment right to a jury trial.

True to its word, H&P filed a Complaint in the District Court for the Central District of California seeking declaratory and injunctive relief on the ground that the FDA’s civil money penalty proceeding against it violates the U.S. Constitution.  H&P specifically relies on the Supreme Court decision in Jarkesy, as well as the 2023 Supreme Court decision in Axon Enterprise, Inc. v. FTC, 598 U.S. 175 (2023) (holding that district courts have jurisdiction to hear constitutional challenges to agency authority to adjudicate enforcement actions).  H&P seeks a declaration that the FD&C Act’s statutory provisions allowing FDA to impose civil money penalties violate the Seventh Amendment, a declaration that the administrative proceeding against H&P violates the Seventh Amendment, an order requiring FDA to dismiss the administrative complaint against H&P, an order prohibiting FDA from adjudicating civil money penalties generally and against H&P specifically, and an order awarding fees and expenses.

The case could provide greater clarity on whether and to what extent the “public rights” exception continues to permit the adjudication of certain administrative issues.  The majority and dissenting Jarkesy opinions discuss and debate the history of the adjudication of certain “public rights” without a jury.   Whether a civil penalty for violation of the FDC Act is sufficiently different from an SEC fraud penalty to be a “public right” remains to be seen.

Another potentially interesting aspect of this case appears only in the caption, which is styled as an action “SEEKING STATEWIDE OR NATIONWIDE RELIEF.” The propriety of nationwide injunctions has been discussed by legal scholars, judges and Justices in recent years.  Even more limited statewide injunctive relief would be a departure from the normal rule that non-mutual collateral estoppel does not prevent the federal government from re-litigating an issue that it has lost, especially at the district court level.

In sum, this case raises some interesting unresolved legal issues, so we’ll be following it. Note that we also predicted that “[t]he impact on USDA and DEA could be similarly significant.“  Stay tuned.

A recent draft guidance on predetermined change control plans (PCCP) for medical devices continues FDA’s effort to implement Section 515C of the Food and Drug Omnibus Reform Act of 2022 (FDORA),   which Congress enacted to make it easier for manufacturers to make post-market device changes by avoiding the need for additional FDA authorization (see our prior summary of FDORA here). A draft guidance issued last year focused on PCCPs for devices incorporating artificial intelligence and machine learning (AI/ML), which we blogged about here; this guidance has not yet been finalized.  In contrast, the new draft guidance,  Predetermined Change Control Plans for Medical Devices (Draft Guidance), addresses all device types, and describes the types of modifications that the agency “believes generally may be appropriate for inclusion in a PCCP, and the information that should be included in a PCCP in a marketing submission for any device type.” Draft Guidance at 4.

As a reminder, a PCCP is a document submitted in a marketing application that describes future modifications to a device that would typically require submission of a subsequent application and a description of how the sponsor will verify and validate the modified device.

FDORA gives wide latitude to FDA with respect to the types of changes that may be made to a device with an approved or cleared PCCP.  The statute states that FDA may approve a PCCP for a PMA device for any change that would otherwise require a supplemental application as long as the device remains safe and effective without any change.  For 510(k) devices, FDA may authorize a PCCP as long as the changes would not affect the device’s substantial equivalence to the predicate device and the change is not necessary to maintain the device’s safety and effectiveness without any change.

The Draft Guidance takes a narrower approach.  For 510(k) devices, PCCPs can be considered for modifications that “significantly modify an existing risk”, but generally not for those that “introduce a new risk.”  Id. at 20.    Longstanding guidance on evaluating postmarket device changes, Deciding When to Submit a 510(k) for a Change to an Existing Device (Change Guidance), states that a change “could significantly affect the safety or effectiveness of the device”—and requires a new 510(k)—if it either introduces a new risk or significantly modifies an existing risk. Change Guidance at 8.  Given that this prior FDA guidance treats both types of changes—modifications to existing risk and introduction of new risks—as significant and likely to require a 510(k) submission, logic dictates that, in determining PCCP eligibility, FDA should apply it to both categories of change since the purpose of a PCCP is to avoid the need for a new marketing submission.  In fact, FDORA does not preclude PCCPs for changes that introduce a new risk, as long as the device remains safe and effective without any change and remains substantially equivalent to the predicate.  Nevertheless, the Draft Guidance would preclude the use of PCCPs for such changes, even if the modified device would remain substantially equivalent to the predicate device.  Likewise, for PMA devices, the Draft Guidance would preclude use of a PCCP for changes that are considered major or that modify the intended use of the device.  As both these categories of changes are currently permitted via a PMA supplement, and the goal of FDORA is to provide an alternative to the need for such supplements, we would expect major changes and modifications to intended use to be permissible via a PCCP as long as the device remains safe and effective without any change.

The Draft Guidance includes examples of changes that would be eligible for PCCPs, as well as those that would continue to require new submissions.  These examples further demonstrate that FDA is narrowing the scope of PCCP-eligible changes contemplated under FDORA.  For instance, the Draft Guidance states that a PCCP would be appropriate to add a device to a product with different dimensions that are within the range of dimensions of those currently authorized.  Under the Change Guidance, such change would likely be classified as non-significant, meaning that no additional submission would be necessary even without a PCCP, so it is unclear how this example furthers the goal of FDORA.  On the other hand, the Draft Guidance states that a significant change to the design of a printed circuit board (PCB) in a multi-parameter physiological patient monitor, with arrhythmia detection alarms for use in a hospital environment, would not be appropriate for inclusion in a PCCP. Draft Guidance at 34. As described, this change would not appear likely to introduce a new risk, making it unclear why it could not be implemented via a PCCP.

The Draft Guidance also provides detail regarding the content of a PCCP, stating that the sponsor should include:

• a description of the modification, including specific changes to the device characteristics and performance;
• a modification protocol, including performance evaluation methods and update procedures;
• traceability between the description of the modifications section and the modification protocol section; and
• an impact assessment. Id. VII.

FDA recommends a PCCP include “only a limited number of modifications that are specific, and that can be verified and validated.” Id. at 26.  Practically speaking, we agree that limiting the number of modifications in a PCCP will be most efficient for sponsors to achieve timely submission and authorization, but again, FDORA does not impose this limitation.  If a sponsor is able to provide a detailed description of multiple changes with appropriate performance evaluation methods for each, we hope the Agency will be willing to consider them under a single PCCP.

Finally, the Draft Guidance indicates that a PCCP may be included with most application types.  For PMA devices, a PCCP may be included with an original application, modular application, or any of the pre-approval supplement types (panel-track, real-time, 180-day, 135-day).  A PCCP may also be submitted as part of a De Novo application.  For 510(k) devices, a PCCP may be submitted only with a traditional or abbreviated application.  We find it surprising that a PCCP may not be submitted with a Special 510(k), given a Special 510(k) may be used to modify an existing device where well-established methods are available to evaluate the change. FDA, Guidance for Industry,  The Special 510(k) Program (2019).  Given the limitations in the Draft Guidance for types of changes that may be made using a PCCP, it seems that changes eligible to be made via a Special 510(k) may be well suited for being made via a PCCP.  The Draft Guidance states that Special 510(k)s may be an appropriate submission type if the Sponsor wishes to modify a previously cleared PCCP for their own device and the PCCP methods are well-established. Given FDA appears prepared to permit modification of an existing PCCP via a Special 510(k), it remains unclear why one could not implement a PCCP via the Special 510(k) pathway in the first instance.

While the description of the content that should be included in a PCCP is generally helpful, the Draft Guidance leaves much uncertainty—and uneasiness—about the types of changes FDA will ultimately allow manufacturers to make via the PCCP process.

Comments on the Draft Guidance may be submitted until November 20, 2024.

If you monitor Regulations.gov dockets and litigation dockets on PACER like we do, then you know that one company name—more than any other over the past several years—pops up: Vanda Pharmaceuticals, Inc.  But unlike the fictitious Vandelay Industries of Seinfeld that George Costanza claims to have been interviewed for as a latex salesman, Vanda Pharmaceuticals, Inc.—and the issues the company raises—are very, very real.

Not only that, but they are often novel issues!  Consider, for example, a Complaint filed just recently in the U.S. District Court for the District of Columbia (“DDC”) against FDA alleging that the Agency’s structure of NDA review is unconstitutional (by our count the 31st Vanda litigation against FDA or another government entity in the last five years, including appeals).

