In a speech last week, Deputy Attorney General Lisa Monaco touched on a number of topics that should interest readers of this blog.  First, although the topic of her speech was corporate criminal enforcement, DAG Monaco stressed that DOJ’s “number one priority is individual accountability.”  While individual accountability is not a new theme, the speech suggested that companies may see a new level of urgency to government investigations. DAG Monaco stated, “In individual prosecutions, speed is of the essence.”  For companies (who routinely control the documents and information relevant to the government’s investigation of individuals), she warned “undue or intentional delay in producing information or documents—particularly those that show individual culpability—will result in the reduction or denial of cooperation credit” for the company.

The next topic that DAG Monaco addressed was corporate recidivism.  The speech explained how DOJ will look at that issue. Of particular interest to readers of this blog, she noted “if a corporation operates in a highly regulated industry, its history should be compared to others similarly situated, to determine if the company is an outlier.”  She also explained that while the evaluation of prior misconduct is a multi-factor analysis, “dated” misconduct is given less weight, defining dated as “[c]riminal resolutions that occurred more than 10 years before the conduct currently under investigation, and civil or regulatory resolutions that took place more than five years before the current conduct.”  Of further interest to those considering acquisition of a company with a troubled past, DAG Monaco explained “We will not treat as recidivists companies with a proven track record of compliance that acquire companies with a history of compliance problems, so long as those problems are promptly and properly addressed post-acquisition.”

The speech’s third topic, voluntary self-disclosure is potentially the most significant. DAG Monaco announced that “every Department component that prosecutes corporate crime will have a program that incentivizes voluntary self-disclosure.” While programs may vary in some respects, “Absent aggravating factors, the Department will not seek a guilty plea when a company has voluntarily self-disclosed, cooperated, and remediated misconduct.”  Whether programs will offer any guidance on what constitutes “aggravating factors”—an exception that could swallow the rule—remains to be seen.

DAG Monaco closed her speech by discussing how DOJ views corporate compensation. She explained “when prosecutors evaluate the strength of a company’s compliance program, they will consider whether its compensation systems reward compliance and impose financial sanctions on employees, executives, or directors whose direct or supervisory actions or omissions contributed to criminal conduct.”  While the speech did not identify any examples of compliance bonuses, it did note compensation clawbacks as one example of a compensation policy to deter misconduct.

We expect further guidance documents on these topics in the coming days and will continue to follow how these changes play out both on paper and in practice.

Earlier this week, President Biden signed Executive Order 14081, titled “Advancing Biotechnology and Biomanufacturing Innovation for a Sustainable, Safe, and Secure American Bioeconomy.”  The Executive Order was spurred in part by the COVID-19 pandemic, but it points out that biotechnology and biomanufacturing—defined as use of biological systems to develop products, tools, and processes at commercial scale—has other uses outside of human health, including securing supply chains and growing the American economy.   Efforts to further policies outlined in the order are referred to as the National Biotechnology and Biomanufacturing Initiative (NBBI).

The Executive Order includes objectives to bolster and coordinate Federal investment in biotechnology and biomanufacturing, and to improve and expand on domestic biomanufacturing production capacity and processes while also accelerating the translation of basic research results into practice (section 1).  It also includes a Section on improving the clarity and efficiency of the regulatory process for agricultural biotechnology products (section 8).   The Executive Order also mentions the need to develop genetic engineering technologies and techniques and advance the science of scale-up production so that innovative technologies and products can reach markets faster.  We’ve only touched on a few of the objectives identified in this ambitious and all-encompassing order.

To achieve the objectives outlined in section 1, several heads of agencies, including the Health and Human Services (HHS) are to submit reports to the President through the Assistant to the President for National Security Affairs (APNSA), in consultation with the Assistant to the President for Economic Policy (APEP) and the Director of the Office of Science and Technology Policy (OSTP) within 180 days of the order.  Each report is to identify high-priority basic research and technology development, opportunities for public-private collaboration, and actions to enhance biosafety and biosecurity.  These reports will be used to develop an implementation plan and by September 2024, HHS and other heads of agencies will report on measures taken and resources allocated to enhance biotechnology and biomanufacturing per the plan.

HHS published a press-release in response to the Executive Order, stating that it will support development of 1) FDA research programs for advanced manufacturing technologies, 2) Advanced Manufacturing Innovation Hub in the FDA’s Office of Counterterrorism and Emerging Threats, 3) FDA Center for Advancement of Manufacturing Pharmaceuticals and Biopharmaceuticals, etc.  While it is not clear what HHS will discuss in its report, the FDA/CDER Emerging Technology Program and FDA/CBER Advanced Technologies Program are collaborative programs where industry, innovators/developers, and the FDA can discuss advanced technologies, including advanced manufacturing.  However, the Committee on Identify Innovative Technologies to Advance Pharmaceutical Manufacturing, indicated industry is still hesitate to implement innovative technologies due to inconsistent feedback from the FDA during these meetings.  In addition to holding meetings, FDA also solicits applications for extramural funding to support advanced manufacturing and other innovative technologies through the FDA Broad Agency Announcement and the NIH Grants and Funding portal.  While HHS mentions the FDA’s Center for Advancement of Manufacturing Pharmaceuticals and Biopharmaceuticals, there is little information on this center aside what the FDA stated in October 2021 and January 2021.  The HHS’s report may consider incorporating some of the FDA’s efforts (Framework for Regulatory Advanced Manufacturing Evaluation) to identify and implement changes in the regulatory structure to enable new technologies, including advanced manufacturing mentioned very, briefly, here.

