By Mark I. Schwartz* –

On March 2, 2015, investigators from the U.S. Food and Drug Administration walked into a factory at Zhejiang Hisun Pharmaceutical in China to conduct an inspection. According to the investigators, at one point a lab employee pulled a memory stick from a computer and put it in his pocket. When they asked what he had removed, the man ran away.

The FDA has never been able to piece together what, if any, drug-manufacturing data were on that memory stick. But its removal became one of a long list of significant deviations that FDA investigators observed on recent inspections of foreign drug-manufacturing facilities that would threaten the robustness of the U.S. pharmaceutical supply chain.

FDA officials say they could call into question the safety of the U.S. drug supply. The agency is now taking steps to improve its evaluation of drug-manufacturing facilities not just in the U.S. but abroad.

It is troubling, however, that the FDA has been so delinquent in developing a framework to more objectively assess the strength of quality systems throughout the industry, which could have identified such problems in their infancy, and done so more accurately.

The FDA dramatically increased its focus on foreign inspections after a scandal in 2008, when contaminated raw material for the anticoagulant heparin, sourced from China, was linked to at least 81 deaths and 785 serious injuries. Around the same time, there was a scandal in which human and animal food, mainly from China, was adulterated with the toxic substance melamine.

Many recent drug inspections have revealed egregious manufacturing practices, especially in India and China. The agency has followed up on these inspections by issuing a flurry of warning letters threatening enforcement action if the companies don’t rectify the deficiencies in their quality systems.

These letters, which are in the public domain, paint a grim picture of the safety of the drug supply, as a disturbingly large percentage of the facilities in question are alleged to have “data integrity” violations, meaning that the FDA believes that the records kept as evidence of the safety of the manufactured products have been manipulated in some way. This is significant because approximately 40% of drugs sold in the U.S. are made outside the country, as are 80% of the active pharmaceutical ingredients used in these drugs. An increasing fraction of these are sourced from India and China.

Examples of data-integrity problems observed by the FDA at these facilities include the repeated testing of products until they are deemed to meet the threshold specifications (a practice known as “testing into compliance”); the destruction and falsification of laboratory data; the blending of out-of-specification batches of drug product with batches that met specifications; the backdating or predating of lab records; and the failure to implement measures preventing the manipulation, deletion, or overwriting of electronic data.

The FDA’s letter warning Zhejiang Hisun included allegations involving several of these practices.

THE DEPTH OF THE QUALITY-CONTROL PROBLEM over the past few years, particularly with drugs originating in the developing world, is stark. For instance, in 2012 only four warning letters were issued to Indian and Chinese pharmaceutical firms, versus 15 last year. The FDA has alleged data-integrity problems in 13 of those 15 letters. Those letters covered more than 70% of the facilities in the world where the FDA asserted data-integrity violations in 2015.

In addition to the public-health concerns associated with products deemed by the FDA to have been manufactured in serious violation of proper manufacturing practices, these problems threaten to worsen shortages of some drugs. The allegations are disrupting the supply chains of numerous U.S. drug manufacturers.

Case in point: Zhejiang Hisun Pharmaceutical is a linchpin manufacturer, supplying products to dozens of U.S. pharmaceutical companies, including Merck and Pfizer. After the FDA’s inspection of Zhejiang Hisun, at least 15 of the company’s active pharmaceutical ingredients, or API, were barred by the FDA from entering the U.S., forcing manufacturers in the U.S. to quickly identify alternative suppliers and get them approved by the FDA (which could take many months), or face a shutdown.

THE FDA’S FAVORITE LEGAL MECHANISM for barring such drugs from the U.S. is the Import Alert, and it doesn’t take much for the FDA to be able to place a firm’s products on that list of prohibited imports. A foreign facility’s drug products can be refused admission into the U.S. simply if “it appears” that such articles are “adulterated or misbranded” as defined in the Federal Food, Drug and Cosmetic Act.

This threshold would be triggered as a result of virtually any of these problematic good-manufacturing-practice inspections. Furthermore, if the FDA alleges that a firm is in any way delaying, denying, or limiting an inspection, that too can cause the firm’s pharmaceutical products to be barred from entering the U.S. Not surprisingly, the actions of Zhejiang Hisun’s fleeing lab employee were deemed by the FDA to fall into this category.

Just since the beginning of 2015, 36 drug firms, which export hundreds of drugs to the U.S., have been added to the FDA’s Import Alert list; 28 of those facilities were in India or China. Once a firm is on an Import Alert, it can be next to impossible to persuade the FDA to remove it, or its drug product, from that list. Indeed, firms have been known to languish on Import Alert for many years, well after they claim to have performed all of the facility remediation that the FDA has demanded.

While the FDA tries to exclude from Import Alert drugs that are on the shortage list or deemed medically necessary, it is likely that the agency’s barring entry to so many of these drugs will eventually lead to more drug shortages, particularly for older generic drugs, which are often manufactured by only two or three FDA-approved facilities worldwide. If one of those firms ends up on the receiving end of a bad “483,” the term used for the FDA’s inspectional observations, an Import Alert is likely to strain the U.S. supply of that API or drug product to the breaking point.

And if the FDA decided not to place that facility on Import Alert, it would be allowing products into the U.S. that it alleges were manufactured using falsified data, putting the agency and consumers in a no-win situation.

FDA REPRESENTATIVES have long acknowledged publicly that the agency hasn’t had an objective method for measuring quality in the drug industry. At which facilities are manufacturing procedures improving? By how much and in what way?

Last year, finally recognizing that one cannot effectively improve what one cannot measure, the agency released a public document on quality metrics. When finalized, it might allow for a comprehensive assessment of quality across the industry. It is based on data submitted to the FDA by drug firms.

The goal is to improve the FDA’s evaluation of drug-manufacturing operations; predict scenarios where certain drugs might be at risk for supply disruptions; and better calibrate the agency’s new risk-based inspection scheduling, where leading indicators for quality problems would prompt the FDA to inspect some facilities with greater frequency.

