The Improving Access to Affordable Prescription Drugs Act: A Different Tack on Exclusivity

On March 29, 2017, Senator Al Franken (D-MN) and several other Senate Democrats introduced S. 771, the “Improving Access to Affordable Prescription Drugs Act.”  A companion bill, H.R. 1776, was introduced in the House on the same day by Representatives Jan Schakowsky (D-IL), Elijah Cummings (D-MD), Rosa DeLauro (D-CT), and Peter Welch (D-VT).  The 129-page, four-title bill has been billed [https://www.franken.senate.gov/?p=press_release&id=3655] as a “landmark proposal” that “seeks to tackle prescription drug costs by increasing transparency and accountability, boosting access and affordability of key drugs, spurring innovation, and increasing choice and competition.”  In other words, the bill covers a lot of ground.  (If you’re not up for reading all 129 pages of the bill, Sen. Franken released a 5-page summary that’s a bit easier to digest.)

The “landmark proposal” billing for the “Improving Access to Affordable Prescription Drugs Act” isn’t too far off the mark . . . at least insofar as some of the bill’s provisions concerning exclusivity are concerned. Whereas we’ve seen bill after bill over the years prosing new and expanded exclusivity incentives (both stand-alone exclusivities and so-called exclusivity-stacking measures – see our previous posts here and here), or new alternative incentives (such as priority review vouchers or tax credits – see our previous posts here and here), we cannot recall an instance in which there’s been a serious effort to broadly reduce (or even eliminate) brand-name exclusivity incentives . . . until now.

Because reducing or eliminating exclusivity is such a shocking concept, we’ll ease our readers into the issue with Section 301 of the “Improving Access to Affordable Prescription Drugs Act.” That section, titled “Prize Fund For New And More Effective Treatments Of Bacterial Infections,” would establish a $2 billion “prize fund” for new and more effective treatments of bacterial infections.  Awardees must either show a benefit over existing therapies in the treatment of serious and life-threatening bacterial infections, or must use openly sourced materials, technology, data, and knowledge to advance antibiotic research.  The National Institutes of Health would set the goals for these awards, as well as award the prizes.  But there’s a string or two attached to accepting a prize.  In addition to agreeing to offer the qualifying product at a “reasonable price” (as defined in the bill) and to publicly disclose all pre-clinical and clinical trial data relating to the product, the award recipient must “irrevocably waive” “all periods of exclusivity available to the product under [the FDC Act and the PHS Act]” as well as “all applicable patent rights under title 35, United States Code.”

That doesn’t seem too harsh. After all, it’s a voluntary system and doesn’t at all resemble previous prize fund proposals that would have eliminated patent and exclusivity rights in lieu of a prize (see our previous post here).  But Section 301 of the “Improving Access to Affordable Prescription Drugs Act” is just the tip of the iceburg when it comes to addressing exclusivity.

Section 303 of the bill, curiously titled “Rewarding Innovative Drug Development,” would amend the FDC Act’s 5-year New Chemical Entity (“NCE”) exclusivity provisions (at least insofar as ANDAs are concerned under FDC Act § 505(j)) to alter ANDA submission and approval times.  Specifically, the bill would amend the law so that FDA could accept an ANDA 3 years after the NCE NDA approval (instead of 4 years, and regardless of the ANDA containing a Paragraph IV certification to an Orange Book-listed patent on the brand-name drug), and would permit approval of an ANDA not containing a Paragraph IV certification immediately upon expiration of NCE exclusivity.  The bill would also reduce the 7.5-year 30-month stay period to 6.5 years.  Below are redlines (new language in red italicized font, deletions in strike-through) of the proposed changes to FDC Act § 505(j).  Conforming changes would also be made to other affected sections in the statute.

FDC Act § 505(j)(5)(B):

The approval of an application submitted under paragraph (2) shall be made effective on the last applicable date determined by applying the following to each certification made under paragraph (2)(A)(vii):

(i) If the applicant only made a certification described in subclause (I) or (II) of paragraph (2)(A)(vii) or in both such subclauses, the approval may be made effective immediately except that such approval may not be made effective before the date that is 5 years after the date on which the drug to which the application refers was approved under subsection (c).

(ii) If the applicant made a certification described in subclause (III) of paragraph (2)(A)(vii), the approval may be made effective on the date certified under subclause (III) except that such approval may not be made effective before the date that is 5 years after the date on which the drug to which the application refers was approved under subsection (c).