On September 9, 2022, FDA published two notices regarding draft guidance related to labeling of drug products: a notice on the publication of a draft guidance on the Statement of Identity and Strength — Content and Format of Labeling for Human Nonprescription Drug Products and a notice on the publication of a draft guidance on the Quantitative Labeling of Sodium, Potassium, and Phosphorus for Human Over-the-Counter and Prescription Drug Products.  For both draft guidances, it is unclear what induced FDA to publish these draft guidances now.

Draft Guidance Regarding the Statement of Identity and Strength for Human Nonprescription Drug Products

FDA indicates that this guidance is intended to help manufacturers ensure consistent content and format of the statement of identity and strength for all nonprescription drug products, which then will allow consumers to compare products.  FDA’s thinking on the format to be used is quite specific.

The guidance applies to all non-prescription drugs available in the United States, including products approved by FDA and monograph drug products.  It details FDA’s interpretation of the regulation 21 C.F.R. § 201.61 regarding the statement of identity.  FDA interprets the regulation for drug products without an established name (generally monograph drug products do not have an established name) as requiring the name of the active ingredient, the pharmacological category, and strength.  (The regulation does not include a specific requirement to identify the strength of the active ingredient).  In addition, unless it is obvious, the route of administration (ROA) should be included.  For products that include more than one active ingredient, FDA recommends that this information for each active ingredient is vertically aligned.

The regulation requires that the statement of identity must be in “a font reasonably related to the most prominent printed matter on the principal display panel” (PDP).  Consistent with FDA comments in a few Warning Letters,  FDA asserts that this means that the statement of identify must be 50% or more of the size of the most prominent printed matter.  FDA does not explain how it arrived at 50% or more.  (Interestingly, in the 2019 proposal for sunscreen labeling, FDA proposed to require a size at least one quarter the size of the most prominent printed matter).

Without further discussion or explanation, FDA asserts that the requirement for the placement of the statement of identity “in direct conjunction” with the brand or proprietary name “implies that the proprietary name and the statement of identity should not be separated by any intervening matter.” (underline added).

If a monograph includes requirements for the statement of identity that are inconsistent with this guidance, FDA does not intend to take action against companies who follow the guidance.

Draft Guidance on the Quantitative Labeling of Sodium, Potassium, and Phosphorus for Human Over-the-Counter and Prescription Drug Products

For OTC drug products, this guidance (simply) restates the legal requirements included in regulations regarding the quantitative information for sodium and potassium in labeling of OTC products intended for oral ingestion. Interestingly, it provides information for manufacturers who want to include (voluntarily) the phosphorus level in the drug product.

The amount of phosphorus would be the calculated equivalent amount of elemental phosphorus from all the phosphorus-containing components. (FDA stresses that it should not be the amount of phosphate).  As is the case for sodium and potassium, the amount of phosphorus should not be declared if it is less than 5 mg per single dose because that amount is not expected to be clinically relevant.  Also, amounts should be rounded to the nearest 5 mg.  FDA recommends including this information in the Drug Facts under the heading Other information, i.e., in the same sections as where sodium and potassium (if present) will be declared.   If the product contains sodium, potassium, and phosphorus in amounts of 5 mg per single dose, phosphorus must be listed after potassium (which is listed after sodium).  However, if a voluntary statement about the absence of sodium, potassium, or phosphorus is included, it should be the last statement in the “Other Information” section.  The guidance includes several examples of the labeling.

Patients with certain conditions, such as heart failure, hypertension, or chronic kidney disease, are advised to restrict their dietary intake of sodium, potassium and/or phosphorus. Thus, inclusion of information on sodium, potassium, and phosphorus content in a drug may help healthcare providers and patients to select drug products with lower amounts of sodium, potassium, or phosphorus.

For both guidances, comments must be submitted by November 8, 2022, to be considered by FDA.

As promised in our posts from earlier this summer (here and here), we are back to report on our assessment of CDRH’s electronic submission process through its Customer Collaboration Portal (CCP).  In short, the process is FANTASTIC!  Say goodbye to your thumb drives and CDs – the CCP electronic submission process couldn’t be easier.  FDA’s CCP allows for a simple drag and drop to upload of a zip file containing your full eCopy directly to the Center.  The site, alternatively, allows for uploading of an eSTAR formatted submission.  The upload process really couldn’t be easier.  The instructions are simple and the site is user friendly and intuitive.

This author has now submitted two 510(k)s using the system.  It has been seamless.  In both cases, the 510(k)s were submitted in the afternoon/early evening.  We immediately received an automated confirmation through the website after each was submitted.  Then, the following business day, we received the confirmation email from the Document Control Center identifying the submission number.

The CCP also tracks your sent submissions as well as your Traditional 510(k)s currently under review.  In our view, this submission functionality is a great technological step forward for CDRH.  We look forward to the application being opened up to allow additional users to submit electronically and for the tracking function to be expanded to other submission types (e.g., pre-submissions, IDEs, Special 510(k)s).