Or consider Vanda’s challenge that FDA’s approval of a generic version of one of the company’s drugs violated the Appointments Clause of the Constitution (U.S. Const. art. II, § 2, cl. 2) because the FDA employees who approved the application were not “Officers of the United States.”  In that case, the DDC recently said:

[T]he Court has lingering concerns about whether [Dr. Iilun C. Murphy, Director of the Office of Generic Drugs’] ratification cured any Appointments Clause deficiency because it is unclear whether any statute properly authorized her appointment.  Given this uncertainty, as well as the maze of procedural barriers that may prevent the Court from even considering the matter, the Court will allow the FDA one more chance to put the matter to bed for good (should it so choose) before the Court renders a final decision on it.

Or consider Vanda’s lawsuit filed in the U.S. Court of Federal Claims alleging that FDA improperly disclosed Vanda’s trade secrets by offering certain recommendations to various generic competitors, and thus that FDA breached its duty of confidentiality.  Specifically, Vanda alleges that FDA communications to certain generic competitors regarding dissolution rates, impurities, and micronization revealed Vanda’s confidential manufacturing information and caused economic injury to the company. To that end, Vanda asserts a Fifth Amendment takings claim based upon a government official’s alleged disclosure—intentional or inadvertent—of claimed trade secrets and confidential commercial information.  In January 2024, the U.S. Court of Federal Claims allowed Vanda’s Fifth Amendment takings claim to move forward in litigation.

The ramifications of the Federal Claims case and some of the other lawsuits brought by Vanda could be significant to regulated industry and to the food and drug bar.

Given all of the Vanda lawsuits flying around, some of which are based on FDA Citizen Petition decisions or other FDA decisions, we thought it would be helpful to pull them all together in a couple of tables.  To that end, below is a list of the cases Vanda has filed over the past five years or so against FDA or another government agency or entity, as well as a list of FDA Citizen Petitions and appeals.

Table 1. Litigation filed by Vanda Pharmaceuticals against FDA (and the Federal Government) Since 2019

Table 2. Citizen Petitions and Appeals Filed by Vanda Pharmaceuticals Against FDA Since 2019

In May 2023, we posted about a CMS proposed regulation that sought to make a wide variety of changes to the Medicaid Drug Rebate Program (MDRP), including a new “price verification survey,” and a controversial proposal to require “stacking” of discounts to different customers when determining best price.  Fortunately, in the final regulation, which was published in the Federal Register on Thursday, September 26, CMS decided not to finalize some of the more objectionable proposals – a good illustration of the usefulness of submitting comments on proposed regulations.

CMS did not finalize the price verification survey, which would have required manufacturers of 10 costly drugs selected annually to provide clinical information as well as information on production, distribution, research, and marketing costs, revenue and profit, and ex-U.S. pricing, among other things.  CMS also decided to forego its best price stacking proposal, which has been the subject of litigation, though CMS is instead going to pursue a “collection of additional information from manufacturers related to best price stacking methodologies to inform future rulemaking.”  In addition, CMS is not going to finalize an “all-in” definition of “manufacturer,” which would have required that a manufacturer and all of its affiliates, subsidiaries, business segments, and entities under common corporate ownership or control each maintain a National Drug Rebate Agreement (NDRA), with the threat of termination of all of the manufacturer’s agreements if this requirement were violated.  Another rejected proposal was a definition of “vaccine” (vaccines are exempt from Medicaid rebates), which would have limited this term to a product that is administered prophylactically – i.e., to prevent rather than treat a disease. Yet another rejection was a proposal requiring a diagnosis on Medicaid prescriptions as a condition for claims payment.

Despite the removal of some of the most controversial proposals, the final rule still contains a variety of significant changes, which become effective on November 19, 2024.  The most noteworthy are the following:

1.  Penalties for “Misclassification”

The Medicaid Services Investment and Accountability Act of 2019 added new penalties to the Medicaid rebate statute for knowingly misclassifying a covered outpatient drug.  See 42 U.S.C. § 1396r-8(b)(3)(C)(iii).  CMS’ final regulation expansively defines a “misclassification” to include not only misclassifying the drug category (e.g., misclassifying a single source drug or innovator multiple source drug as a non-innovator multiple source drug), but also reporting other “drug product information . . . that is not supported by the statute and applicable regulations.”  The term “drug product information” is now defined to include NDC, drug name, units per package size (UPPS), drug category (S, I, or N), unit type (e.g., TAB, CAP, ML, EA), drug type (prescription or OTC), base date AMP, therapeutic equivalent code, line extension indicator, 5i indicator, 5i route of administration (if applicable), FDA approval date, FDA application number or OTC monograph citation (if applicable), market date, and covered outpatient drug status.  In response to comments, the catch-all phrase “any other information CMS deems necessary” was deleted from this list.  A misclassification also includes correctly reporting drug product information, but paying rebates at a level not corresponding with that classification.  A misclassification can occur even if it was not a knowing error.

The regulation sets forth a process under which CMS may notify a manufacturer in writing about a misclassification, after which the manufacturer must (1) report and certify corrected product information in the Medicaid Drug Programs (MDP) system within 30 calendar days after the CMS notice; and (2) pay any underpaid rebates to states and provide documentation to CMS that such payments were made, both withing 60 calendar days after the CMS notice.  Remarkably, manufacturers may not dispute a CMS notification.  CMS specifically declined to provide a dispute resolution process, inconsistently explaining on one hand that the statute does not provide for such a process, but on the other hand stating that CMS will consider a dispute process for future rulemaking.  The preamble notes that the corrections required by a CMS notice may extend back to periods beyond the 10-year recordkeeping requirement under the MDRP.  If a manufacturer no longer has records required to make corrections, it may make “reasonable assumptions.”

With regard to the 30-day deadline for corrections, many manufacturers who have corrected drug product information know that it frequently takes longer than 30 days to investigate and correct information such as base date AMP, market date, or unit type, and revise the other drug data and prices that follow from such corrections – especially if numerous NDCs are involved.  However, CMS rejected requests to extend the 30-day timeframe.  The preamble (but not the rule) does state that a manufacturer may request an informal extension of the 30- and 60-day deadlines if there are extenuating circumstances.

The 60-day deadline for adjusting rebates to the states means that these adjustments will take place outside of the usual quarterly cycle in which rebate adjustments have traditionally been made with the states.

If a manufacturer fails to make corrections or pay rebates within the respective deadlines, CMS may do any or all of the following:

• Unilaterally correct the drug product information, which the manufacturer must certify in MDP within 30 days;
• Suspend the drug in question from the MDRP and deny federal financial participation (FFP; i.e., funding) to states if the drug is dispensed to Medicaid beneficiaries;
• Impose a civil monetary penalty not to exceed 23.1% of the AMP for each unit paid for by Medicaid during the period of misclassification.

If these actions were not enough, a manufacturer’s rebate agreement may be suspended if the information required in a CMS notice is not reported within 90 calendar days, as further explained in section 2, below.

CMS will also post annually on a public web site all of the drugs that were identified as misclassified during the previous year, and any of the above actions taken by CMS.

2.  Rebate Agreement Suspension

The final rule for the first time provides for suspensions of rebate agreements in two circumstances.  The first is where a manufacturer receives a notice of a misclassification described in section 1, above, and fails to correct the drug product information within 90 calendar days.  Second, if a manufacturer fails to submit timely quarterly pricing reports, CMS will notify the manufacturer of the failure.  If the manufacturer fails to submit the required pricing reports within 90 calendar days after the notice, the manufacturer’s rebate agreement will be suspended for all of the manufacturer’s covered outpatient drugs furnished after the end of the 90-day period, and will remain suspended until the pricing information is reported in full to CMS and certified, and CMS reviews it for completeness, but may not be suspended for less than 30 calendar days.  Continued suspension of the rebate agreement may result in termination for cause.  The suspension of a rebate agreement will not affect the status of the manufacturer’s covered outpatient drugs under the 340B Drug Discount Program or under Medicare Part B.