FDC Act § 505(j)(5)(F)(ii):

If an application submitted under subsection (b) for a drug, no active ingredient (including any ester or salt of the active ingredient) of which has been approved in any other application under subsection (b), is approved after the date of the enactment of this subsection, no application may be submitted under this subsection which refers to the drug for which the subsection (b) application was submitted before the expiration of five years expiration of 3 years from the date of the approval of the application under subsection (b), except that such an application may be submitted under this subsection after the expiration of four years from the date of the approval of the subsection (b) application if it contains a certification of patent invalidity or noninfringement described in subclause (IV) of paragraph (2)(A)(vii).  The approval of such an application shall be made effective in accordance with subparagraph (B) except that, if an action for patent infringement is commenced during the one-year period beginning forty-eight months after the date of the approval of the subsection (b) application, the thirty-month period referred to in subparagraph (B)(iii) shall be extended by such amount of time (if any) which is required for seven and one-half years 6 and one-half years to have elapsed from the date of approval of the subsection (b) application.

Section 303 of the bill would also alter the FDC Act’s 3-year New Clinical Investigation exclusivity provisions – at least insofar as the bill alters only FDC Act § 505(c)(3)(E)(iv) applicable to 505(b)(2) NDAs and NDA supplements – to heighten the standard for granting exclusivity. Below is a redline (new language in red italicized font) of the proposed change.

FDC Act § 505(c)(3)(E)(iv):

If a supplement to an application approved under subsection (b) is approved after the date of enactment of this clause and the supplement contains reports of new clinical investigations (other than bioavailabilty 68 studies) essential to the approval of the supplement and conducted or sponsored by the person submitting the supplement, and the supplement shows a significant clinical benefit over existing therapies manufactured by the applicant in the 5-year period preceding the submission of the application, the Secretary may not make the approval of an application submitted under subsection (b) for a change approved in the supplement effective before the expiration of three years from the date of the approval of the supplement under subsection (b) if the investigations described in clause (A) of subsection (b)(1) and relied upon by the applicant for approval of the application were not conducted by or for the applicant and if the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted.

Finally, Section 303 would amend the PHS Act to reduce the current 12-year period of Reference Product Exclusivity for biological products licensed under PHS Act § 351(a) to 7 years.

Moving on to Section 304 of the “Improving Access to Affordable Prescription Drugs Act,” titled “Improving Program Integrity,” the bill would amend the FDC Act to add new Section 569D, titled “Conditions on Award of Drug Exclusivity.” And here’s where we see the harshest exclusivity-related provisions.   It provides as follows:

(a) TERMINATION OF EXCLUSIVITY.—Notwithstanding any other provision of this Act, any period of exclusivity described in subsection (b) granted to a person or assigned to a person on or after the date of enactment of this section with respect to a drug shall be terminated if the person to which such exclusivity was granted or any person to which such exclusivity is assigned commits a violation described in subsection (c)(1) with respect to such drug.

The periods of exclusivity referred to include specific exclusivities (e.g., NCE, 3-year, orphan drug, 12-year Reference Product Exclusivity, etc.), as well as “[a]ny other provision of this Act that provides for market exclusivity (or extension of market exclusivity) with respect to a drug.”  And the list of violations that could lead to a termination of exclusivity is long.  It includes a  criminal conviction, a civil judgment, and a settlement agreement that is found to violate any one of various Federal and State laws.

That’s a lot to digest . . . but there’s more.

Title IV of the “Improving Access to Affordable Prescription Drugs Act” would alter ANDA 180-day exclusivity. In particular, Section 402 would amend the definition of “first applicant” at FDC Act § 505(j)(5)(B)(iv)(II)(bb) so that a generic drug applicant that has entered into a presumably anticompetitive agreement as detailed in Section 401 is disqualified as a “first applicant.”  Additionally, an applicant that did not submit an ANDA on the first day that a substantially complete application was accepted, but that lawfully maintains a Paragraph IV certification or a “section viii” statement and is not a defendant in a pending patent infringement action, may also be considered a “first applicant.”  These provisions of the bill borrow concepts (and language) from previously-introduced legislation, including the “Preserve Access to Affordable Generics Act” (see our previous post here), and the “Drug Price Competition Act of 2009” (see our previous post here).  Below are redlines (new language in red italicized font, deletions in strike-through) of the proposed changes to some of the provisions in FDC Act § 505(j).

FDC Act § 505(j)(5)(B)(iv)(II)

(bb) FIRST APPLICANT.—As used in this subsection, the term “first applicant” means an applicant that, on the first day on which a substantially complete application containing a certification described in para-graph (2)(A)(vii)(IV) is submitted for approval of a drug, submits a substantially complete application that contains and lawfully maintains a certification described in paragraph (2)(A)(vii)(IV) for the drug.

FDC Act § 505(j)(5)(B)(v)—FIRST APPLICANT DEFINED.