It’s been almost 11 years since FDA first clarified use of multiple predicate devices and introduced the concept of Reference Devices in the draft guidance titled The 510(k) Program:  Evaluating Substantial Equivalence in Premarket Notifications [510(k)], which we blogged about here.  The final guidance with the same title (Guidance), which we blogged about here at the time of release in 2014, provided additional clarity, but we find that, even with years of experience, it is still a challenge in many cases to decide how best to bring a second device into a substantial equivalence discussion.  One frequent issue that arises is whether to designate that second device as a secondary predicate device or so‑called reference device.

A little history may be helpful.  Prior to the Guidance, FDA had sometimes allowed so‑called split predicates in 510(k)s.  A split predicate was one “using one legally marketed device for intended use and a different legally marketed device for technological characteristics to demonstrate substantial equivalence.”  Guidance at 39.  In the Guidance, FDA took the position that “the use of a ‘split predicate’ is inconsistent with the 510(k) regulatory standard.” Id.  Since that time, this practice has essentially been taken off the table for 510(k) submissions.

Even as the Guidance ruled out the use of split predicates, it acknowledged that the practice of relying on multiple predicates in a submission can be valid.  However, the Guidance recommended designating a single device as the “primary predicate device” while citing additional devices as either “secondary predicate devices” or “reference devices.”  The Guidance defined a secondary predicate as one used when “combining features from two or more predicate devices with the same intended use into a single new device, when seeking to market a device with more than one intended use, or when seeking more than one indication for use under the same intended use.” Id. At 11.

Things are a bit clearer with reference devices.  The Guidance defines a reference device as a device that is used to “support scientific methodology or standard reference values.” Id. at 13.  This device explicitly does not need to satisfy each step in the SE flow chart.  Rather, it aids with respect to step 5a related to acceptability of methods for performance testing.

When combining features from two or more devices with the same intended use, the determination of whether to consider the second device a secondary predicate or reference device is not always obvious.  Based on the guidance, the second device would be identified as a secondary predicate device.  However, as the primary predicate is sufficient to reach a determination of substantial equivalence, one may also consider an argument that the second device is merely referenced for support of test methods or standard reference values for specifications related to the features not present in the primary predicate device.

Given FDA concerns over split predicates, it seems that most applicants lean towards use of a reference device, even when identifying the device as a secondary predicate may be more appropriate.  As long as the primary predicate device is appropriate, we have not seen FDA raising concerns during review over whether a second device is a secondary predicate or a reference device.  However, given the drift towards considering any second device a reference device, it is important to review the definitions and descriptions of both secondary predicates and reference devices so that the most appropriate choice can be made in the preparation of 510(k) submissions.

Hyman, Phelps & McNamara, P.C.’s Deborah Livornese will be a panelist for FDAnews’ September 15, 2022 webinar titled “Califf’s Post-PDUFA, Post-COVID FDA Agenda: Key Developments, Insights and Analysis”.  Aspirational only title notwithstanding, you can find more information about the webinar and registration at FDAnews and use code VIP20 for a 20% discount.

Three patient advocate groups have sued the Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS), challenging HHS’s 2020 Notice of Benefits and Payment Parameters (NBPP) rule.  As it stands, the rule allows insurers and pharmacy benefit managers (PBMs) to broadly use copay accumulator programs, which have long been criticized by patient advocacy groups as padding insurers’ pockets while leaving patients high and dry.

Recognizing the problems that high prescription drug costs pose to patient access to medications, many drug manufacturers have created copay assistance programs to help patients afford the copays and deductibles for their medications.  In a common example of this practice, the drug manufacturer issues a coupon to an insured individual to present at the pharmacy.  The pharmacy bills all or most of the individual’s copayment or coinsurance—which the patient would otherwise pay the pharmacy directly—to the manufacturer.

Insurance companies and PBMs, on the other hand, have largely resisted these programs to shift drug costs away from patients and have instead found ways to shift the cost of drugs back to the patient and away from the insurer.  By prohibiting patients from counting manufacturer-provided assistance as part of the patient’s copay obligation, insurers can collect from both the patient and the manufacturer.  These prohibitions are often referred to as copay accumulator adjustment programs.  Under a copayment accumulator adjustment program, if a patient pays the $300 copay for a one-month supply of medication using a $300 manufacturer copay card or coupon, the insurer accepts the payment but does not count any manufacturer-provided copay assistance against the insured individual’s deductible or out-of-pocket maximum in the insurer’s internal accounting systems.  The insurer receives a windfall by being able to collect payments from the manufacturer and then still collect the full deductible and copayment amounts from the patient.

The patient, on the other hand, is no closer to meeting their deductible than before.  Despite securing funds to satisfy the copay obligation, the insurer’s disregard of that payment leaves full benefits and more affordable drugs for the rest of the year the same distance out of reach.  Patients who exhaust any available copay assistance program benefits will then return to square one, facing the same, limited choice: go into debt to acquire needed medications or forgo sometimes life-saving or life-extending treatment.

