FDA Narrows Interpretation of “Same Product as Another Product” under PDUFA VI; 505(b)(2) Applicants Will Primarily be Affected

Over the years, we’ve been critical at times of FDA policies and regulations that cause companies to have to pay user fees under the Prescription Drug User Fee Act (“PDUFA”) (see, e.g., “FDA’s Unauthorized User Fee Money Grab” and “The Drug User Fee Catch-22”)  Well, we have a new gripe with a policy change FDA has implemented under the sixth iteration of PDUFA (“PDUFA VI”).  The policy change has to do with what constitutes the “same product as another product” under FDC Act § 736(a)(2)(B)(ii) for purposes of assessment of the new annual prescription drug program fee, which was set at $304,162 per product for Fiscal Year 2018.  (The new PDUFA user fee structure is described in our memo summarizing the 2017 FDA Reauthorization Act.)

But before we get to FDA’s policy change, let’s take a look at what changed between PDUFA V and PDUFA VI with respect to FDC Act § 736(a)(2)(B)(ii). Under PDUFA V (and going all the way back to PDUFA I), when FDA was authorized to assess both annual product and establishment user fees, FDC Act § 736(a)(2)(B) provided for the following exception to payment of a product fee (which also carried over to payment of the annual establishment fee):

A prescription drug product shall not be assessed a fee under subparagraph (A) if such product is . . .

(ii) the same product as another product that—

(I) was approved under an application filed under section 505(b) or 505(j) of this title; and

(II) is not in the list of discontinued products compiled under section 505(j)(7) of this title;

(iii) the same product as another product that was approved under an abbreviated application filed under section 507 of this title (as in effect on the day before the date of enactment of the Food and Drug Administration Modernization Act of 1997); or

(iv) the same product as another product that was approved under an abbreviated new drug application pursuant to regulations in effect prior to the implementation of the Drug Price Competition and Patent Term Restoration Act of 1984.

Under PDUFA VI, which disposed of the annual product and establishment user fees in lieu of a new annual prescription drug program fee assessed for each product approved under an NDA (up to five), FDC Act § 736(a)(2)(B) provides for the following exception to payment of a program fee:

A prescription drug program fee shall not be assessed for a prescription drug product under subparagraph (A) if such product is . . .

(ii) the same product as another product that—

(I) was approved under an application filed under section 505(b) or 505(j); and

(II) is not in the list of discontinued products compiled under section 505(j)(7);

(iii) the same product as another product that was approved under an abbreviated application filed under section 507 (as in effect on the day before the date of enactment of the Food and Drug Administration Modernization Act of 1997); or

(iv) the same product as another product that was approved under an abbreviated new drug application pursuant to regulations in effect prior to the implementation of the Drug Price Competition and Patent Term Restoration Act of 1984.

That’s right . . . other than the description of the fee in the opening sentence of FDC Act § 736(a)(2)(B), nothing has changed. Nevertheless, FDA’s interpretation of the statute has changed.  And the change means that the holders of some 505(b)(2) NDAs (as well as some 505(b)(1) NDA holders) will now be paying the annual program fee.

You see, for decades FDA interpreted the “same product as another product” exception at FDC Act § 736(a)(2)(B)(ii) to mean that drug products listed in the Orange Book with any therapeutic equivalence rating – either an “A” code or a “B” code – are exempt from annual PDUFA user fees. This is apparent from a 1994 revised guidance document stating that “an exception [exists] from product fees for products that are ‘the same product as a product approved under an application filed under 505(b)(2) or (j).’ . . .  ‘Same’ means the same active ingredient, strength, potency, dosage form, and route of administration.”  In other words, “same” means pharmaceutically equivalent drug products.  And both “A-rated” and “B-rated” drug products are pharmaceutical equivalents.  (“A-rated” products are pharmaceutical equivalents for which bioequivalence has been shown, and “B-rated” products are pharmaceutical equivalents for which bioequivalence has not been shown.)  Although the 1994 revised guidance also notes that “[t]he products need not have the same ‘Orange Book’ Therapeutic Equivalence Code to be considered the same,” FDA has required publication of a therapeutic equivalence code in the Orange Book before applying the user fee exemption.