Also, the agency’s New Inspection Protocol Project, for which no substantive documents have yet been issued, seeks to use semi-quantitative scoring on inspections to allow the FDA to make comparisons among facilities manufacturing similar products. It would also compare the results from within a facility over multiple inspections, with the goal of standardizing the inspection process.

THESE NEW FDA PROGRAMS will take years to completely implement. Stakeholders should participate fully in the public consultation process to make sure that the intended objectives are achieved without imposing an undue burden on industry, and without foisting requirements on pharmaceuticals that exceed the agency’s legal authority. Public health in the U.S. is at stake. 

* This article was published as an Op-Ed in BARRON’s Magazine in July 2016.  Dow Jones Copyright.

By Jay W. Cormier –

It is no surprise that in a presidential election year that every piece of legislation in Washington gets an extra dose of political theater. Federal funding for Zika virus research is no exception.  The President and the NIH have been asking Congress for months to provide additional resources to support research designed to learn more about the virus and to develop vaccines to prevent wide-spread infection.

With all the attention that the 2016 Summer Olympics has brought to concerns about Zika virus, it is somehow fitting that last Friday, just hours before the opening ceremonies in Rio, FDA’s Center for Veterinary Medicine (CVM), in consultation with the U.S. Environmental Protection Agency’s Office of Pesticide Programs Biopesticides and Pollution Prevention Division, the Centers for Disease Control and Prevention’s Division of Vector-Borne Diseases, and the National Institutes of Health National Institute of Allergy and Infectious Diseases’ Laboratory of Malaria and Vector Research, issued a final Environmental Assessment (EA) and Finding of No Significant Impact (FONSI) regarding a proposed investigational release of genetically engineered (GE) mosquitos.

The mosquitos, being developed by Oxitec Ltd. (Oxitec), have a specific genetic change that is lethal to offspring when they are not exposed to a specific antibiotic, tetracycline. The mosquitos, of the species Aedes aegypti, are the specific type of mosquitos that have been at the center of the recent Zika virus infections in Miami, and are also known to transmit dengue, chikungunya, and yellow fever.  Continuing the linkage with Rio, earlier this year Oxitec reported that field trials of their mosquitos in Brazil resulted in a 96% drop in the wild mosquito population in the trial area in just 6 months.  Oxitec hopes to have similar results in field trials in Key Haven, Florida – just east of Key West.  In the Florida study, Oxitec will evaluate: (1) the ability of released Oxitec mosquitoes to mate with local wild-type Ae. aegypti females; (2) the survival of the resultant progeny in order to estimate mortality related to inheritance of the recombinant DNA (rDNA) construct; and (3) the efficacy of sustained releases of the Oxitec mosquitoes for the suppression of a local population of Ae. aegypti in the defined release area.

When FDA approved GE Atlantic salmon for commercial production and introduction into the human food supply in 2015 (see our post on that approval here), FDA issued an EA and FONSI, as required by the National Environmental Policy Act (NEPA).  What is unique with FDA’s decision last week is that CVM has elected to publicly issue an EA and FONSI for the investigational use of the GE mosquitos.  FDA concluded its EA stating that “data and information presented and evaluated indicates that the investigational use of [the Oxitec] mosquitoes, as described in th[e] EA, would not result in significant effects on the quality of the human environment.”

To be clear, don’t go throwing out your DEET just yet.  Even if the Florida field trial is successful, Oxitec will still need to seek full FDA approval for the mosquitos via a New Animal Drug Application (NADA), which will include issuing another draft EA that will consider the effects on the human environment of wide-spread release of the mosquitos. 

By Jay W. Cormier –

As readers of this blog may recall, FDA observed remarkable conditions at two facilities on the NIH campus in Bethesda, MD (see our post here).  Then, earlier this year, NIH stated again that it was closing its drug manufacturing facilities (see our post here).  What wasn’t clear in April was whether the facility closures were the same facilities as were the subject of the 2015 inspection.  A newly released letter from FDA to NIH, however, confirms that the facilities were, in fact, the same facilities.

In that letter from FDA, dated July 29, 2016, FDA provides a number of new details regarding the ongoing manufacturing issues at NIH. Specifically, we learn that:

• NIH officially notified FDA in May of its April decision to close the NIH Pharmaceutical Development Section (PDS) facility;
• NIH currently has not determined whether or when it will attempt to re-open the PDS facility;
• NIH has developed plans to build a new sterile product manufacturing facility to replace the Intravenous Admixture Unit (IVAU) that was closed immediately after the 2015 inspection;
• FDA believes that the proposed new IVAU “represent[s] a substantial improvement over [the] current IVAU” and that NIH should “move to the new interim IVAU as quickly as possible”; and
• NIH has indicated to FDA that the new interim IVAU will open by October 31^st.

Given the numerous and significant violations that were observed in the IVAU and PDS, it is not surprising that any proposed new interim IVAU would present a significant improvement over the prior facility, but we applaud NIH’s efforts to restart its important drug manufacturing operations that are such a critical component of so many NIH clinical studies.

We will continue to monitor NIH’s remediation efforts.

This spring marked the 40th Anniversary of the Medical Device Amendments.  Thanks to significant technological advancements there is no sign of slowing down for medical device regulatory developments.  Devices were a prominent focus at this year’s Food and Drug Law Institute’s Annual Conference.  Sessions included digital health, including wearables and clinical decision support software, laboratory developed tests, and combination products.  Dr. Shuren also discussed the Center’s top priorities, highlighting the National Medical Device Evaluation, which we have blogged on previously (here, here, and here). In a new article in FDLI’s Update Magazine, titled “Devices May Be Over-the-Hill, but Regulatory Developments and Challenges Show No Signs of Slowing Down,” Hyman, Phelps & McNamara, P.C.’s Allyson Mullen discusses medical device developments and highlights from FDLI’s Annual Conference.