3.  Restatements Pursuant to Internal Investigations

Under the MDRP, manufacturers must restate incorrect AMPs and best prices and may do so without CMS involvement going back three years from the current quarter.  Periods before the three-year window may only be restated pursuant to a request to CMS citing one of the grounds specified in the regulations.  One of the specified grounds for such a request is to address specific rebate adjustments as required “under an internal investigation.”  CMS proposed to define an “internal investigation” as a manufacturer’s investigation of its AMP, best price, customary prompt pay discounts, or nominal prices previously certified to CMS “that results in a finding of fraud, abuse, or a violation of law or regulation.”  In response to manufacturer objections, CMS inserted the word “possible” before “fraud, abuse, or a violation of law or regulation” so that manufacturers would not have to concede legal fault in order to make a restatement beyond three years. However, a restatement request will still concede a “possible” violation of law – even if the error caused an overpayment of rebates to the government’s benefit.  (CMS has previously stated that a restatement may result from an internal investigation that discovered an underpayment or an overpayment of rebates.)  The manufacturer must also “make data available to CMS to support its finding” of a possible violation.  CMS has not typically required manufacturers to submit data supporting a restatement beyond the three-year window, other than submission of change request templates and an estimate of the financial impact (i.e., how much money will be owed to the states or to the manufacturer).  It remains to be seen what additional information CMS will be requesting to support a manufacturer’s finding of possible fraud, abuse, or violation of law.

4.  Other Changes

The final rule contains an assortment of other changes to the MDRP, which include the following:

• “Direct reimbursement” definition: Under the statute, covered outpatient drugs do not include drugs that are used incident to other services (e.g., physicians services or inpatient hospitals services) and for which Medicaid payment may be made as part of payment for the service “and not as direct reimbursement for the drug.”  42 U.S.C. § 1396r-8(k)(3).  Under the final rule, “direct reimbursement for the drug” would not be limited to separate payment for the drug.  It would also occur when there is an all-inclusive payment for the drug and the service, but the drug, the charge for the drug, and the units are specified on the claim, and the inclusive payment includes an amount directly attributable to the drug based on a reimbursement methodology described in the state’s Medicaid state plan.
• Market Date definition: Market Date, which determines the baseline quarter, is defined in the final rule to be “the date on which the covered outpatient drug was first sold by any manufacturer.”  The preamble explains that manufacturers may use reasonable assumptions as to when a sale takes place (e.g., date of payment, date of shipment, date of invoice, etc.).  The preamble also explains that the definition is prospective only, so that manufacturers that determined Market Date in accordance with earlier program instructions that Market Date was the earliest date the drug was available for sale will not be required to change the Market Date to the earliest date sold.
• Three-Year Limit on Disputes: The final rule establishes a three-year limit for manufacturers to dispute, audit, or request a hearing on state utilization data.  The three years runs from the last day of the quarter from the state invoice postmark date.  Commenters had advocated a similar restriction on states seeking to submit rebate utilization, citing certain states that have sent invoices for decades-old utilization.  CMS declined to impose any similar time limit on states, explaining that states have an incentive to resolve disputes promptly because federal law prohibits them from receiving FFP for adjustments beyond two years after a claim for FFP is first filed.  CMS failed to mention that states may request a waiver of the two-year deadline for good cause.  The final rule contains no provision for good-cause waivers of the new three-year limit on disputes.
• PBM Spread Reporting: Pharmacy Benefit Managers (PBMs) have been criticized in recent years for their practice of spread pricing, and Congress has been debating legislation that would prohibit it.  Spread pricing refers to PBMs’ practice of charging their health plan clients a higher price for a unit of dispensed drug than the PBM pays the pharmacy for the unit.  The so-called spread, or margin, is not disclosed by the PBM to their clients, patients, or anyone else.  The final rule, while not prohibiting spread pricing, takes a step toward discouraging it through a new transparency reporting requirement.  Medicaid managed care plans must contractually require their PBMs to separately report to them payments made to providers — such as drug reimbursement, dispensing fees, drug administration fees, and payments for other patient services — and expenses of the PBM itself —  such as administrative costs, fees, and other expenses.
• Codification of URA cap sunset: Under the American Rescue Plan Act of 2021, a provision that capped the Unit Rebate Amount to 100% if the average manufacturer price (AMP) was sunsetted effective December 31, 2023.  The final rule makes conforming changes to the MDRP regulations.  In the preamble, CMS foreclosed any possibility of waiver of inflation rebates for drugs in shortage (similar to waivers provided for under the Medicare Inflation Rebate Programs), explaining that CMS has no such authority under the Medicaid statute.

We can all acknowledge that the title of this post is not that funny-at least, not to anyone other than medical device regulatory nerds, such as the author of this post. What no one should find funny is how CDRH seems to be approaching Breakthrough devices of late, setting clinical study expectations so high that these innovative, novel, life-saving products may never get to the other side of the door, regardless of how much they knock.

CDRH takes great pride in stating that it is committed to innovation. In fact, it has a whole page dedicated to “CDRH Innovation,” which states that CDRH “is committed to advancing public health by helping to bring innovative technologies to market.” In particular, CDRH touts its Breakthrough Devices Program, which it advertises as a “program for certain medical devices and device-led combination products that provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating diseases or conditions. Manufacturers can expect increased interaction with the review team and prioritized review of the marketing submission.”

The reality, however, is quite different. The Breakthrough program started in 2015. Since that time, CDRH has granted 921 Breakthrough devices, and CBER has granted 12. This graph shows the number of granted Breakthrough Device designations by fiscal year.

Of the 933 devices granted Breakthrough status, a whopping total of 95 have received marketing authorization (91 CDRH devices and four CBER devices). That is just barely over 10% in almost a decade. While there can be any number of reasons why so few have received authorization, if this were truly a program to benefit innovative products, it would stand to reason that more would have been successful in getting to market, especially given the volume granted designation in 2020-2021.

In advising clients who have received Breakthrough designation, one theme seems to be emerging, which we expect is responsible for at least some of the missing authorizations-CDRH’s clinical trial expectations, especially for low-prevalence conditions, can almost guarantee that most of these Breakthrough devices never see the light of day. CDRH seems unwilling to move away from a theoretical world in which money and time are abundant and enriching studies is a simple task. For certain indications or populations, a prospective study is simply infeasible-even a well-funded, large company is unlikely to enroll tens of thousands of study participants to properly power a study for a low-prevalence disease. Even for higher-prevalence conditions, CDRH’s recent feedback in pre-submission meetings shows just how far apart the review teams are from the reality of what it takes to run a robust clinical trial.

For many companies, start-ups in particular, a request for Breakthrough designation may be their first interaction with FDA. These requests are often based upon promising data from early feasibility studies, and the indication requested stems from the results of those small studies without considering what the requirements might be for a pivotal study to support the same indication.

If a company is successful in obtaining Breakthrough status, when it goes back to the FDA with a proposed pivotal study design, it may not like what it hears-that a study to support the Breakthrough indication will need to be larger and more complex than the company likely anticipated or is able to support. This then puts the company in the unenviable position of deciding whether to abandon its Breakthrough status to design a more palatable study for a different indication, or to negotiate study design with the Agency to support the Breakthrough indication. And while FDA repeatedly states that it does not design studies, the sponsors do, the hard truth is that only FDA can ultimately deem a study adequate to open the door to allow the Breakthrough device to cross the threshold into the marketplace.

So what can be done? There is no reason for the Breakthrough to be the first interaction-it only has to be submitted to the Agency before submitting the marketing application. Therefore, while there is no guaranteed path to success, one suggestion is that before going to FDA with a Breakthrough designation request, companies should submit a standard pre-submission with proposed indications and clinical trial design. If a company takes this approach before submitting a Breakthrough request, the company can gain alignment with FDA on what its expectations will be for a study to support the indication desired by the company, before getting a Breakthrough indication only to learn that FDA’s clinical trial expectations are impractical.

CDRH should take a close look at the Breakthrough designations granted to date, how many sponsors with Breakthrough devices submitted marketing applications that were not ultimately granted, and how many came in with pre-submissions with requests for feedback on clinical trial design that ultimately never submitted a marketing application. If CDRH truly wants to be a hub of innovation, it needs to find ways to work with companies to facilitate market access, rather than slamming the door in their face.