As used in this subsection, the term “first applicant” means an applicant—

(I)(aa) that, on the first day on which a substantially complete application containing a certification described in paragraph (2)(A)(vii)(IV) is submitted for approval of a drug, submits a substantially complete application that contains and lawfully maintains a certification described in paragraph (2)(A)(vii)(IV) for the drug; and

(bb) that has not entered into a disqualifying agreement described under clause (vii)(II); or

(II)(aa) for the drug that is not described in subclause (I) and that, with respect to the applicant and drug, each requirement described in clause (vi) is satisfied; and

(bb) that has not entered into a disqualifying agreement described under clause (vii)(II).

FDC Act § 505(j)(5)(B)(vi)—REQUIREMENT.

The requirements described in this clause are the following:

(I) The applicant described in clause (v)(II) submitted and lawfully maintains a certification described in paragraph (2)(A)(vii)(IV) or a statement described in paragraph (2)(A)(viii) for each unexpired patent for which a first applicant described in clause (v)(I) had submitted a certification described in paragraph (2)(A)(vii)(IV) on the first day on which a substantially complete application containing such a certification was submitted.

(II) With regard to each such unexpired patent for which the applicant described in clause (v)(II) submitted a certification described in paragraph (2)(A)(vii)(IV), no action for patent infringement was brought against such applicant within the 45-day period specified in paragraph (5)(B)(iii); or if an action was brought within such time period, such an action was withdrawn or dismissed by a court (including a district court) without a decision that the patent was valid and infringed; or if an action was brought within such time period and was not withdrawn or so dismissed, such applicant has obtained the decision of a court (including a district court) that the patent is invalid or not infringed (including any substantive determination that there is no cause of action for patent infringement or invalidity, and including a settlement order or consent decree signed and entered by the court stating that the patent is invalid or not infringed).

(III) If an applicant described in clause (v)(I) has begun commercial marketing of such drug, the applicant described in clause (v)(II) does not begin commercial marketing of such drug until the date that is 30 days after the date on which the applicant described in clause (v)(I) began such commercial marketing.

FDC Act § 505(j)(5)(B)(vii) —AGREEMENT BY FIRST APPLICANT TO DEFER COMMERCIAL MARKETING; LIMITATION ON ACCELERATION OF DEFERRED COMMERCIAL MARKETING DATE.

(I) AGREEMENT TO DEFER APPROVAL OR COMMERCIAL MARKETING DATE.—An agreement described in this subclause is an agreement between a first applicant and the holder of the application for the listed drug or an owner of one or more of the patents as to which any applicant submitted a certification qualifying such applicant for the 180-day exclusivity period whereby that applicant agrees, directly or indirectly, (aa) not to seek an approval of its application that is made effective on the earliest possible date under this subparagraph, subparagraph (F) of this paragraph, section 505A, or section 527, (bb) not to begin the commercial marketing of its drug on the earliest possible date after receiving an approval of its application that is made effective under this subparagraph, subparagraph (F) of this paragraph, section 505A, or section 527, or (cc) to both items (aa) and (bb).

(II) AGREEMENT THAT DISQUALIFIES APPLICANT FROM FIRST APPLICANT STATUS.—An agreement described in this subclause is an agreement between an applicant and the holder of the application for the listed drug or an owner of one or more of the patents as to which any applicant submitted a certification qualifying such applicant for the 180-day exclusivity period whereby that applicant agrees, directly or indirectly, not to seek an approval of its application or not to begin the commercial marketing of its drug until a date that is after the expiration of the 180-day exclusivity period awarded to another applicant with respect to such drug (without regard to whether such 180-day exclusivity period is awarded before or after the date of the agreement).

FDC Act § 505(j)(5)(B)(viii)—LIMITATION ON ACCELERATION.

If an agreement described in clause (vii)(I) includes more than 1 possible date when an applicant may seek an approval of its application or begin the commercial marketing of its drug—

(I) the applicant may seek an approval of its application or begin such commercial marketing on the date that is the earlier of—

(aa) the latest date set forth in the agreement on which that applicant can receive an approval that is made effective under this subparagraph, subparagraph (F) of this paragraph, section 505A, or section 527, or begin the commercial marketing of such drug, without regard to any other provision of such agreement pursuant to which the commercial marketing could begin on an earlier date; or

(bb) 180 days after another first applicant begins commercial marketing of such drug; and

(II) the latest date set forth in the agreement on which that applicant can receive an approval that is made effective under this subparagraph, subparagraph (F) of this paragraph, section 505A, or section 527, or begin the commercial marketing of such drug, without regard to any other provision of such agreement pursuant to which commercial marketing could begin on an earlier date, shall be the date used to determine whether an applicant is disqualified from first applicant status pursuant to clause (vii)(II).