By Karla L. Palmer –

FDA announced last week the availability of a draft guidance document titled, “Insanitary Conditions at Compounding Facilities.”  This draft is FDA’s first attempt to assist compounding facilities and state regulators in identifying “insanitary conditions so they can implement appropriate corrective actions.”  The draft intends to apply to federal facilities, physician’s offices including veterinarian offices (notwithstanding the inapplicability of Sections 503A and B to animal drug compounding), and outsourcing facilities that compound human or animal drugs including radiopharmaceuticals (notwithstanding the applicability of cGMP to these facilities).  The draft comes after FDA has conducted hundreds of compounding pharmacy/facility inspections since late 2012, the substantial majority of which has left at least the traditionally state-regulated pharmacies wondering what inspection standard (if any) applies to their practices.  Note that comments on the draft are due October 3, 2016 (Docket No. FDA-2016-D-2268).

Despite exemptions from certain provisions of the FDCA for lawfully compounded drugs under Sections 503A (e.g., adequate directions for use, new drug, and cGMP provisions) and 503B (e.g., DSCSA, adequate directions for use and new drug provisions), compounders still must comply with the adulteration provisions in Section 501(a)(2)(A): A drug is adulterated "if it has been prepared, packaged, or held under insanitary conditions whereby it may have been contaminated with filth, or whereby it may have been rendered injurious to health." FDA has cited compounders – in Form 483 Observations and Warning Letters – with violations of the Act’s adulteration provision since late 2012.  It typically has stated that, if compounding has occurred under insanitary conditions, other exemptions under Section 503A — such as cGMP — and Section 503B do not apply.

FDA states it published the draft because it is “critical that compounding facilities avoid the presence of insanitary conditions and identify and remediate any insanitary conditions at their facilities before the conditions result in drug contamination and patient injury." The draft provides numerous, non-exhaustive examples of insanitary conditions that FDA investigators have observed in prior compounding facility inspections, including the presence of vermin, visible microbial contamination such as mold and bacteria, and non-microbial contamination such as rust, glass shavings or hair in a production area.  FDA also lists insanitary conditions in aseptic operations (including gowning, procedures, and equipment), cleaning and disinfection.  In addition, it lists procedures for compounders to ensure their facilities are sanitary, and remedial actions when insanitary conditions are found.  The remedial action section reads similar to warning letters issued to compounding facilities where FDA claimed insanitary conditions were present.  Specifically,

In addition to the immediate actions recommended above, if a compounding facility has insanitary conditions, it should undertake a comprehensive assessment of its operations, including, as applicable, facility design, procedures, personnel, processes, materials, and systems, and should consider consulting a third party with relevant drug production expertise to conduct this comprehensive evaluation and to assist in implementing appropriate corrective actions.

FDA notes that facilities should not rely on a passing sterility test as an indication of sterility assurance because “microbial contamination, when present, is not uniformly distributed within a batch and may not be identified by a sterility test.” And, facilities that have insanitary conditions must correct them regardless of whether they pass a sterility test.  Facilities may be subject to federal regulatory actions including warning letters, seizure or injunction proceedings.  FDA also may recommend recalls of adulterated products and institute proceedings against the facility and responsible individuals.  States may also pursue actions under applicable state authority.    

A breakthrough paper by Hyman, Phelps & McNamara, P.C’s Frank Sasinowski and Alexander Varond concerning FDA’s Subpart H approvals has just published in the Food and Drug Law Journal. Titled “FDA’s Flexibility in Subpart H Approvals: Assessing Quantum of Effectiveness Evidence,” the paper examines the strength of scientific and clinical evidence for FDA’s 19 non-AIDS, non-cancer Subpart H approval determinations over the accelerated approval program’s 24-year existence. The authors conclude that, despite the agency’s infrequent use of accelerated approval for non-AID, non-cancer therapies, FDA exercises extraordinary regulatory flexibility in its Subpart H approvals—much more than is expressly provided for in the Federal, Food, Drug and Cosmetic Act, FDA’s regulations, or FDA’s 2014 guidance, entitled Expedited Programs for Serious Conditions.

Sasinowski and Varond researched the bases for FDA’s determinations when an unvalidated surrogate or intermediate clinical endpoint is “reasonably likely to predict clinical benefit.” For the 19 precedents, the authors found wide variances between the quantum and quality of evidence on each of the three key factors outlined in Section VII of FDA’s Expedited Programs Guidance. The authors conclude from this that, to FDA, a lack of robust evidence on any single factor does not disqualify a therapy from Subpart H consideration, according to FDA’s own precedents.

The three key factors in FDA’s Expedited Programs Guidance are

1. Understanding of the disease;
2. Understanding of the relationship between drug effect and disease process; and
3. Clinical evidence for (a) the unvalidated surrogate, and (b) the clinical benefit.

The figure below provides a snapshot of the flexibility FDA has employed in its 19 Subpart H approvals.

The critical takeaway from the paper is that a robust showing on the key factors in FDA’s May 2014 Guidance is not required, or, as the authors write: “you don’t need to knock it out of the park” on all 3 factors.

For their efforts, the authors “hope to promote a better understanding of the circumstances under which Subpart H may be employed in order to facilitate the development and expedited review of new drugs with the potential to address unmet medical needs for serious and life-threatening illnesses and to mobilize expanded FDA use of Subpart H.”

Of particular interest to readers may be the 2-4 page case analysis summaries provided in the second half of the paper. Each of the 19 approved drugs presents a distinct set of facts and circumstances that highlight how Subpart H is employed by FDA and emphasizes the degree of flexibility FDA has exercised.

This paper comes on the heels of Frank Sasinowski and James Valentine’s 2015 paper analyzing the quantum of effectiveness evidence that is required to secure FDA approval of orphan drugs from 2010-2014, which updated Sasinowski’s seminal analysis on the orphan drugs approved from the 1983 enactment of the Orphan Drug Act through 2010.