In a recent guidance document, titled “Assessing User Fees Under the Prescription Drug User Fee Amendments of 2017,” FDA announced a new interpretation of the “same product as another product” user fee exception at FDC Act § 736(a)(2)(B)(ii). According to FDA:

For purposes of this section, we interpret the term same product as another product to mean a drug product that FDA has determined is therapeutically equivalent to another drug product.  Therapeutically equivalent products are approved drug products that are pharmaceutical equivalents for which bioequivalence has been demonstrated and that can be expected to have the same clinical effect and safety profile when administered to patients under the conditions specified in the labeling.  Generally, products classified as therapeutically equivalent can be substituted with the full expectation that the substituted product will produce the same clinical effect and safety profile as the prescribed product. FDA publishes its conclusions regarding therapeutic equivalence in the Orange Book.

The “same product” provision in section 736(a)(2)(B)(ii) of the FD&C Act is intended to provide drugs with a user fee exception if they are subject to competition from generic drug products.

The term generic drug is often used to refer to a drug named in an ANDA submitted under section 505(j) of the FD&C Act. For purposes of section 736(a)(2)(B)(ii) of the FD&C Act, we believe Congress also meant to provide the exception to products not named in an ANDA whose therapeutic equivalence to another product makes them generally substitutable for that other product, because such products could offer the same type of competition as products approved under an ANDA.

If FDA’s guidance document wasn’t clear on the policy change, then FDA’s Fiscal Year 2019 PDUFA Dear Colleague Letter makes the change explicit in a section titled “Policy Changes Under PDUFA VI” explaining FDA’s new interpretation of the “Same Product as Another Product” Program Fee Exception. According to FDA:

Section 736(a)(2)(B)(ii) of the FD&C Act provides that a prescription drug product will not be assessed a program fee if it is the same product as another product that was approved under an application filed under section 505(b) or 505(j) of the FD&C Act and is not in the list of discontinued products compiled under section 505(j)(7) of the FD&C Act.

To be considered the “same product as another product,” a product must be determined by FDA to be therapeutically equivalent to another drug product. Therapeutically equivalent products are approved drug products that are pharmaceutical equivalents for which bioequivalence has been demonstrated and that can be expected to have the same clinical effect and safety profile when administered to patients under the conditions specified in the labeling.

FDA publishes its conclusions regarding therapeutic equivalence in the Approved Drug Products with Therapeutic Equivalence Evaluations (the Orange Book) available at https://www.accessdata.fda.gov/scripts/cder/ob/. Therapeutically equivalent products are identified by “A” codes. Therefore, FDA considers a product to be the same product as another product for the purpose of the program fee exception if a product has been assigned an “A” code published in the Orange Book.

As noted above, FDA’s policy change means that the holders of some 505(b)(2) NDAs will now be paying the annual program fee. And with a maximum of five program fees per NDA, or $1,520,810 for Fiscal Year 2018 (and likely a higher rate in Fiscal Year 2019), the change will not be cheap for some companies.

While many 505(b)(2) NDAs are approved for drug products that differ pharmaceutically from another drug product, and thus are not assigned a therapeutic equivalence rating, there are also many 505(b)(2) NDAs approved for drug products that are pharmaceutically the same as another approved drug product but for which bioequivalence has not been established (i.e., “B-rated” drug products).  To make matters worse, there are several instances in which the Orange Book fails to identify two products as pharmaceutical equivalents because of changes to FDA policies on dosage form and route of administration nomenclature.  In addition, FDA may not automatically undertake an evaluation to assign a therapeutic equivalence rating to a drug product approved under a 505(b)(2) NDA.  Instead, the Orange Book Preface instructs: “We recognize that certain drug products approved in 505(b)(2) applications may not have therapeutic equivalence codes, and that FDA may undertake therapeutic equivalence evaluations with respect to such drug products.  A person seeking to have a therapeutic equivalence rating for a drug product approved in a 505(b)(2) application may petition the Agency through the citizen petition procedure (see 21 CFR 10.25(a) and 21 CFR 10.30).”

All of the above factors, when taken together, mean that 505(b)(2) NDA holders will be facing a higher PDUFA user fee burden. To that end, 505(b)(2) NDA holders should review their Orange Book listings and request (or petition) FDA for changes/corrections, and, when appropriate, request an “A” therapeutic equivalence rating.  After all, there’s no reason to pay a user fee that should not have been assessed in the first place.