In the Hatch-Waxman Community there are certain folks who are viewed as “the Founders” or pioneers of the law.  There are, of course, the names Representative Henry Waxman and Senator Orrin Hatch, but there were several other Founders.  One of them—who was said to have been an honorary Member of Congress leading up to the September 24, 1984 enactment of the Hatch-Waxman Amendments—is Alfred B. Engelberg.

These days, Al (as we have come to know him) is a Trustee for The Engelberg Foundation, a private foundation that supports the Icahn School of Medicine at Mt. Sinai.  But forty years ago, Al was the generic drug industry’s patent counsel during the negotiations that led to the Hatch-Waxman Amendments.  He originated the idea of patent certifications, new drug exclusivity, and the Bolar exemption.  (And by the by, Al, a patent attorney, also brought the earliest successful Paragraph IV patent challenge in the 1980s – see here).

Throughout his illustrious career, Al has been engaged with Hatch-Waxman, even authoring one of the earliest papers providing an account of the law: “Special Patent Provisions for Pharmaceuticals: Have They Outlived Their Usefulness?”  In his new book, “Breaking the Medicine Monopolies: Reflections of a Generic Drug Pioneer,” which will be released in January 2025 by Post Hill Press and is available now for pre-order on Amazon, Al provides a first-hand account of the events that led to the enactment of the Hatch-Waxman Amendments and of the many others who have shaped brand-name and generic drug competition over the last fifty years.

From Chapter 1 (My First Generic Drug Client), through Chapter 4 (The Hatch-Waxman Act), to Chapter 12 (My Prescription for the Future), the 208-page “Breaking the Medicine Monopolies: Reflections of a Generic Drug Pioneer” is definitely worth a read!  It provides a perspective on Hatch-Waxman that only a few folks out there (and dwindling) can provide.

FDA issued a Federal Register notice on September 13, 2024, seeking feedback on the Integrated Review format that the Center for Drug Evaluation and Research (CDER) began using as part of its New Drugs Regulatory Program (NDRP) modernization effort several years ago.

The NDRP focused on six strategic objectives one of which was the implementation of the Integrated Assessment which per CDER was designed to “critically, collaboratively, and consistently assess whether information in drug approval applications meets legal and regulatory requirements.”  These efforts included the adoption of a new review template for the assessment and documentation to be used in reviewing NDAs and BLAs with an overall goal of having a more collaborative inter-disciplinary approach to the process.  While much of the effect may have been on the internal processes of the review division and other disciplines tasked with evaluating the approvability of applications submitted to CDER, a significant change also occurred in how CDER conveys information about the internal review process and conclusions that lead to an application approval.  Specifically, CDER moved from sharing the reviews of the individual disciplines in the documents available to the public to sharing an Integrated Review which shares the conclusions but much less of the detail of each review.

Before FDA even asked, we had been considering an HPM FDA Law Blog post on this subject.  The appeal of distilling down the extensive process that goes into the decision to approve an application into a single package is easy to see, and some may be interested in only the ultimate distillation – an approval is issued or not. As frequent consumers of both the old-style Summary Basis of Approval (SBA) that includes the individual detailed discipline reviews and the newer leaner Integrated Assessments, however, we have found the more summary nature of the Integrated Assessments to be lacking information that can be critically important in identifying and understanding how resolution was reached on issues identified in the review.

For example, one cannot always discern the opinions of individual reviewers in an Integrated Review.  Those of us seeking to learn how FDA may approach a similar issue in another context want to understand what the differences of opinion were.  The Additional Analyses and Information section of the Integrated Review includes only the separate reviews of reviewers who “disagree with significant elements of the Executive Summary and Interdisciplinary Assessment sections or the decision of the Signatory Authority.”  89 FR 74966 at 74968 (Sept. 13, 2024).  Differences of opinion that were resolved before the action was taken would not be included.

Another potential problem with an Integrated Review is that we can never know what information was eliminated from the individual reviews.  For example, perhaps the Integrated Review simply agrees with some conclusion in an individual review but does not include the “why” rationale that the individual reviewer found persuasive.  Fully understanding FDA’s thought process and the basis of its conclusions (i.e., the “why”) is of particular import to those who seek to understand how FDA may view the issue in other situations.

We also have encountered instances where there was a mathematical or other objective error in the underlying review.  The Integrated Review includes the conclusions or results of various analyses, but there is no “show your work” feature.  Consequently, it can be difficult to follow how FDA came to its conclusion.

Some of the goals of the Integrated Review (including making information available to lay people) may be well-served by the more concise document.  Consolidation into a single review by its nature, however, will leave details of the individual review process on the cutting room floor.  There are those who are willing to read through the more extensive package consisting of all the reviews.  These individual reviews already exist and could be posted in addition to the Integrated Review or an even more concise version of the Integrated Review.

We look forward to seeing what others have found useful or frustrating about the Integrated Review, including in comments that provide responses to these specific questions FDA asks in the Federal Register notice:

1. We are interested in preserving for stakeholders what they find most useful in FDA reviews.
2. Comparing the Integrated Review to previous review documentation, is there any information you are having difficulty locating?
3. Are you able to use the Integrated Review for the same purpose that you used previous reviews? If not, please provide specific examples.
4. We are interested in specific recommendations about any areas of the Integrated Review documentation of the Integrated Assessment that can be improved to meet the needs of stakeholders.
5. We are interested in stakeholders’ views regarding the advantages and disadvantages of an interdisciplinary assessment presentation of key review issues and the resultant integration of the assessments of multiple disciplines into a single Integrated Review document.
6. We would like to know whether the new format of the Integrated Review documentation for the Integrated Assessment provides clarity of benefit-risk assessments and informs your knowledge of FDA’s basis for making decisions.
7. Based on the integrated review, were the issues that concerned the review team clear and understandable? If so, what helped achieve this? If not, what can be improved?

Comments are due by December 12, 2024.

Forty years ago today—on a sunny Monday, September 24, 1984 at approximately 3:30 PM Eastern Time in the Rose Garden at the White House—President Ronald Reagan signed into law Public Law 98-417, the Drug Price Competition and Patent Term Restoration Act of 1984, stating that “[t]he legislation will speed up the process of Federal approval of inexpensive generic versions of many brand name drugs, make the generic versions more widely available to consumers, and grant pharmaceutical firms added incentives to develop new drugs.”  (Thanks to the Ronald Reagan Presidential Library & Museum and its White House Photo Collection Contact Sheets, you can see some of the enactment pictures here and here with President Reagan, Margaret Heckler, Strom Thurmond, Orrin Hatch, Henry Waxman, James (Jimmy) Quillen, and Ralph Regula.)  Some would initially refer to the new law as Waxman-Hatch, but during the 1990s it became known as Hatch-Waxman.  And that name has stuck for many of us.

There have already been (with more coming) a slew of 40th anniversary celebration papers, analyses, and events in 2024, including:

• The Brookings Institution’s Hatch-Waxman at 40
• The Association for Accessible Medicines’ Hatch-Waxman turns 40. Is it over the hill? (Or is the Hill over Hatch-Waxman…)
• The Engelberg Center on Innovation Law & Policy at NYU School of Law’s Health Care at Reasonable Cost: The Hatch-Waxman Act at 40 and Beyond
• The Food & Drug Law Institute’s Hatch–Waxman at 40: A Critical Examination of its Past and Future
• The American Academy of Neurology’s Happy Birthday, Hatch-Waxman: What 40 Years of Generic Drug Access Has Done for Neurology
• The Orrin G. Hatch Foundation’s For cheap generic drug prices, you can thank 40 years of Hatch-Waxman
• We Work For Health’s Hatch-Waxman Act: Celebrating 40 Years of a Balanced and Innovative Drug Ecosystem
• Tradeoffs’ Race to the Bottom Series
• FDA CDER Conversations – 40th Anniversary of the Generic Drug Approval Pathway
• The U.S. Patent and Trademark Office’s Drug Patent and Exclusivity Study

Over the years we’ve celebrated various Hatch-Waxman milestones.  For the 25th and 30th anniversaries, we held trivia contests (here and here).  For the 40th anniversary of the Orange Book (and the quasi-35th anniversary of Hatch-Waxman), we put together a public Orange Book Archive (and it has become one of the more popular stops on the FDA Law Blog).