By Jennifer D. Newberger –

On July 29, 2016, FDA finalized its guidance document, General Wellness: Policy for Low Risk Devices. The draft guidance, on which we posted here, was issued in January 2015. The final guidance is nearly identical to the draft, while providing a few more examples of products that would be considered general wellness products, and clarifying that to be considered “low risk,” the product must present not only a low risk to the user, but also to “other persons.”

In assessing the risk of a product, it would seem that a key determinant is the accuracy of the product. Yet in both the draft and final guidances, FDA notes that general wellness products may present risks, “such as inaccuracy,” but, “when made in the absence of disease or medical condition claims,” such inaccuracy “does not pose a risk to the safety of users and other persons if specific regulatory controls are not applied.” The lack of concern about product accuracy in the absence of a medical claim seems to provide a great deal of leeway to manufacturers seeking to enter the general wellness product marketplace. If a product’s inaccuracy were to lead to user harm, FDA may reconsider this position. However, in the absence of such harm—and with proper disclaimers as to the level of accuracy provided by the product—products that meet the definition of general wellness may be marketed without oversight by FDA.

Of course, it may not always be easy to determine whether a product meets the definition of a general wellness product. The guidance states that FDA “does not intend to examine low risk general wellness products to determine whether they are devices within the meaning of” the Federal Food, Drug, and Cosmetic Act. This means that manufacturers may self-determine whether the product they intend to market meets the definition of a general wellness product without seeking FDA’s opinion. Doing so, however, is not without some risk. For products that fit squarely within the examples provided by FDA, there should be no risk associated with going to market without complying with FDA regulatory obligations. It is reasonable to assume, however, that there are a number of potential products that meet the definition of a general wellness product as described in the guidance, but are not captured in the specific examples provided. For example, the guidance includes as an example of a general wellness product a “portable product that is intended to monitor the pulse rate of users during exercise and hiking.” Presumably, a portable product that is intended to monitor respiratory rate during exercise and hiking would also meet the definition of a general wellness product, but the extent to which companies may market products under the auspice of the guidance is not yet clear, given its recent issuance. It is safe to assume that FDA will disagree with the self-determination made by certain companies. The question is what the outcome of those disagreements may be.

By Riëtte van Laack –

Yesterday, FDA announced the availability of a webpage providing information to industry regarding the requirements of the recently finalized Nutrition Facts and serving size regulations. 

FDA clarifies that until the compliance date of July 26, 2018 (or July 26, 2019 for companies with less than 10 million dollars in food sales), the use of updated Nutrition and Supplement Facts labels is voluntary. FDA indicates that it will issue further guidance regarding specifics such as the determination of the value of annual food sales. 

Anyone frustrated with the quality of the graphics in the final rule will be happy to find higher quality graphics for the examples in 21 C.F.R. §§ 101.9 and 101.36 (here and here).  FDA also included a mockup of the various Nutrition Facts label depicting the format, line thickness, font styles, and leading specifications that were previously shown in Appendix B to 21 C.F.R. Part 101.  In addition, the resources include separate tables of the reference values and some other information that is included in the final rules.

FDA provided responses to questions that FDA has received; thus, the responses should not be considered an exhaustive list. For various questions, FDA’s answer is that it will issue further guidance, e.g., as to whether concentrated fruit purees need to be declared as “added sugars.”  We will be monitoring new developments.

Hyman, Phelps & McNamara, P.C. (“HP&M”) is pleased to announce that Serra J. Schlanger has joined the firm as an Associate. Ms. Schlanger assists clients with FDA regulatory strategy, compliance matters, and enforcement issues.  She has specific expertise with regard to federal and state health care fraud and abuse laws and defends clients in connection with government investigations and other enforcement inquiries.  Ms. Schlanger also advises clients on legal and regulatory issues associated with state licensure and CLIA certification.

Prior to joining the firm, Ms. Schlanger practiced in the health care and life sciences practice of a national law firm, where she provided regulatory and compliance counseling to a wide variety of health care providers, defended clients in government investigations, and advised clients on issues related to the Medicare and Medicaid programs.

Before beginning her legal career, Ms. Schlanger worked in clinical administration at Memorial Sloan-Kettering Cancer Center in New York City as a liaison between physicians, patients, researchers, and administrators.

Ms. Schlanger graduated from Vassar College with a Bachelor of Arts in Science, Technology, and Society. She was a Leadership Scholar at the University of Maryland School of Law and graduated cum laude with a certification in Health Care Law.  While at the University of Maryland, she was the Executive Editor of the Journal of Health Care Law & Policy and a member of the National Health Law Moot Court team.  Ms. Schlanger is admitted to practice law in the District of Columbia and Maryland.

The American Conference Institute (“ACI”) will hold the Second Annual Legal, Regulatory and Compliance Forum on Animal Health: Veterinary Drugs, Therapeutics, and Animal Food on September 13-15, 2016, in New York City at The Carlton Hotel.  This forum will help attendees make sense of the legal and regulatory animal health landscape as well as the nuances and differences between the animal health and human health landscapes. This unique, one of a kind event is designed for lawyers and regulatory executives who work for the animal health industry.  This conference will provide attendees with state of the union updates in addition to in-depth discussions to discuss some of the industry’s most perplexing challenges.

Hyman, Phelps & McNamara, P.C.’s Joseph W. Cormier will present with a panel of experts and provide an essential, yet intense and extensive overview of the legal and regulatory landscape of animal medicines, therapeutics, food and feed. Dr. Cormier will also present in a session titled “From Glofish to Frankenfish: Understanding How the Approval of Transgenic Animals May Impact Animal and Human Food and Drugs.” 

FDA Law Blog is a conference media partner. As such, we can offer our readers a special 15% discount. The discount code is: P15-999-FDAB17.  You can access the conference brochure and sign up for the event here.  We look forward to seeing you at the conference.