During the Trump administration, HHS and CMS issued the 2020 NBPP rule, revising 45 C.F.R. § 156.130(h) to explicitly allow insurers to broadly use copay accumulator programs.  The 2019 rule allowed the use of copay accumulator programs, but only with respect to drugs for which a generic alternative was available.  The complaint alleges that “copay accumulator adjustment policies have grown in the wake of HHS’s changing policy” (internal quotations omitted).

We have blogged before on Trump-era drug pricing and payment regulations, most of which have been struck down by the courts (see here and here), including another accumulator adjustment rule (see here).  The HIV and Hepatitis Policy Institute, the Diabetes Patient Advocacy Coalition, and the Diabetes Leadership Council have similarly filed suit in the U.S. District Court for the District of Columbia, challenging the 2020 NBPP rule as plainly unlawful on the grounds that it conflicts with the plain language of the Affordable Care Act (ACA) and the agencies’ existing regulations, and is arbitrary and capricious.

Among other arguments, the complaint asserts that the NBPP rule violates the ACA’s cost-sharing cap, which mandates that cost-sharing, i.e., the part of an insured patient’s annual healthcare costs for which the patient is responsible, “shall not exceed” the result of a statutory formula.  The ACA defines “cost-sharing” to include “deductibles, coinsurance, copayments, or similar charges” and “any other expenditure required of an insured individual…”  The statute sets an annual cap on the “expenditure[s] required of an insured individual” by their health insurance plan.  The complaint argues that the rule must be set aside as contrary to the ACA because the statutory text “looks not to where the money used for a copay originates,” yet the rule permits insurers to exclude payments from the annual statutory cap on cost-sharing “just because the insured obtains assistance from the drug manufacturer in satisfying that obligation.”

The complaint further argues that the rule contradicts the statute because the ACA defines the maximum amount of funds that an insurer may receive as compensation beyond premiums, yet the rule allows insurers to collect more money than the statute authorizes by collecting the ACA out-of-pocket maximum and any manufacturer-provided copay assistance.

The patient advocate groups are requesting that the court declare unlawful and set aside the rule.  An opinion that is favorable to the patient groups would mark another defeat of Trump-era drug pricing regulations.  As it stands, 14 states and Puerto Rico have passed laws outlawing copay accumulator programs.  It remains to be seen whether copay accumulator programs will be banned throughout the nation.

Last month FDA published its 4th annual report on the state of pharmaceutical quality and, needless to say, there were some interesting statistics, particularly for us FDA nerds.

Number of Manufacturing Sites and Registered Products

The report states that for fiscal year 2021, there were 4,451 CDER drug manufacturing sites, which is a 3% increase over fiscal year 2018, the only comparison year provided.  39% of these manufacturing sites are what is referred to as “no application” sites, meaning that the products manufactured there are without an approved FDA application, which includes over-the-counter (OTC)  products, unapproved prescription drug products and homeopathic products.  The remaining 61% of the sites manufacture at least one application product, meaning either a product resulting from a Biologics License Application (BLA), a New Drug Application (NDA), or an Abbreviated New Drug Application (ANDA).

The countries with the five most manufacturing sites, namely, the United States, India, China, Germany and Canada, all saw net increases in the number of manufacturing sites in inventory over the past three years.

For fiscal year 2021, CDER oversaw 12,428 ANDAs, 3,537 NDAs and 315 BLAs. CDER also oversaw more than 140,000 non-application products, including 75,300 OTC products, and 15,640 homeopathic products.  Presumably the balance of non-application products are unapproved prescription drug products, though that was not specified in the report.

Quality Surveillance with Foreign Regulatory Authority Inspection Reports and Record Requests

Given the problems with performing on-site inspections during COVID over the last year, alternative inspection tools were used by FDA to a greater degree during fiscal years 2021, including review of foreign regulatory authority inspection reports and records requests of the facility at issue.  During fiscal year 2021, FDA reviewed and classified 139 site inspections in 18 Mutual Recognition Agreement (MRA) countries, as we as six other countries.  The latter point about six other countries is particularly interesting because FDA does not appear to have previously acknowledged accepting for review and classification site inspections from non MRA countries.  In addition, during the same period FDA conducted 288 surveillance-based assessments using information from section 704(a)(4)(A) (record review) requests, which resulted in 21 import alerts.

Product Quality Defect Reports

The so-called product quality defect (PQD) reports includes Field Alert Reports (FARs), Biological Product Deviation Reports (BPDRs), MedWatch Reports (MWs) and Consumer Complaints (CCs). During fiscal year 2021, CDER received  4,115 FARs, 205 BPDRs, 11,512 quality related MWs and 273 CCs, which appear to be similar to the number of such product quality defects reported in fiscal year 2020.  According to FDA, in the coming years, the CARES Act will enable FDA to normalize product quality defect reports by the amount of each product manufactured, thereby allowing for a more thorough evaluation of the impact and magnitude of PQDs.

Import Alerts and Recalls

During fiscal year 2021, FDA placed 49 sites on import alert for, among other things, non-compliant laboratory testing, non-compliant findings from inspections, refusing inspections, and refusing 704(a)(4)(A) records requests.  The largest number of import alerts were from sites in China and Latin America, the latter owing to the large number of facilities that manufactured hand sanitizer that were detained at the border.