So what should we do here on the FDA Law Blog to celebrate the 40th anniversary of Hatch-Waxman?  We thought about an interview with Rep. Waxman (sadly, Sen. Hatch passed away in April 2022), but Eli Mazour’s Clause8 podcast from October 2018 already covered that ground: see Henry Waxman – The Hatch-Waxman Act and a Life In Congress.  We wanted something different . . . something useful to Hatch-Waxman practitioners.  We thought long and hard, and then it came to us.  We’ve done our best over the years to collect each Paragraph IV Certifications List FDA has published.  (And, as you’ll see, sometimes we’ve captured multiple versions on the same day as FDA furiously changed some things around.)  How about an archive of what is, next to the Orange Book, perhaps the second most relied on and viewed list associated with the Hatch-Waxman Amendments—FDA’s ANDA Paragraph IV Certifications List?!?  That stuck with us, so we went ahead and created the ANDA Paragraph IV Patent Certifications List Archive.

The “PIV List” started out in the early 2000s as a pilot program FDA initiated in response to a July 27, 1999 Citizen Petition submitted by Biovail Corporation International (FDA Legacy Docket No. 1999P-2778) requesting that “FDA disclose to the public through its Web site (1) the name of the innovator drug and approved dosage strengths, (2) the date the first Paragraph IV-containing ANDA is submitted, and (3) the dosage strengths included in that ANDA.”  On October 4, 2000, a second Citizen Petition (FDA Legacy Docket No. 2000P-1556) was submitted by Hyman, Phelps & McNamara, P.C., requesting, among other things, “that FDA disclose to the public through its Web site (1) the date on which the first Paragraph IV-containing ANDA was received by FDA, and (2) the patents to which ANDA applicants have made Paragraph IV certifications and the date of the first such certification for each patent.”  FDA responded to the Citizen Petitions on February 27, 2004, and issued a Press Release on March 2, 2004 (yeah, we saved that as well) concerning the PIV List.

The Paragraph IV Certifications List began as a web-based list on FDA’s website, and eventually transformed into a PDF downloadable list.  The most recent facelift to the PIV List occurred in June 2019 when FDA announced various enhancements (see our previous post here).  Unfortunately, FDA’s PIV List does not track changes to each of the entries (except for a change in 180-day exclusivity status).  And, as we recently noted, those entries can quietly change.  So, our new ANDA Paragraph IV Patent Certifications List Archive (which we will add a link to on the FDA Law Blog homepage) will serve to preserve more Hatch-Waxman history.

Thank you Senator Orrin Hatch and Representative Henry Waxman!  Your leadership and grit brought disparate parties together to benefit the public good (and has led to countless careers, including this blogger’s career)!

Oh, and what is this blogger’s memory of September 24, 1984?  It was uneventful.  I had just started 6th grade at Franklin Elementary School in Manitowoc, Wisconsin.  Here’s the class picture for proof.  You’ll have to find me in it . . . .  Thank Gawd there’s some safety in numbers!

On August 22, 2024, FDA hosted a webinar to provide further guidance on the regulatory requirements it intends to apply to Laboratory Developed Test (LDT) developers in Stage 1 of the phaseout policy of the LDT Final Rule – during which FDA has said laboratories developing LDTs will need to comply with Medical Device Reporting (MDR) (21 CFR Part 803), Corrections and Removals (21 CFR Part 806), and Complaint Handling (21 CFR § 820.198) by May 6, 2025 unless the LDTs offered are those for which the Final Rule says FDA may provide enforcement discretion with respect to these specific requirements. See our prior blog post summarizing the different phaseout stages and categories of enforcement discretion.

The webinar largely consisted of summarizing the general requirements under Parts 803, 806 and 820.198, which we do not reproduce here (but see another of our prior blog posts discussing these requirements and their applicable to LDTs in greater detail; you can also find FDA’s slides from the webinar here). Instead, we focus here on the few notable statements that provide new or more detailed guidance than FDA has previously offered.

Complaints

FDA discussed how LDT developers should handle the transition from the current Quality System Regulation (QSR)(21 CFR Part 820) to the recently promulgated Quality Management System Regulation (QMSR) that is scheduled to take effect on February 2, 2026. The new QMSR incorporates the requirements of ISO 13485 by reference, including those related to complaint handling. FDA noted that because the scope of ISO 13485’s complaint handling requirements are “substantially similar to the QS Regulation for complaints”, FDA believes that laboratories that satisfy the current QSR complaint requirements “will meet the amended QS Regulation requirements” for complaints. Prior to February 2, 2026, FDA also said that it does not intend to enforce complaint requirements under 21 CFR 820.198 for developers that are already in compliance with the complaint requirements under ISO 13485.

MDR

FDA discussed a few preliminary steps that it says laboratories should take prepare for submitting MDRs as medical device manufacturers.

FDA indicated that, prior to submitting an MDR, laboratories will first need to request FEI Numbers from FDA, which are ordinarily provided as part of FDA’s establishment registration process (a requirement that FDA has said it does not intend to enforce for LDTs until Stage 2 of the phaseout policy). To request an FEI Number, laboratories will need to provide a long list of identifying information to FDA via email (feiportal@fda.hhs.gov) (see slide 23 of the FDA’s presentation for the complete list). Of note, laboratories will need to provide a comprehensive list of activities conducted at the laboratory site. There is no cost associated with obtaining an FEI Number.

Additionally, the Agency said that laboratories will need to identify a Product Code for each LDT that FDA says is subject to MDR requirements, and such Product Code will need to be identified in any future MDR reported to FDA. Product Codes are typically assigned to a device based on the regulatory classification of the device, found in 21 CFR Parts 862-892. Although a test developer can use one of these existing device-specific Product Codes if one is identified for the specific LDT, FDA has also issued 7 LDT-specific Product Codes that it says will need to be used in place of or in addition to the device-specific Product Codes. The LDT-specific Product Codes are as follows:

• SCE:  IVD offered as LDT, first marketed before May 6, 2024, and not modified beyond scope described in preamble to LDT Final Rule.
• SCF: LDT, unmet need within an integrated healthcare system.
• SCG: Modified version of another manufacturer’s FDA-authorized test within scope described in preamble to LDT Final Rule.
• SCH: LDT, approved by NYS CLEP.
• SCI: IVD offered as LDT—not designed, manufactured, and used in a single lab—that is not under a targeted enforcement discretion policy described in the preamble to LDT Final Rule.
• SCJ: LDT—designed, manufactured, and used in a single lab—that is not under a targeted enforcement discretion policy described in preamble to LDT Final Rule.
• SCK: LDT, non-molecular antisera for RBC antigens when there is no alternative IVD.

There are no Product Codes for the categories of LDTs the Final Rule identifies as being subject to potential enforcement discretion for all regulatory requirements, including MDR requirements (i.e., 1976-type LDTs; Human Leukocyte Antigen LDTs for transplantation; Forensic Use LDTs; and LDTs performed within the Veterans Health Administration or Department of Defense).

The Agency also said that laboratories should set up an eMDR account, the online system used for submitting MDRs, before the lab needs to submit an MDR. This process includes requesting an ESG (electronic submission gateway) account, submitting a “test MDR submission”, and sending FDA a copy of the “pass” acknowledgement (AcK3) to the eMDR help desk to request approval for a production account, all of which can take some time before the laboratory is able to submit MDR electronically.

After a lab submits an MDR, FDA said that laboratories should save the electronic “Acknowledgement 3” (Ack3) generated after submitting an MDR in the MDR event files. This callout is notable as FDA recently issued its first Warning Letter citing a manufacturer for failing to save these electronic acknowledgements in MDR event files. It should be noted that 21 CFR 803.18(b)(1)(ii) requires manufacturers to keep copies of ALL electronic acknowledgments sent by FDA in response to electronic MDR, not just Ack3.

Corrections and Removals

Under 21 CFR Part 806, manufacturers generally need to communicate corrections and removals (i.e., recalls) to consignees of the product, i.e., the customers to whom a device was distributed. During the webinar, FDA described two examples of recalls: one where the consignee (presumably a patient) is in possession of a specimen collection device associated with an LDT that the laboratory instructs the consignee to dispose of, and a second where the consignee is a healthcare provider that is notified not to use false test results and use a different test instead. However, even after the webinar, it is not entirely clear who the “consignee” is in the case of an LDT that does not leave the laboratory (i.e., is it the lab itself, the healthcare provider, or the patient?).