The American Conference Institute’s (“ACI”) popular FDA Boot Camp, now in its 28th iteration, is slated to take place at the Omni Parker House in Boston, Massachusetts from September 22-23, 2016. The conference is billed as the premier event to provide folks with a roadmap to navigate the difficult terrain of FDA regulatory law.

This year’s FDA Boot Camp has been designed to not only provide attendees with the essential background in FDA regulatory law, but also to provide key sessions that show attendees how to apply the regulatory knowledge to situations encountered in real life. Highlights of this year’s program include the “Ripped from the Headlines” sessions that will update attendees on key developments in the FDA regulatory bar, and “The Marketing Pendulum Has Swung,” which will focus on case studies analyzing off-label civil and criminal enforcement activity.

A stellar cast of presenters will share their knowledge and provide critical insights on a host of topics, including:

• The organization, jurisdiction, functions, and operations of FDA
• The essentials of the approval process for drugs, biologics, and devices, including: INDs, NDAs, BLAs, OTC Approval, 510(k) submissions, and the PMA process
• Clinical trials for drugs and biologics and the clearance process for devices
• The classification of devices and the concept of “risk-based” classification
• The role of the Hatch-Waxman Amendments in the patenting of drugs and biologics
• Labeling in the drug and biologics approval process
• cGMPs and other manufacturing concerns relative to products liability
• Proactive adverse events monitoring and signal detection
• Recalls, product withdrawals, and FDA oversight authority

Hyman, Phelps & McNamara, P.C.’s Kurt R. Karst, who is co-chairing the conference, will present with a panel of experts and provide an overview of the Hatch-Waxman Amendments and the Biologic Price Competition and Innovation Act (“BPCIA”).  Mr. Karst will also head one of the workshops new to the ACI FDA Boot Camp program. Titled “Hatch-Waxman and BPCIA in the Trenches: Deconstructing and Constructing an Exclusivity Dispute,” Mr. Karst will deconstruct, in a step-by-step manner, a complex exclusivity dispute, analyzing FDA’s and the disputing parties’ various (and sometimes evolving) positions on exclusivity.  Relevant court decisions will also be analyzed and their practical and future effects discussed.  After the exclusivity case analysis is completed, attendees will have the opportunity to construct their own exclusivity dispute by choosing from various base facts.  Once the case is constructed, Mr. Karst will lead attendees through the exclusivity analysis. 

FDA Law Blog is a conference media partner. As such, we can offer our readers a special 15% discount. The discount code is: P10-999-FDAB17. You can access the conference brochure and sign up for the event here.  We look forward to seeing you at the conference.

By Kurt R. Karst –

Like the Running of the Bulls in Pamplona, Spain each Summer, we wait with bated breath each July and August to see how FDA-regulated companies might get gored when FDA releases the user fee rates for the next fiscal year. Over the past week, FDA has released a herd of notices in the Federal Register establishing the Fiscal Year 2017 (“FY 2017”) user fee rates for several programs, including:

• Prescription Drug User Act (“PDUFA”) Fee Rates
• Biosimilar User Fee Act (“BsUFA”) Rates
• Generic Drug User Fee Amendments (“GDUFA”) Rates
• Medical Device User Fee Rates
• Animal Drug User Fee Act Rates and Payment Procedures
• Animal Generic Drug User Fee Act Rates and Payment Procedures
• Food Safety Modernization Act Domestic and Foreign Facility Reinspection, Recall, and Importer Reinspection Fee Rates
• Outsourcing Facility Fee Rates

For many years now we’ve been tracking the changes in user fees rates FDA sets each fiscal year under PDUFA, and, more recently, under BsUFA and GDUFA (see our previous post here).  Unlike most previous years, many of the user fee rates for FY 2017 will be less – and in some cases far less – than those established for FY 2016.  This is particularly the case under PDUFA and BsUFA, which is keyed to PDUFA user fee rates.  Under GDUFA, while ANDA applicants will be getting a break with reduced application user fees, Drug Master File (“DMF”) filers, and Active Pharmaceutical Ingredient (“API”) and Finished Dosage Form (“FDF”) facility owners will have to deal with moderate increases.  So, instead of a goring, many drug companies will be getting a break in FY 2017, potentially causing them to delay submissions planned for FY 2016 into FY 2017.

The FY 2017 PDUFA application user fee rate is set at $2,038,100 for an application requiring “clinical data” (defined here in an FDA guidance document), and one-half of a full application fee ($1,019,050) for an application not requiring “clinical data” and a supplement requiring “clinical data.” These figures reflect FDA’s estimate of 123.405 fee-paying full application equivalents – an average of the number of full applications that paid fees over the latest 3 years – and result in a 14.2% reduction in the fee compared to FY 2016 (i.e., $2,374,200). The 123.405 figure is higher than last year’s estimate of 119.545 fee-paying full application equivalents.  Annual establishment and product fees have been set at $512,200 and $97,750, respectively, and are based on estimates of 491 establishments and 2,573 products.  The FY 2017 establishment and product fees are 12.5% and 14.6% less than those established for FY 2016.  The FY 2017 PDUFA user fee rates become effective on October 1, 2016.

The decreases in FY 2017 PDUFA user fee rates are the result of a provision included in PDUFA V (2012), which requires that if user fee revenue collected from FYs 2013-2015, as well as estimated revenue to be collected in FY 2016, “exceeds the
cumulative amount appropriated for fees for FYs 2013 through 2016, the excess shall be credited to FDA’s appropriation account and subtracted from the amount of fees that FDA would otherwise be authorized to collect for FY 2017. . . .”  The cumulative difference between PDUFA fee amounts specified in appropriation acts for FYs 2013-2016 and the PDUFA fee amounts collected resulted in a $124,065,726 excess.