For the second consecutive year, the total number of recalls increased, from a near historic low in fiscal year 2019 of around 300 (my estimate, based on a review of figure 3 in the report), to around 700 in fiscal year 2020 and around 800 in fiscal year 2021 (the report doesn’t provide precise numbers).  In addition, the number of Class I recalls appears to have nearly doubled in fiscal year 2021 from the prior year, due in large measure to the recalls associated with hand sanitizer products that contained methanol, and the sunscreen products that contained benzene.

In my next blog post, I will summarize FDA’s views from the report on their research into the general state of quality in the pharmaceutical industry, as well as detail the agency’s progress with respect to two initiatives, the New Inspection Protocol Project (NIPP), and the Quality Management Maturity Project (QMM). So stay tuned!

FDA recently published a Draft Guidance entitled “Charging for Investigational Drugs under an Investigational New Drug Application: Questions and Answers” (the Draft Guidance). This Draft Guidance, when finalized, will replace the Final Guidance issued just six years ago (the 2016 Guidance). As the new Federal Register notice explains, FDA issued the 2016 Guidance in question and answer format to respond to the most frequently asked questions about charging for investigational drugs provided under an IND for either clinical trials or expanded access for treatment use under 21 CFR section 312.8

Changes from the 2016 Guidance

What’s new in the new Draft Guidance? Not all that much.  The 2022 Draft Guidance keeps all the same 20 questions with minimal tweaks to wording and added just three new questions and answers.  The new Q & As (Q21, Q22, and Q23) all concern charging in the context of expanded access.  Below we outline the Draft Guidance and highlight the new information in the 2022 Draft Guidance.

The Draft Guidance covers charging in a clinical trial or in one of the expanded access settings and the differences between them. However, many provisions are broadly applicable in both settings. For example, the Draft Guidance includes answers to general questions about the intended timeframe for response to charging requests (30 days), who should request FDA’s authorization to charge (the IND sponsor), and whom the sponsor may charge with this authorization (not FDA’s business). For this last question, FDA explains that it anticipates the sponsor would charge the patient directly or would charge a payor if reimbursement were available, but clearly states that FDA has no authority in this arena.  FDA has added language to the Answer that covers this topic (A3), stating that sponsors should ensure that charging for drugs in a clinical trial or through expanded access does not create barriers to access “that may exacerbate disparities in clinical trial participants or expanded use patients.”

Authorization for Charging in the Clinical Trial Context

The Draft Guidance continues to list the regulatory requirements to obtain authorization for charging in a clinical trial setting: (1) evidence that the drug has a potential clinical benefit that would provide a significant advantage over available products; (2) the data to be obtained from the trial would be essential to establishing that the drug is safe or effective for the purpose of initial approval or a significant change in labeling; and, (3) the trial could not be conducted without charging because the cost of the drug is “extraordinary” to that particular sponsor.

The Draft Guidance also notes that if the sponsor is evaluating an unapproved use of its approved drug, it is still required to obtain authorization; however, if a sponsor is not the marketing entity and must purchase an approved drug, it is not required to obtain authorization to charge for the drug (limitations on the amount that can be charged still apply even when authorization is not required). Additionally, authorization is not required for a sponsor to charge for the use of its own approved drug as concomitant therapy in a clinical trial intended to evaluate another drug when the concomitant therapy is not part of the clinical trial evaluation, as this is not an investigational use of the approved drug. Finally, the Draft Guidance notes that charging may continue for the duration of the clinical trial unless FDA specifies otherwise.

Authorization for Charging in the Expanded Access Context

The requirements described in the Draft Guidance for authorization to charge in an expanded access setting reflect the particular concerns that arise in the expanded access context.  Specifically, reasonable assurance that charging will not interfere with drug development is needed, and for a treatment IND or treatment protocol under 21 CFR § 320. The reasonable assurance must include (1) evidence of sufficient enrollment in ongoing clinical trials (to reasonably assure FDA that those trials will be completed as planned); (2) evidence of “adequate progress” in the development of the drug for marketing approval; and, (3) information about drug development milestones the sponsor plans to meet in the next year.

Charging may continue for 1 year from authorization unless FDA specifies a shorter period. The Agency may reauthorize upon request for additional periods if the requirements continue to be satisfied.

Cost Calculations

The Draft Guidance explains that the regulation is intended to allow a sponsor to recover direct costs specifically and exclusively incurred in making a drug available. The cost calculation submitted in the request must be accompanied by a statement that an independent certified public accountant (CPA) has reviewed and approved the calculations. The Draft Guidance adds a clarification that the independent CPA “must be qualified to make the required determinations”.

When the amount to be charged is simply the amount charged to the expanded access sponsor by a third party such that there is no calculation to be made, the sponsor does not need to submit the CPA statement, but should submit a copy of the receipt or invoice from the source to justify the amount to be charged.

Although a sponsor of an individual patient expanded access trial may only recover direct costs associated with making the drug available, a sponsor of an intermediate-size patient population expanded access IND, or a treatment IND may also recover administrative costs directly associated with the expanded access use. These additional costs may include fees paid to a third party for administration, including any profit that may be included in the fees.