With respect to FDA’s example of a sample collection kit that has been distributed outside the laboratory, it is unclear why this activity would be considered a recall of the LDT, since use of the collection device in and of itself it not likely to cause adverse health consequences. In the preamble to the Final Rule, FDA explicitly stated that collection devices are not LDTs and expressed its expectation that collection devices are already in compliance with applicable medical device regulations.  The removal of the collection device from its point of use or instructing the patient to destroy the collection devices would be separate from any actions taken with respect to the LDT that would be subject to a correction or removal.

It also occurs to us that FDA has not provided any guidance regarding the use of risk management files in connection with recalls. In practice, traditional medical device companies establish risk management files during the design phase of a device, which are then used to inform the severity of harm and probability of occurrence in health hazard evaluations and, in turn, help determine whether a recall is necessary. Because most LDT developers will not implement risk management files until design controls are required (in Stage 3), they may have to conduct more ad hoc risk analysis when evaluating complaints that may necessitate recalls prior to Stage 3.

LDT Case Studies

FDA provided two “case studies” with mock situations involving LDTs, walking through how each situation should be handled as an MDR or recall (see slides 41-42). Although neither addresses the questions we raise about the difficulty in assessing recalls without risk management files or determining who the consignee is, these examples may be helpful to laboratories looking for straightforward examples of what it looks like to receive a complaint and process it as either an MDR or recall.

Previously Submitted Questions

FDA then proceeded to answer questions that were submitted to the agency before the webinar. We are not reproducing the questions that were simple recitations of regulatory definitions or FDA’s arguments in the Final Rule. Below are a few of the more interesting Q&As (paraphrased, as FDA did not provide these in the slides):

• Q: How do recall requirements apply if LDT materials and equipment never leave the laboratory?
  • A: FDA explained that recalls are actions taken by a manufacturer to remove or correct a device that FDA considers in violation and against which FDA would take action. While a removal requires physical removal from the point of use, a correction does not. Therefore, FDA asserted that an action may constitute a recall whether or not a device is physically removed from its point of use. Even if LDT materials never leave a lab, they can be recalled. [HPM Note: This suggests that the vast majority of LDT recalls will be corrections, as LDTs typically do not have materials that leave the laboratory unless FDA is now considering the collection device to be part of the LDT which we noted above is different from the FDA’s position in the preamble to the LDT rule.]

• Q: The Final Rule states that LDTs falling within its potential enforcement discretion policies for currently marketed LDTs or LDTs to meet unmet needs are expected to comply with 21 CFR Part 820, Subpart M (Records), but these regulations cite to other sections of Part 820 for which these categories of LDTs are subject to enforcement discretion (e.g., 21 CFR 820.20 and .40) – so what requirements are expected for these LDTs under this subpart of the regulation
  • A: As the Final Rule states, FDA recognizes that part 820, subpart M (records) includes cross-references to sections 820.20, 820.22, 820.40, and 820.50, for which FDA does not expect compliance for these categories of LDTs. FDA indicated that it does not expect labs will comply with these regulations simply because they are referenced in Subpart M.

• Q: What are the differences between CMS/CLIA and FD&C Act requirements for complaint records?
  • A: FDA asserted that CLIA’s complaint requirements relate to lab operations/processes (e.g., specimen handling errors, lab personnel qualification issues, record falsification) and are not specific to identifying test-specific problems, whereas FDA’s complaint handing requirements focus on investigation of test-specific problems (e.g., issues with the design, manufacturing, and components of the device). FDA explained that all test-related complaints that a lab receives should be evaluated for FDA MDRs and noted that to address test-related complaint handling requirements outlined in 21 CFR 820.198, a lab may decide to expand its current complaint handling procedures, which meet CLIA requirements.

• Q: When a lab modifies another manufacturer’s cleared or approved test, is the laboratory considered a manufacturer responsible for meeting MDR requirements?
  • A: According to the Agency, the lab would be considered a  manufacturer of the new, modified test and must follow applicable regulatory requirements, including MDR requirements.

What Now?

Stage 1 is scheduled to take effect on May 6, 2025. According to FDA, by this date, laboratories should have established procedures and trained employees on requirements for complaints, MDR, and corrections and removals. As noted above, this will also entail setting up eMDR, requesting an FEI Number from FDA, and evaluating currently used LDTs to determine which product code(s) apply to each procedure. FDA is unlikely to provide significantly more guidance on these topics before they are implemented, although laboratories can consider reaching out to the agency with specific questions as they arise during implementation (e.g., reaching out to FDA’s Division of Industry and Consumer Education – DICE@fda.hhs.gov).

FDA plans to hold its next webinar on September 24, 2024, which will cover the labeling requirements that go into effect in Stage 2.

The dietary supplement exclusionary clause is, as its name suggests, a clause in the Federal Food, Drug, and Cosmetic Act (FDC Act) definition of dietary supplement.  That clause excludes those ingredients that were first marketed as drug ingredients. Specifically, FDC Act 201(ff)(3)(B) provides that a dietary supplement does not include:

(i) an article that is approved as a new drug under section 355 of [the FDC Act], certified as an antibiotic under section 357 of [the FDC Act], or licensed as a biologic under section 262 of title 42, and

(ii) an article authorized for investigation as a new drug, antibiotic, or biologic for which substantial clinical investigations have been instituted and for which the existence of such investigations has been made public,

which was not before such approval, certification, licensing, or authorization marketed as a dietary supplement or as a food unless [FDA] has issued a regulation, after notice and comment, finding that the article would be lawful under [the FDC Act].

The phrase in subsection (ii) “authorized for investigation as a new drug” is generally accepted to mean that an IND is in effect.  However, there is a continuing disagreement between FDA and industry about how that phrase should be read with the phrase “and for which substantial clinical investigations have been institute and for which the existence of such investigations has been made public.”  FDA interprets the exclusionary clause to mean that the critical date is the date that the IND came into effect, not the date on which the existence of the substantial clinical investigations under the IND has been made public.  Because the existence of an IND is not public, FDA’s interpretation puts the dietary supplement industry at a disadvantage and creates great uncertainty.  Under FDA’s interpretation, it is impossible to determine whether there is a non-public IND prior to starting work on developing an ingredient as a dietary supplement.

By way of background, the exclusionary clause was added to the law to protect the pharmaceutical industry against making significant investments in drug development to then be undercut by a dietary supplement marketer who would take the identical product and introduce it as a dietary supplement.  However, FDA’s interpretation creates that exact risk for a dietary supplement manufacturer who invests in development of a dietary supplement.

Dietary supplement trade associations, including the Natural Products Association (NPA) and the Center for Responsible Nutrition (CRN) have filed citizen petitions challenging FDA’s interpretation several times.  On August 28 of this year, NPA sued FDA challenging FDA’s determination that NMN is excluded from the dietary supplement definition.

What led to NPA’s lawsuit?  The facts are detailed in the complaint.  Briefly, on October 11, 2022, FDA issued a letter in response to a new dietary ingredient notification (NDIN) by Inner Mongolia Kingdomway Pharmaceutical Ltd. (MKP) asserting that “NMN is excluded from the dietary supplement definition under [FDC Act § 201(ff)(3)(B)(ii)] and may not be marketed as or in a dietary supplement.”  This letter was somewhat of a surprise because several months earlier, on May 16, 2022, FDA issued a response letter to NDIN 1247 for NMN by SyncoZymes (Shanghai) Co. Ltd. acknowledging receipt of SyncoZymes’ NDIN without any comments related to the status of NMN.  Such a response letter is generally interpreted as a no objection letter.

In a supplemental letter dated November 4, 2022, FDA addressed MKP’s arguments that FDA’s determination was incorrect.  FDA cited February 16, 2021, as the first date on which another manufacturer could have marketed its NMN-containing dietary supplement lawfully after submitting an NDIN to the Agency on December 3, 2020.  FDA asserted that even if an NMN supplement was marketed on that date, it would still be excluded because, according to FDA, NMN was authorized for investigation as a new drug under an IND before December 3, 2020.  FDA did not disclose the exact date of the IND because that information is confidential.