As noted above, BsUFA user fees – i.e., the initial and annual biosimilar Biological Product Development (“BPD”) fees, the reactivation fee, and the biosimilar biological product application, establishment, and product fees – are keyed to PDUFA user fees.  The FY 2017 rates have thus been set at $203,810 (initial and annual PBD), $407,620 (reactivation), $2,038,100 (application), $512,200 (establishment), and $97,750 (product). 

The first table below shows the changes in PDUFA user fee rates for the latest iteration of the law – PDUFA V – and the next three tables chart the historical growth of each fee since the initiation of the PDUFA program. Additional historical tables for user fee rates changes since the enactment of PDUFA are available here.    

GDUFA establishes several types of user fees that together generated $299 million in funding for FDA in FY 2013 (including $50 million from the one-time ANDA backlog fee). That $299 million base amount is adjusted annually.  The FY 2014 adjusted base figure was $305,659,000; in FY 2015, it was set at $312,224,000; in FY 2016, it was set at $318,363,000; and in FY 2017, it is set at $323,010,000.  Three of the FY 2017 GDUFA user fee rates – applicable to DMFs, and API and FDF facilities – have increased vis-à-vis the FY 2016 user fee rates (by 21.3%, 8.2%, and 6.0%, respectively); however, the application and Prior Approval Supplement (“PAS”) fee rates each dipped by 7.3% compared to the FY 2016 user fee rates. This is somewhat similar to what happened in FY 2015 when FDA hiked the API and DMF fee rates and reduced the application, PAS, and DMF fee rates.

The original ANDA and PAS fees, which make up 24% of the $323,010,000 (or $77,523,000 rounded to the nearest thousand dollars), are based on a total number of 1,100 fee-paying full application equivalents expected to be received in FY 2017. Dividing $77,523,000 by the total number of fee-paying full applications expected to be received results in an original ANDA fee of $70,480 and a PAS fee of $35,240 for FY 2017. The 1,100 fee-paying full application equivalents figure FDA identifies for FY 2017 is the second lowest under GDUFA.  FDA estimated 1,160 in FY 2013; 1,148.8 in FY 2014; 1,276 in FY 2015; and 1,005 in FY 2016. 

The DMF fee, which makes up 6% of the $323,010,000 ($19,381,000 rounded to the nearest thousand dollars), is based on an estimate of 379 fee-paying DMFs in FY 2017. This is a significant decrease over the 453 fee-paying DMFs estimated in FY 2016 (and much less than the 701 fee-paying DMFs estimated in FY 2015), and explains the rise in the DMF fee over the past couple of years.  The resulting fee is $51,140 for FY 2017 (a 21.3% increase over FY 2016).

The API and FDF facility fees are based on data submitted by generic drug facilities through the self-identification process. The FDF facility fee revenue makes up 56% of $323,010,000 ($180,886,000 rounded to the nearest thousand dollars), and the API facility fee makes up 14% of $323,010,000 ($45,221,000 rounded to the nearest thousand dollars).  According to FDA, the total number of FDF facilities identified through self-identification was 675 (255 domestic and 420 foreign), and the total number of API facilities identified through self-identification was 789 (101 domestic and 688 foreign).  These numbers translate into FY 2017 FDF facility fee rates of $258,646 for a domestic facility and $273,646 for a foreign facility, and API facility rates of $44,234 for a domestic facility and $59,234 for a foreign facility. The table and chart below show the changes in GDUFA user fee rates for the first iteration of the law. 

By Kurt R. Karst –      

Late last week, Judge Ketanji Brown Jackson of the U.S. District Court for the District of Columbia issued a 57-page Memorandum Opinion handing FDA a victory on the scope of 3-year new clinical investigation exclusivity. The decision came in a case initiated last October when Otsuka Pharmaceutical Development & Commercialization, Inc. and Otsuka Pharmaceuticals Co., Ltd. (collectively “Otsuka”) filed a Complaint challenging FDA’s October 5, 2015 denial of a Citizen Petition (Docket No. FDA-2015-P-2482) submitted by Otsuka and FDA’s approval of Alkermes plc’s (“Alkermes”) 505(b)(2) NDA 207533 for ARISTADA (aripiprazole lauroxil) Extended-release Injectable Suspension notwithstanding unexpired 3-year exclusivity applicable to Otsuka’s ABILIFY MAINTENA (aripiprazole) for Extended-release Injectable Suspension, for Intramuscular Injection (NDA 202971).  ARISTADA is a prodrug of N-hydroxymethyl aripiprazole (and which N-hydroxymethyl aripiprazole is a prodrug of aripiprazole) that FDA approved for the treatment of schizophrenia – the same use for which ABILIFY is approved – and for which a period of 5-year New Chemical Entity Exclusivity was awarded.  In ruling for FDA (and intervenor Alkermes), Judge Jackson granted Motions for Summary Judgment filed by FDA and Alkermes (here and here), and denied Otsuka’s Motion for Summary Judgment (here).

As we previously reported (see our previous posts here and here), Otsuka alleged in its Complaint that FDA violated the FDC Act’s 3-year exclusivity provisions (FDC Act § 505(c)(3)(E)(iii) and (iv), and referred to as “romanette iii” and “romanette iv” in the court’s ruling), the Agency’s regulation governing 3-year exclusivity (21 C.F.R. §§ 314.108(b)(4) and (5)), and the Administrative Procedure Act (“APA”) in approving ARISTADA. All three allegations boil down to a single issue, as the court noted:

What is at issue in the instant case is the scope of the exclusivities that were conferred to Abilify Maintena and its supplement by statute. . . .  In essence, Otsuka maintains that the FDA was plainly prohibited from approving Alkermes’s drug Aristada during the relevant time period, and thus the agency’s authorization of the marketing of Aristada was arbitrary, capricious, and in violation of the law, because the three-year periods of marketing exclusivity that Abilify Maintena and its supplement received under romanettes iii and iv (and their accompanying regulations) were broad enough to block the approval of subsequent drug applications that have the same “conditions of approval.” But the FDA has taken the position that the exclusivity provisions in the FDCA and the agency’s regulations only prohibit approval of a subsequent new drug application that pertains to a drug that has the same active moiety as the drug that received exclusivity, regardless of any overlap with respect to the conditions of approval, and so, the FDA argues, because Aristada and Abilify Maintena have different active moieties, the agency was permitted to approve the Aristada NDA within Abilify Maintena’s exclusivity periods.  [(emphasis in original)]

Applying the familiar deference principles articulated by the U.S. Supreme Court in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), and Auer v. Robbins, 519 U.S. 452 (1997), Judge Jackson came down on the side of FDA  and Alkermes for each allegation:

First, the Court concludes that the FDCA’s terms do not unambiguously preclude the FDA from viewing the exclusivity bar as pertaining only to drugs that contain the same active moiety as the drug with exclusivity, and, in fact, the Court finds that the FDA’s interpretation of the FDCA’s exclusivity provisions is entirely reasonable. Furthermore, to the extent that the FDA reads its own implementing regulations in the same way as it has interpreted the pertinent statutory provisions, this Court concludes that the agency’s reading is not plainly erroneous and is entitled to deference. In this same vein, the Court also finds that the agency’s resolution of the regulation’s ambiguity through its active-moiety interpretation is not a “de facto” rulemaking, as Otsuka argues. Consequently, the summary judgment motions that the FDA and Alkermes have submitted must be granted; Otsuka’s motion for summary judgment must be denied; and Otsuka’s claims against the FDA will be dismissed.

Analyzing each allegation separately, Judge Jackson took great pains to parse out the so-called “eligibility” and “bar” clauses of the 3-year exclusivity provisions at FDC Act §§ 505(c)(3)(E)(iii) and (iv). Finding that the provisions are susceptible to “multiple plausible interpretations,” and thus ambiguous with respect to whether or not 3-year exclusivity blocks the approval of a 505(b)(2) NDA for a drug product containing a different active moiety for the same condition of approval as the drug product protected by 3-year exclusivity, Judge Jackson eventually moved on to Chevron Step Two. There, Judge Jackson ruled that the text of FDC Act § 505(c)(3)(E)(iii) (and later FDC Act § 505(c)(3)(E)(iv)) permits  FDA’s “active moiety” interpretation, and that FDA has provided a cogent explanation that is supported by the goals of the FDC Act. 

[I]t makes eminent sense for the FDA to conclude that the scope of the three-year-exclusivity benefit should relate to the particular drug substance that was studied in order to give rise to exclusivity in the first place; indeed, to find otherwise would upset the “careful balance” that Congress struck in the Hatch-Waxman Amendments insofar as it would seemingly permit a drug manufacturer who made investments related to one particular drug substance to prevent the marketing of other drug products and substances that might be safe and effective as treatments for the same or similar conditions.  Nothing in the statutory scheme suggests that Congress intended that result, and in fact, it appears that Congress strongly desired to affect the drug market in precisely the opposite manner.  Thus, an agency interpretation that views romanette iii’s exclusivity as only extending to second-in-time applications for the marketing of drugs that are, in essence, the same as the drug that was previously studied (i.e., those that have the same active moiety) is entirely consistent with the way the statutory scheme was intended to operate and accords fully with the purposes animating Hatch-Waxman.  [(emphasis in original; internal citation omitted)]

Similarly, Judge Jackson found that FDA’s interpretation of the Agency’s 3-year exclusivity regulations at 21 C.F.R. §§ 314.108(b)(4) and (5), which largely mirror the text of FDC Act §§ 505(c)(3)(E)(iii) and (iv), are not plainly erroneous or inconsistent with the text of those regulations.

[T]he regulations clearly permit the agency to employ the same reasoning that it applies when it interprets the statute, which means that “the conditions of approval of the original application” language is permissibly viewed as, in effect, incorporating the nature of the drug in the original application itself. . . . All that the Court has said before with respect to its analysis of romanettes iii and iv applies and leads inexorably to the conclusion that the FDA has not committed plain error or acted inconsistently with its regulations, and indeed, the fact that these regulations involve “a complex and highly technical regulatory program, in which the identification and classification of relevant criteria necessarily require significant expertise and entail the exercise of judgment grounded in policy concerns” makes deference to the FDA’s interpretation “all the more warranted[.]”  These ambiguous regulations do not preclude the conclusion that an active-moiety overlap is needed in order for a second-in-time application to be “for” the “conditions of approval” of an earlier NDA regarding a drug, or “for” a “change approved” in a supplement regarding a drug with exclusivity.  [(internal citation omitted)]

Having ruled for FDA on Otsuka’s first two allegations, it was relatively easy for Judge Jackson to dispense with the third allegation. (In fact, Judge Jackson wrote that the “final claim can be resolved in mercifully short order.”)  “[T]his Court’s prior rejection of Otsuka’s argument that the three-year exclusivity regulations have an unambiguous meaning that foreclosed the FDA’s “active moiety” interpretation and consequent approval of Aristada, also compels the rejection of Otsuka’s contention that the FDA transgressed the APA by improperly ‘amending’ an unambiguous regulation,” wrote Judge Jackson. 

As we’ve noted before, disputes concerning the metes and bounds of 3-year exclusivity have been plentiful over the past few years. And we may very well see more in the months and years ahead as the countours of the statutory 3-year exclusivity provisions are further elucidated through approvals, exclusivity determinations (particularly in the context of abuse-deterrent drug products), and in guidance that FDA is expected to issue, tentatively titled “Three-Year Exclusivity Determinations for Drug Products.”  And while there may be plenty to argue about in the shades of gray, Judge Jackson’s opinion seems to be one clear bookend on the scope of 3-year exclusivity: in order for 3-year exclusivity to have an effect against a competitor’s product, both drug products must share the same conditions of approval and share an active moiety.