Two of the new questions added in the Draft Guidance (Q22 and Q23) address the fact that monitoring and other administrative “startup” costs, and manufacturing costs are often higher in the first year compared to subsequent years. These new Q & As explain that some sponsors may amortize costs.  Specifically, sponsors of an intermediate or treatment IND or protocol  can take this approach for monitoring and other administrative startup costs, and sponsors of an expanded access IND or protocol may do so for the costs of manufacturing. In these cases, the sponsor can distribute the additional costs to reduce the per patient cost difference between patients treated earlier and patients treated later. Such a cost amortization plan should be done in accordance with standard accounting practices and this must be reviewed and approved by an independent CPA. In these situations, sponsors must still submit requests to reauthorize charging to continue after the expiration of the initial authorization period.

Finally, the Draft Guidance adds the new recommendation that if a sponsor of an intermediate-size patient population expanded access IND or treatment IND seeks to recover fees paid to a third party, it should disclose the relationship with the third party to patients, and notes that under the regulations governing informed consent, this information  also must be included in the informed consent document.

We are almost three years into the public health emergency as a result of the COVID-19 pandemic, and still only have 19 rapid antigen tests authorized for at-home use in the United States. The primary barrier to bringing new antigen tests to market has been FDA’s minimum requirement of 80% sensitivity for authorization. The 80% sensitivity requirement for antigen tests has yet to be explained either scientifically or clinically by the Agency.

It is clearly rooted in fear that less sensitive tests may have too many false negatives. But the question is, is 80% sensitivity the right place to set the bar? By doing so, FDA has limited the number of tests that have reached the market, thereby reducing available supply and increasing prices. Right now, the demand is not particularly high, but last winter had a severe shortage in which it was hard to find antigen tests at any price. That could happen again.

As FDA would acknowledge, the antigen tests are the fastest and most practical method for distributing testing in the general population. These practical benefits are in marked contrast to molecular COVID-19 tests that are used for definitive diagnosis and are generally expected to detect the SARS-CoV-2 virus at least 95% of the time when someone is infected. The molecular tests must be run in a laboratory and usually take several days due to the need to ship the sample and the constraints on laboratory availability and supplies.

Everyone understands that antigen tests are less sensitive and could miss someone who is asymptomatic with an early infection or a low viral load. But on the flip side, they are very specific, i.e., if a positive result is obtained, the result is typically very accurate in the range of 95% of the time or better.  The question is whether requiring 80% sensitivity is too high for this tool and keeping too many of them from the market.

Ironically, a recent FDA safety communication points to a potential way out of this dilemma.  In this safety communication, FDA advises the public as follows:  If you test negative and have COVID-19 symptoms, you test again 48 hours later for a total of two tests. After two negative tests, you should consider a molecular test, or call your healthcare provider. If you test negative and do not have COVID-19 symptoms, you should test again 48 hours later. If the second test is negative, you should test again 48 hours after the second test. If the third test is negative, you should test again with an antigen test, or get a laboratory molecular-based test, or call your healthcare provider. If you get a positive result on any repeat test with an at-home COVID-19 antigen test, you most likely have COVID-19.

These recommendations come based on the latest National Institutes for Health (NIH) and University of Massachusetts Chan Medical School study which was funded by the NIH Rapid Acceleration of Diagnostics (RADx) program.  This prospective cohort study recruited participants who were asymptomatic to investigate the performance of serial testing using COVID-19 rapid antigen tests compared to molecular tests. The study represents the most robust attempt at understanding the performance of serial use of rapid antigen tests for SARS-CoV-2 detection among asymptomatic individuals in the U.S. The study demonstrates that serial testing does optimize the ability to detect SARS-CoV-2 infections when using at-home rapid antigen tests.

This testing scheme calls into question whether it is really necessary to require at least 80% sensitivity when comparing an initial at-home antigen test result to the more sensitive molecular tests. One can use serial testing to make up for the sensitivity shortfall in most antigen tests.

In fact, FDA recently authorized several antigen tests that did not meet the sensitivity threshold of 80% for symptomatic individuals when the study population had more than 20% of individuals with low viral loads. The low viral loads were most likely due to individuals infected with the Omicron variant. Instead of simply denying authorization, FDA responded by authorizing these tests with a requirement in the labeling for serial testing. For example, labeling stated: This test is authorized “when tested twice over three days with at least 24 hours (and no more than 48 hours) between tests.”

While this was a step in the right direction, only the tests whose clinical studies occurred during the Omicron surge had this stipulation included in their labeling. Low viral loads within the population will impact all authorized tests, not just the ones that have been authorized since the emergence of the Omicron variant. However, we have not observed any action on the part of FDA to revise the labeling of products that were authorized in 2020 or 2021 to make the labeling consistent across all tests. Nor has FDA required additional warnings highlighting, to the user, that the clinical performance data on the currently authorized tests were generated primarily on a variant that is no longer circulating in the U.S. This lack of uniformity across manufacturers may place an unfair stigma on the newest entrants to the market as being fundamentally less accurate when that may not be the case.

The NIH RADx-sponsored study mentioned in the safety communication addresses a data gap in FDA’s review of antigen tests. FDA permitted the authorization of tests with at least 80% sensitivity in symptomatic individuals and allowed claims regarding serial screening of asymptomatic individuals without submitting performance data on this population. While companies were required to commit to conducting such studies post-authorization, none have been completed to date based on our knowledge. (This nebulous post-authorization study is not well defined in the public templates. See our previous post on the topic here.) The NIH RADx-funded study is a long-awaited dataset finally made public addressing the question of performance in asymptomatic individuals but also includes performance against the Omicron variant for tests authorized without this challenge.