Subsequently, in March 2023, the National Products Association (NPA) filed a citizen petition (CP) requesting that FDA determine that NMN is not excluded or, in the alternative, that FDA decide to exercise enforcement discretion and allow the continued marketing of NMN as a dietary supplement. FDA provided an interim response to the citizen petition 180 days after the petition was filed, stating that due to competing agency priorities FDA had not reached a decision on the citizen petition.

On 28 August, 2024, almost a year after FDA’s interim response to the CP, NPA filed a complaint in US District Court for the District of Columbia seeking preliminary and permanent injunction prohibiting FDA from taking any regulatory action against firms producing or  marketing NMN.  As detailed in the complaint, NPA’s complaint follows FDA’s “Notice of FDA Action” letter to a member of NPA stating that FDA detained that member’s import of NMN because “it appears to be a new drug . . . without an approved New Drug Application.”  (According to NPA, this action shows that FDA has made a final decision on the status of NMN and is engaging in enforcement efforts in accordance with that decision).

The complaint challenges FDA’s alleged misapplication of the exclusionary clause.  In the 47-page complaint (and many exhibits), NPA makes it case providing seven reasons why FDA’s interpretation of the exclusionary clause is incorrect.  Primary arguments are that the canons of statutory interpretation require that the critical date for the exclusion to apply is the date that the existence of the substantial investigations is made public rather than the date that the IND is granted, and that FDA must consider whether the clinical studies that were done are substantial, an issue that NPA claims FDA did not consider in its determination that NMN was excluded.

This is not the first time that NPA sued FDA over its interpretation of the exclusionary clause.  Previously, it sued the Agency regarding the exclusion of N-acetyl cysteine (NAC).  That lawsuit was withdrawn when FDA issued final guidance that, although it had determined that NAC was excluded, it would exercise enforcement discretion while considering rulemaking under FDC Act section 201(ff)(3)(B) to permit the use of NAC in or as a dietary supplement.  Although that guidance resolved the immediate concerns for industry regarding marketing NAC, it left the uncertainty about interpretation of the exclusionary clause.  It remains to be seen if the courts ever get an opportunity to weigh in on the meaning of the exclusionary clause. We will of course continue to follow this issue.

FDA’s Office of Prescription Drug Promotion (OPDP) has issued its fourth Untitled Letter of 2024 – this one to AbbVie, Inc. (AbbVie), for a direct-to-consumer (DTC) TV advertisement for its drug UBRELVY (ubrogepant) that features tennis star, social media influencer and entrepreneur Serena Williams.  This letter, dated August 29, 2024, (at the height of the US Open, no less) comes not even a month after OPDP’s last letter from August 1, and a little over a month since another celebrity-related Untitled Letter, both of which we blogged about here.  OPDP alleges in this latest letter that the DTC TV ad made false or misleading representations and suggestions about the efficacy of UBRELVY, which is considered misbranding of the product under the Federal Food, Drug, and Cosmetic Act.  Advantage, OPDP.

UBRELVY is indicated for the acute treatment of migraine with or without aura in adults and is not indicated for the preventive treatment of migraine.  The approved labeling for UBRELVY includes a warning and precaution regarding hypersensitivity reactions, with the most common adverse reactions being nausea and somnolence.

The Untitled Letter states that the TV ad misleadingly suggests that UBRELVY provides a greater benefit in treating migraines than what has been demonstrated in clinical trials, which, from a public health perspective, can mislead healthcare providers, patients, and caregivers.  Specifically, OPDP alleges the ad implies that UBRELVY quickly eliminates migraine pain after just one dose, which was not fully supported by clinical data.  The TV ad shows Serena preparing to appear on a talk show and holding her head while experiencing pain and light sensitivity from a migraine headache, and then almost immediately appearing relaxed while the show lights continue to shine overhead.  Serena then voice overs with the claim that “One dose works fast to eliminate migraine pain,” with an accompanying graphic, “UBRELVY QUICKLY ELIMINATES MIGRAINE PAIN,” (emphasis added).  OPDP claims this before-and-after presentation, together with the claims, misleadingly suggest that UBRELVY eliminates migraine pain and symptoms more quickly than demonstrated in clinical trials, where only 19%-21% of patients experienced complete pain freedom within two hours of taking 50 mg and 100 mg of the drug, respectively, meaning the majority did not see such results.  Conversely, 11.8% of placebo patients achieved pain freedom at two hours. OPDP acknowledged the claim, “Some people had pain freedom within 2 hours” appeared in a small footnote in the TV, but this was not sufficient to mitigate the misleading suggestion that UBRELVY can eliminate migraine pain and symptoms more quickly than has been demonstrated in clinical trials.  OPDP also states that the “One dose…” language misleadingly suggests that all patients who take UBRELVY can expect their migraine pain to be eliminated after a single dose, when this also has not been demonstrated in clinical trials.  According to the labeling, approximately 19% to 22% of patients achieved pain freedom at two hours after receiving one dose of UBRELVY, which means that 78% to 81% of patients were not pain-free after one dose.  OPDP also specifically notes that the DOSAGE AND ADMINISTRATION section of the labeling for UBRELVY says, “If needed, a second dose may be taken at least 2 hours after the initial dose,” (emphasis added), adding to the misleading nature of the TV ad.

There are a few really interesting points that come with this letter, and we have to wonder whether OPDP is playing a few head games with this migraine drug ad.

The first issue of note is that the Untitled Letter asserts that using a celebrity athlete of Serena Williams’s stature amplifies the misleading impact of the ad to the audience due to her perceived credibility.  The statement includes a footnote with a string of references dating back to 1979 to support the assertion.  While not a new concept, OPDP did not include such a reference in the recent Auvi-Q enforcement letter featuring Brittany Mahomes, nor has OPDP included such a claim in other enforcement letters addressing ads featuring celebrities and athletes over the past few years.  These bloggers are curious to see whether OPDP may be taking a page from the FTC regarding concerns over endorsements and whether OPDP may extend this analysis beyond traditional celebrities featured in TV ads to social media influencers with large followings.

Another point of interest is contained in footnote 6.  OPDP acknowledges that the storyboard submitted on Form 2253 identifies in frame one that the ad opens in the afternoon with Serena in a talk show dressing room experiencing migraine pain and by frame eight of the storyboard, when Serena does her final mirror check before heading out to the talk show, it is evening – indicating a several hour time lapse between when UBRELVY is taken and when it starts to work.  OPDP notes that the time lapse is lost on the audience viewing the TV ad as the ad does not otherwise indicate the passing of time in a manner consistent with the storyboard.  For promotional committee reviewers, this really drives home the point that even with an OPDP pre-review of a DTC TV ad storyboard, the implementation of that storyboard will drive the compliance status of the ad.  While a number of scene changes may be captured in a storyboard, there are other aspects of a finished TV ad that must be considered (here – how lapse of time should be represented – but in other cases, quick movements and competing audio, among other things).

The Untitled Letter also references OPDP advisory comments previously provided to the prior holder of the UBRELVY New Drug Application (NDA) (Allergan, Inc.) on March 10, 2020.  OPDP states that while Allergan is no longer the application holder, “OPDP is concerned that [AbbVie] appears to be promoting Ubrelvy using similar claims and presentations in a misleading manner.”  New sponsors take note – when acquiring a new drug from another company, GET THE REGULATORY CORRESPONDENCE.

Game, set and match – it’s unclear whether AbbVie’s implementation of the storyboard was an unforced error or whether OPDP’s interpretation is something of a wildcard.  What we can tell you is that TV ads featuring drugs for conditions that affect millions of Americans will always be a higher priority for OPDP, and the stakes are high to get these ads right.

FDA recently published a Federal Register (FR) Notice [Docket No. FDA-2024-N-3945] announcing the publication of a draft strategy document, for public comment, outlining specific actions FDA plans to take to facilitate the use of innovative manufacturing technologies.

This FR Notice and draft strategy document are part of FDA’s commitment under the Prescription Drug User Fee Act (PDUFA) Reauthorization Performance Goals and Procedures for Fiscal Years 2023-2027 (PDUFA VII), wherein FDA committed to advance the use and implementation of innovative manufacturing.

“Innovative manufacturing” is a somewhat ill-defined term, but the agency uses it to refer to any novel manufacturing that can increase product development speed, bolster supply chains, or prevent drug shortages.  This would include continuous manufacturing, distributed manufacturing, modern aseptic manufacturing equipment and novel analytical methods.