By Jennifer D. Newberger –

With less than two months to go before the UDI compliance date for Class II devices, on July 26, 2016, FDA issued a draft guidance related to what would seem to be the most basic of concepts: the form and content of the UDI. More specifically, the draft guidance states that its intent is to “clarify” for industry and FDA-accredited issuing agencies the form and content of the UDI, and to “better ensure the UDIs developed under systems for the issuance of UDIs are in compliance with” the UDI rule.

The UDI rule was finalized in September 2013, and FDA accredited the first issuing agency soon thereafter. Since then, the issuing agencies have been working with labelers to issue UDIs for Class III and Class II devices. Though FDA does not state in the draft guidance that it is aware of the issuance of any non-compliant UDIs, that seems to be the implication of the draft guidance. For example, the draft guidance states: “It is critical that each FDA-accredited issuing agency develop and operate a system for the assignment of UDIs that allow labelers to confidently use the FDA-accredited issuing agency’s system to develop UDIs that are compliance with the UDI labeling requirements . . . . Therefore, the FDA-accredited issuing agencies’ systems for issuing UDIs should align with the UDI labeling requirements.”

For a labeler that has already obtained a UDI from an accredited issuing agency, this language in the draft guidance may cause some concern, as it seems to imply that the issuing agencies have in fact been issuing UDIs that are not in compliance with the UDI labeling requirements. Yet the draft guidance does not advise labelers to confirm compliance of the issued UDIs, nor does it explicitly state that FDA is aware the issuance of non-compliant UDIs. If FDA is aware of the such UDIs, it should so state, and should provide more direct guidance to labelers and issuing agencies about steps to take the remedy the non-compliance.

The draft guidance also introduces new concepts not discussed in the rule or in guidance issued by FDA since the rule was finalized. It is not clear if these concepts, such as “data delimiter” and “UDI carrier,” were already being used by the issuing agencies, or if they are entirely new ways of developing the form and content of a UDI. It may also be that these concepts are now being introduced as a means of remedying whatever concerns FDA may have about compliance of the UDIs that have been issued. The draft guidance simply does not say.

FDA should more explicitly discuss why the guidance was issued at this late stage, concerns about potential non-compliant UDIs, and why new terms are being introduced now. If labelers obtained non-compliant UDIs from issuing agencies, FDA should allow a grace period to come into compliance, and should not take enforcement actions against labelers that acted in good faith in obtaining a UDI.

By Dara K. Levy –

The Automated Commercial Environment (ACE), which went into effect for FDA-regulated products on June 15, 2016 (after several delays), is an electronic system operated by Customs and intended to automate import processing and expedite reviews for electronic import filings.  It replaces the Automated Commercial System (ACS) and is intended to implement the “single window” electronic submission requirement outlined in the International Trade Data System (ITDS) for import and export data provided to the U.S. Government.  The ITDS is “a partnership of government agencies committed to the modernization and facilitation of international trade.”  In February 2014, President Obama issued Executive Order 13659, Streamlining the Export/Import Process for America’s Businesses, which required this “single window” to go into effect by December 31, 2016 for all partner government agencies involved with the ITDS, which includes FDA.

The purpose of ACE, generally, is to improve the information flow to the U.S. Government about imports and exports and, ultimately, ease the burden on importers/exporters by reducing redundant submissions required by the different agencies that may review the entries.  As importers of FDA-regulated products already know, Customs may often release goods only for those goods to be held for substantial periods of time by FDA while it reviews entry information submitted.  FDA has acknowledged that the ACS system had allowed for incomplete and inaccurate data to be transmitted to FDA, which then required FDA to manually review entry information.  FDA estimates that it took approximately 28 hours for FDA to ultimately release an entry when it conducted a manual review under the legacy ACS system.  Not surprisingly, when complete and accurate information was submitted in ACS, and an automated review was sufficient, the release time was significantly quicker, taking approximately 24 minutes. 

FDA has estimated that with the implementation of ACE, and inclusion of the required (and optional) data elements, manual reviews of information are completed over 30% faster than previously with ACS.  The expectation is that review times will only improve.  Ultimately, the goal is to prioritize FDA resources for products that represent a greater public health risk, while automating the release of lower risk products.

On July 1, 2016, FDA published a proposed rule to establish certain data requirements for FDA-regulated import entries electronically filed in ACE.  Because ACE has already been implemented, much of the proposed rule is practically in effect.  FDA has confirmed that all but four ACE-required elements were previously captured in the legacy ACS system.  The four new elements include the following:  1) name, telephone number, and email address for one of the persons related to the importation of the product, which may include the manufacturer, shipper, importer of record, or Deliver to Party; 2) a telephone number and email address for the importer of record; 3) name and address of the ACE filer; and 4) brand name for tobacco products.

Where things may be different with ACE is in the level of detail that is now being requested as “optional” submission information.  FDA is strongly encouraging ACE filers to include certain “optional” information that will better enable FDA to make automatic admissibility determinations.  FDA is seeking comments on the advantages, disadvantages, and feasibility of requiring the submission of data elements currently identified as “optional,” such as the approval or clearance status of the product and intended use.  Comments are due August 30, 2016.

FDA has implemented a number of outreach programs to assist industry with the transition to ACE.  In addition to webinars, FDA has implemented the FDA ACE Support Center, staffed 24/7 and available to answer questions regarding the FDA Supplemental Guide, required data elements, and general ACE submissions.  FDA is also prioritizing assistance to industry through “Production Calls.”  A production call is a “meeting between the FDA, the entry filer and the entry filer’s software vendor (preferably) to walk through an entry that is being submitted via ACE.  These production calls allow FDA and the entry filer to talk about the entry submission in real time.”  While not mandatory, FDA encourages these calls and, upon request, will assist with a filer’s first ACE submission.  More information about ACE and FDA’s Facilitation of the ACE Transition can be found here and here.