The study results are not surprising, excluding singleton RT-PCR positives, the first-week sensitivity was only 79.2% (71.0-85.9%) after testing three times with a rapid antigen test at 48-hour intervals. Meaning the tests currently on the market and evaluated in the study do not appear to meet FDA’s minimum requirement of 80% sensitivity, even when tested three times in a serial fashion.

The results of this study referenced in the safety communication could be a signal of a new requirement for antigen test developers to add to their labeling, essentially requiring testing at least 3 times with 48 hours between tests if you are asymptomatic and get a negative test result. Adding this new testing scheme to labeling may provide flexibility to the 80% sensitivity requirement but may also require new clinical study designs from sponsors still vying for EUA authorization.

FDA said they are committed to appropriately accurate and reliable at-home COVID-19 tests. The recent safety communication may be a model for how FDA can more broadly authorize tests that do not meet the 80% sensitivity requirement and in addition level the playing field through consistent labeling of the testing scheme for all EUA holders.

After 5 long years, FDA has finally adopted the long-awaited OTC hearing aid rules.  While the Proposed Rule was a year and a half overdue, FDA impressively turned out the Final Rule about 7 months after the close of comments on the Proposed Rule, which is only one month after it was due and before Congress could pass a bill chastising FDA for the anticipated delay.  Kudos to FDA for getting this out so quickly and even making some significant changes and clarifications in response to the comments it received on the Proposed Rule.  We note, however, that some of the most important clarifications are not codified in the actual rule but are presented in the Preamble; thus, while FDA currently plans to interpret the rule as it states in the Preamble, it is not bound to do so.

Nevertheless, FDA clearly put a lot of effort into clarifying the major points that led to confusion in the Proposed Rule.  As we previously noted, a lack of clarity was one of the biggest concerns throughout the submitted comments.  This was especially a concern in the context of self-fitting hearing aids.  As the Proposed Rule suggested, self-fitting hearing aids are OTC hearing aids, but not all OTC hearing aids are self-fitting.  This is important because self-fitting hearing aids require the submission and clearance of a 510(k) while regular OTC hearing aids do not, which provides incentive for manufacturers to self-classify their hearing aid products as regular OTC rather than self-fitting.  (FYI, FDA does not use the term “regular hearing aids,” but we are for simplicity.)  And FDA provided no dividing line between self-fitting and regular OTC, leaving the self-fitting hearing aid category vulnerable to evasion.  The Preamble to the Final Rule addresses this issue by explaining the intended distinction.  While there’s a lot more technicality to the discussion in the Preamble, it basically boils down to user preferences versus user-specific profile; when the hearing aid frequency changes are based on a specific audiogram or hearing profile, the product is “self-fitting.”  While FDA declined to change any definitions from the Proposed Rule, the Preamble provides much-needed guidance in this area though notably, the distinction here is still subjective.

With respect to 510(k)s, FDA stood by its position that 510(k)s would not be required for all OTC hearing aids.  Despite many comments that requested this, FDA declined to implement this position and declined to define all OTC hearing aids as self-fitting devices.  Thus, only self-fitting hearing aids need to be cleared by FDA prior to marketing; regular OTC hearing aids—ones that are customizable based on user preference—do not, and consumers must rely on FDA postmarket enforcement activities to ensure safety and effectiveness of OTC hearing aids (more on that later).

With respect to design specifications, FDA made some significant changes.  The most important change is the reduction in output limit.  While previously FDA planned to impose a 115 dB SPL limit (or 120 dB SPL for devices with activated input-controlled compression), FDA lowered that threshold to 111 dB SPL (or 115 dB SPL with activated input-controlled compression).  FDA made this change in response to a multitude of comments recommending a limit of 110 dB SPL.  Rather than the lower limits of 110 dB SPL (or 115 dB SPL), which FDA noted “would reduce device effectiveness for people with perceived mild to moderate hearing impairment to such a degree that the limits would exclude some intended users from obtaining sufficient benefit of OTC hearing aids,” FDA found a compromise with 111 dB SPL (or 117 dB SPL).  FDA, however, refused suggestions to adopt a gain limit, noting that a gain limit would reduce the ability to amplify soft sounds, again decreasing device effectiveness and user satisfaction.  FDA did agree that user adjustable volume control should be a design feature for all OTC hearing aids, and insertion depth should be limited to 10 mm.  FDA also updated some of the required labeling to make it more user-friendly, though ultimately the Agency decided that usability studies for such language are not necessary due to the immense amount of public input the Agency has already received.  FDA also clarified that all hearing aids, OTC or otherwise, are subject to Quality System Requirements (“QSRs”).