In connection with this effort, on June 8, 2023, FDA participated in a public workshop on the use of innovative manufacturing technologies and discussed potential barriers to their adoption.  It was at this workshop that the agency committed to issuing a draft strategy document, for public comment.

At the workshop, stakeholders also shared feedback on their interactions with CDER’s Emerging Technology Program (ETP) and CBER’s Advanced Technologies Team (CATT), which were designed to guide sponsors on submissions which incorporate innovative manufacturing technologies.

Based on the exchanges during this workshop FDA developed the draft strategy document which outlines the specific activities FDA intends to undertake to facilitate the use of innovative manufacturing technologies.  They include the following:

1. Continuing to enhance CDER’s ETP and CBER’s CATT as mechanisms to support innovation.
   • Regarding CDER’s ETP, the current ETP guidance document, originally published in 2017, will be updated by the end of 2026, and will include details on communicating the type of products and stages of development for which a requestor can approach the ETP. In addition, by the end of 2026 FDA will issue a report summarizing the activities performed by FDA’s Emerging Technology Team (ETT), which includes relevant representation from all FDA pharmaceutical quality functions. Finally, the ETT will establish program goals and performance measures for the ETP.
   • Regarding CBER’s CATT, the center is currently revising its internal procedures, referred to as CATT 2.0, with the goal of providing better service to stakeholders interested in early engagement regarding innovative manufacturing technologies. This will include, by November 2024, a more streamlined process, tracking, more timely review of meeting requests, and communication with requesters by providing periodic updates.  In addition, the CATT website will be revised by November 2024 to provide additional clarity about the CATT meeting process, sponsor eligibility, meeting request content, timelines, and potential outcomes of CATT engagements.
2. Supporting and utilizing ongoing initiatives for advanced manufacturing to address potential barriers.
   • Given that a major regulatory barrier to the adoption of innovative manufacturing is a lack of international harmonization in regulatory requirements, FDA will continue to explore mechanisms for harmonization, including guidances, such as those developed by the International Conference on Harmonization (ICH), and pilot programs such as those created by the International Coalition of Medicines Regulatory Authorities (ICMRA).
3. Implementation of the Advanced Manufacturing Technology Designation Program.
   • In 2023, FDA published a draft guidance entitled Advanced Manufacturing Technologies Designation Program. It provides recommendations to sponsors interested in participating in FDA’s Advanced Manufacturing Technologies Designation Program, which is intended to facilitate the development of drugs manufactured using AMT. The draft guidance outlines the eligibility criteria for AMT designation, the submission and assessment process for requests, and the benefits of an AMT designation.  FDA intends to finalize the guidance on Advanced Manufacturing Technologies Designation program by the end of 2024.

“Inter Partes Review” and “Section 101” are not terms you typically run into on this all-things-FDA blog, but we have talked about such patent-related issues before (here and here), and they are important legal (patent) principles, particularly in the context of drug and biological products (and the Hatch-Waxman Amendments and the Biologics Price Competition and Innovation Act (“BPCIA”)).  And because of that, we try to stay abreast of such things (while staying in our “FDA lane”), especially when Congress gets involved to change the law.  To that end, we were recently alerted to the fact that the Senate Committee on the Judiciary has scheduled an Executive Business Meeting for Thursday, September 19, 2024 to mark-up, among other things, two bills of interest: (1) S. 2220, the Promoting and Respecting Economically Vital American Innovation Leadership Act  (“PREVAIL Act”); and (2) S. 2140, the Patent Eligibility Restoration Act of 2023 (“PERA Act”).

The PREVAIL Act

In short, the PREVAIL Act is intended to, among other things, reform the Inter Partes Review (“IPR”) process created by the 2011 Leahy-Smith America Invents Act.  IPRs have become an important tool used by generic drug and biosimilar manufacturers to try and clear patent thickets covering brand-name products prior to or during the pendency of an ANDA or aBLA submission.

Reading through the “Findings” section of S. 2220, introduced by Senators Chris Coons (D-DE), Thom Tillis (R-NC), Richard Durban (D-IL), and Mazie Hirono (D- HI), as well as the August 2023 press release accompanying the bill’s introduction, the PREVAIL Act sounds pretty good on paper.  After all, who could say “No” to this?

This bill supports inventors, encourages investments in intellectual property, secures U.S. global technology leadership, and protects economic and national security. The PREVAIL Act updates and improves on legislation that Senator Coons previously introduced to ensure that our patent system protects this essential property right.

Or to this from The Inventor’s Project:

The PREVAIL Act makes commonsense reforms to the [Patent Trial and Appeal Board] to promote fair treatment for inventors, improve efficiency, and ensure that the USPTO has the resources it needs to effectively administer a patent system that incentivizes American innovation and enables U.S. inventors to compete.

But there’s another side to this story.  As noted by the Association for Accessible Medicines (“AAM”) in a March 2024 letter opposing the bill:

The PREVAIL Act includes a prohibitive standing requirement, making it a “necessary condition[]” that an entity must be sued or charged with infringement before filing a petition for IPR.  This provision would prevent timely IPR challenges of pharmaceutical patents, and would chill the feasibility of such IPR challenges altogether. . . .

The PREVAIL Act’s proposal that, absent “exceptional circumstances” subsequent petitions cannot challenge the same patent, uniquely harms generic and biosimilar companies.  The Hatch-Waxman Act and [BPCIA] make it highly likely that multiple generic and biosimilar companies will be interested in invalidating the same patents, though not always at the same time, particularly where companies are at different stages of product development. With multiple companies interested in challenging the same patents, there are numerous circumstances in which a subsequently-filed petition may be warranted. . . .  The PREVAIL Act improperly impedes the IPR pathway for such subsequent petitioners, forcing these companies to defer to the arguments presented by their competitors.

The PERA Act

Like the PREVAIL Act, the PERA Act, introduced by Senators Thom Tillis (R-NC) and Chris Coons (D-DE) and intended to address patent eligibility under 35 U.S.C. § 101, also seems pretty good on paper.  Consider this June 2023 press release on the bill’s introduction:

There is now widespread bipartisan agreement in Congress and across all recent administrations that reforms are necessary to restore the United States to a position of global strength and leadership in key areas of technology and innovation, such as medical diagnostics, biotechnology, personalized medicine, artificial intelligence, 5G, and blockchain.

The Patent Eligibility Restoration Act achieves this critical goal by restoring patent eligibility to important inventions across many fields while also resolving legitimate concerns over the patenting of mere ideas, the purported discovery of which already exists in nature, and social and cultural content that everyone agrees is beyond the scope of the patent system. In short, this system is aimed at promoting technology-based innovation.

And again from The Inventor’s Project:

[D]esigned to clear up the confusion caused by recent court rulings on what can be patented under section 101 of the U.S. Code.  The Act aims to eliminate all judicial exceptions to patent eligibility, maintaining the current categories of what can be patented while adding specific exclusions.  Importantly, it clarifies that sections 102, 103, and 112 will still dictate the requirements for getting a patent, but these requirements won’t affect the initial eligibility decision.  This change is meant to make things more straightforward for everyone involved in the patent process, from inventors to judges to patent officials.

But as AAM notes in a March 2024 letter opposing S. 2140:

Section 101 is critically important to AAM and its members.  Because of two statutory schemes, the Hatch-Waxman Act and the [BPCIA], generic and biosimilar companies generally must address patent issues before launching a product through costly and protracted patent litigation.  Eliminating invalid patents under § 101 enables generic and biosimilar companies to streamline pharmaceutical litigation.  Because § 101 can be addressed at the outset of a case, § 101 is a useful tool for generic and biosimilar companies to avoid burdensome discovery and trim the number of asserted patents, which in some cases amounts to dozens.  This in turn can allow generic and biosimilar companies to launch their products sooner, providing patients with earlier access to more affordable medications.

The PERA Act would not only minimize these benefits of § 101, but it would make it easier for brand-name biologic companies to obtain less innovative patents, leading to higher drug prices. . . .  The PERA Act would abolish § 101’s careful test for eligibility and would open the floodgates to non-innovative patents.

So . . . beware of Roger “Verbal” Kint.  Who you ask?  You might know him better as: Keyser Söze.