Teeth, They Must Be Very Much Worthwhile: GAO Report on REMS Abuses Notes Lack of Agency Enforcement

The Government Accountability Office released a new Report last week focusing on the oft-analyzed tactics used by some innovator or brand-name pharmaceutical manufacturers to keep generic versions of products off the market.  Like some facets of then-Commissioner Gottlieb’s Drug Competition Action Plan, the GAO Report focuses specifically on the use of REMS programs to prevent generic companies from obtaining samples.  While FDA and FTC have been working together to help make drug samples easier to obtain (as we at HPM can confirm from personal experience), the GAO Report found that drug companies and stakeholders are not sold on the effect of the agencies’ actions.  This is because the main tools used – letters from FDA, public shaming, FTC review, and waivers from shared REMS systems – lack teeth.  In such situations, there is very little that FDA can do, as it can’t compel reference product sponsors to make products available.  Only the FTC has the ability to take enforcement action for the anticompetitive behavior at issue, but thus far it hasn’t done so.  Therefore, reference product companies may have little incentive to curb these practices.

The need for this GAO Report arose from complains from generic companies that some reference product sponsors use the REMS process to hinder competition by delaying or preventing generic drugs from being developed or coming to market.  Two practices that FDA and FTC are particularly concerned about are the limiting of access to samples of reference standard products needed to show bioequivalence and delaying negotiations for shared REMS programs.  Reference product sponsors may limit access to samples of reference standard drugs both that are subject to REMS, by refusing distribution outside of that REMS, or that are not subject to REMS, by limiting the sale of their reference standard drugs only to certain pharmacies (like specialty pharmacies).  In practice, these activities can restrict all purchases of these products by generic companies who may need them as reference product samples.  Delayed REMS negotiations may occur where the reference product sponsor and the ANDA sponsors cannot come to an agreement on the system, which may delay the approval of an ANDA until such an agreement can be made.

While FDA and FTC have not done much in the way of enforcement, the Report focuses on four actions that FDA and FTC have taken to address these circumstances:

• Draft guidance on Safety Determination Letter: In 2014, FDA issued a draft guidance explaining FDA’s ability to issue a “safety determination letter” to the reference drug company on behalf of the generic manufacturer, assuring the reference drug sponsor that this distribution would not constitute a REMS violation;
• Public Website on Inquiries to FDA About Samples: In February 2019, FDA released a website posting information on inquiries made to FDA by generic companies unable to obtain reference standard samples in an effort to publicly shame innovator companies into providing samples to putative generic manufacturers;
• FTC review: FTC reviewed the inquiries FDA received about samples and filed two amicus briefs related to drugs with REMS, but has not yet brought suit for violation of the Federal Trade Commission Act or the Sherman Act;
• Shared REMS Waivers: FDA has issued waivers of the single shared REMS requirements, allowing generic drug companies to develop a separate REMS system including the same Elements to Assure Safe Use as the RLD.  In 2018, FDA published guidance describing the relevant considerations in its assessment of shared REMS waiver requests, including a comparison of the burdens and benefits of a single shared system and elements of the REMS protected by intellectual property considerations.

The GAO talked to four generic drug manufacturers and five reference standard product manufacturers to get their perspectives on FDA’s and FTC’s efforts to address these practices, in addition to reviewing comments submitted to the federal register with respect to these efforts.  True to form, the generic and reference product manufacturers had differing opinions on these efforts.  The generic companies, for example, found the safety determination letters not useful because they are not enforceable, while the reference product companies who could opine on the issue liked them and noted that they now require them before releasing samples.  The public shaming webpage was an all-around disappointment, as the generic companies got little out of it while some of the reference product companies were unaware of any sample inquiries prior to being included on the webpage.  The waivers also received mixed reviews due to FDA’s timeline for responding to waiver requests, as well as the burden imposed on health care professionals and patients in navigating several REMS systems.  Interestingly, the generic companies thought that the FTC’s amicus briefs were at least helpful, but none of the reference drug companies had any opinions at all on the FTC’s briefs.

The running theme throughout all of these efforts though is that FDA’s efforts are largely fruitless because the Agency cannot compel reference product sponsors to provide samples or to negotiate.  As many lawyers can attest, sometimes a strongly-worded letter just isn’t enough.  And neither is public shaming or a waiver process that ends up taking multiple years.  The FTC is the only one here with any enforcement power, but we’re still waiting to see whether it chooses to exercise it.  It’s taken years of complaining over Citizen Petitions for the FTC to take any action (see our extensive blogging on this case here and here to start), so maybe generic companies just need to bide their time until FTC makes examples out of a few bad actors.  But like with many complaints of anticompetitive conduct, it may to take enforcement action – and use of those regulator teeth – to really get industry attention.