Maine Law Aims to Increase Generic Drug Developers’ Access to Reference Samples

By Michelle L. Butler & Eliot Markman* –

On July 4, 2018, 2017 ME S 432, titled “An Act To Require Drug Manufacturers To Comply with Federal Law” (the “Act”), became law without Maine Governor Paul LePage’s signature.  The Act amends 32 M.R.S.A. § 13702-A and requires a drug manufacturer or wholesaler licensed in Maine to make a drug distributed in the State available for sale to “an eligible product developer.”  An eligible product developer is defined as “a person that seeks to develop an application for the approval of a drug under the Federal Food, Drug, and Cosmetic Act [FDC Act], Section 505(b) or 505(j) or the licensing of a biological product under the federal Public Health Service Act, Section 351.”  We note that this definition is not limited to a person seeking approval of an ANDA or a biosimilar application.  Although the term “reference sample” is not used in the text of the statute itself, the section discussing the intent of the statute calls the drugs that are to be made available under this provision reference samples.

The Act requires a manufacturer or wholesaler to make the drug available for sale “at a price no greater than the wholesale acquisition cost [WAC] and without any restrictions that would block or delay the eligible product developer’s application in a manner inconsistent with [the FDC Act’s provision prohibiting the use of a REMS program to delay competition].” WAC is defined as “the manufacturer’s list price for a brand-name drug or a generic drug per person per year or course of treatment when sold to wholesalers or direct purchasers in the United States, not including discounts or rebates, for the most recent month for which information is available.”  As a consequence of purchasing a drug under this provision at a price no greater than WAC, the eligible product developer must charge consumers in Maine the same price or less for the drug it manufactures, presumably after obtaining approval from FDA of an application.  The Act permits the State to seek injunctive relief against a person who fails to comply with these new provisions.

A number of questions arise from the language of the Act, including some that raise the specter of a lawsuit:

• While the title of the Act suggests that it is only working to implement an existing federal requirement, the FDC Act does not require a manufacturer to make drug available to a person seeking to develop a generic or biosimilar drug in all circumstances; rather, under the FDC Act, a manufacturer is not permitted to use a REMS program to block or delay approval of an ANDA or 505(b)(2) NDA.
• The Act’s requirement for a wholesaler to make drug available may raise issues for the wholesalers. A wholesaler that is distributing drug subject to a REMS and/or closed distribution system would likely be reticent to provide drug to an eligible product developer without the permission of the manufacturer with whom it likely has a contractual relationship that does not permit such distribution.

In addition, the definition of WAC in the Act is not consistent with the real-world definition of WAC. It is appropriate that the definition describes WAC as a list price and does not include discounts or rebates.  However, WAC is the list price for a specific package size of a drug (e.g., a bottle of 100 tablets or a bottle of 1000 tablets) and is not tied to a course of treatment or “per person per year.”  The Act’s definition is likely to lead to confusion.

The Act also includes an exemption from liability for “product of another.” The Act states that a manufacturer or wholesaler is not liable for the failure to include adequate safety warnings or for product defects when the manufacturer or wholesaler has made a drug available to an eligible product developer pursuant to the Act and the product was not manufactured or sold by that manufacturer or wholesaler.  While the language is not entirely clear, it appears that the exemption is intended to shield a manufacturer or wholesaler that provides product to an eligible product developer from liability for the competing generic or biosimilar drug that is ultimately developed and sold by the eligible product developer.

Senate Democratic Leader Troy Jackson, the bill’s sponsor, stated in a press release dated July 5, 2018 that the Act will lower prescription drug prices by making cheaper generic drugs available more quickly after a drug’s patent expires.  According to the press release, the Act is intended to prevent companies from withholding products from generic manufacturers through closed distribution systems that may be implemented as part of a REMS.

We will continue to monitor this and similar laws that states have enacted aimed at curbing drug prices.

* Summer Associate