While FDA addressed some major controversial issues that arose from the Proposed Rule, other areas remained untouched.  The preemption provisions, for example, have not changed.  Under both the Final and the Proposed Rule, FDA determined that the OTC hearing aid rules should preempt any state or local government law that is different from the applicable regulations and “would restrict or interfere with the servicing, marketing, sale, dispensing, use, customer support, or distribution of over-the-counter hearing aids, as defined under section 520(q) of the Federal Food, Drug, and Cosmetic Act, through in-person transactions, by mail, or online.”  While some comments, including those from 41 State Attorneys’ General, raised concerns about the implications of the ambiguity of that preemption proposal and the application to state law, FDA decided against any further clarification.  Essentially, FDA stated that it will look to the plain terms of “restrict or interfere” to determine whether a state law should be preempted, and states can reach out to the CDRH ombudsman for clarification.

Of particular note is that there are numerous consumer protection laws baked into state hearing aid laws, and while they may be protected under FDA’s approach to preemption, it is not entirely clear because the preemption provisions, on their face, could be interpreted in multiple ways.  In response to these concerns, FDA noted that state consumer protections are “not necessary to provide reasonable assurance of the safety and effectiveness of OTC hearing aids.”  Rather than directly addressing consumer protection concerns therefore, FDA explained that it would assess preemption of specific state consumer protection provisions on a case-by-case basis.  Nonetheless, FDA stood firm in its position that consumer protections would not “restrict or interfere” with OTC hearing aid distribution but drew no hard-lines that would provide guidance to states and industry.  FDA explained that its intent in adopting the preemption provision language was merely to codify the preemption language as set forth in FDARA.

Further, FDA explained that state consumer protection laws can continue to be imposed through any licensing requirements that remain for hearing care professionals, meaning that some consumer protection laws may apply to some OTC hearing aids but not others depending on the seller.  In other words, it’s a get-what-you-pay-for type situation.  Where a consumer spends additional money to receive an OTC hearing aid from a licensed professional, the consumer protections required to be provided by the licensed professional apply; otherwise, those consumer protections may not, as state consumer protections typically are required only of licensees.  Inherently, the Agency has set up a system in which any seller of a given hearing aid that has a license is required to comply with more stringent state regulations than one without.  Thus, consumers worried about protections can either shop with a licensed professional or can rely on FTC to enforce its regulations precluding false and misleading advertising and unfair or deceptive business practices.  In other words, consumer protections are not, and will not be, FDA’s problem.

It’s clear that FDA put a lot of thought and consideration into these Final Rules, but it remains to be seen how the proliferation of OTC hearing aids will affect uptake and consumer retention.  Success here depends on FDA enforcement, as there is no premarket review for regular OTC hearing aids.  But the Agency has not made hearing aid enforcement a priority in previous years, which is why “[s]everal comments shared a concern for an influx of unsafe or ineffective devices to the marketplace, for example, devices that do not satisfy the requirements of the OTC Hearing Aid Controls because of lax enforcement and/or manufacturers or sellers evading regulatory controls necessary for reasonable assurance of safety and effectiveness of OTC hearing aids.”  And FDA makes no promises here of increased enforcement now that the Final Rule is out; in fact, the Agency states that it “intends to apply existing practices for monitoring the market and will take action, including enforcement as necessary and appropriate.”  Existing practices for monitoring the market and enforcement—even in the face of the trade complaints that FDA encourages in the Final Rule Preamble—has led to almost no enforcement in the last five years.  Without increased resources devoted to enforcement now to ensure compliance with the Final Rule, it will be difficult to ensure that market entrants are complying with the detailed design and labeling requirements that FDA has established in this rulemaking, and, without that strong enforcement, OTC hearing aid consumers have no other safeguards.  While it’s great that FDA has published such detailed and thoughtful Final Rules, consumers may not be able to actually—and safely—hear using OTC hearing aids without FDA’s committed oversight.

The Final Rule goes into effect 60 days from publication on October 17, 2022.  Unless a device is currently on the market and does not require a new 510(k), FDA expects that any hearing aid complies with these regulations as soon as the law is in effect.  Legally marketed devices that do not need a new 510(k) must comply with these regulations by April 14, 2023.

On August 5, the United States Department of Agriculture’s Agricultural Marketing Service (AMS) announced a proposal to amend the organic livestock and poultry production requirements by adding new provisions for livestock handling, transport for slaughter, and avian growing/living conditions, as well as provisions to clarify existing requirements for livestock care and production practices. This proposed rule reverses the withdrawal by the Trump Administration in 2018 of the 2017 Organic Livestock and Poultry rule (the 2017 rule took ten years to develop).

As we previously reported, the Trump Administration justified the withdrawal of the rule by arguing that it was not AMS’s job to regulate humane treatment of animals. In addition, AMS had concluded that the Economic Analysis of the final rule was flawed.  The withdrawal of the rule resulted in four years of litigation.  See here for information about this litigation.  In the end, the U.S. District Court for the Northern District of California decided in favor of allowing the USDA to redo and update its rulemaking.

The proposed rule essentially reinstates the 2017 rule.   It addresses a range of topics related to the care of organic livestock.  Much of the proposed rule focuses on clarifying and codifying existing practices, but for poultry, additional indoor space and access to outdoors are added.

Livestock health care practices — Certain physical alteration procedures, such as debeaking and tail docking, will be prohibited or restricted for use on organic livestock. The proposal also includes requirements for euthanasia to reduce suffering of any sick or disabled livestock.

Living conditions —Requirements were a major issue of contention in the previous rulemaking.  The proposed rule sets separate standards for mammalian and avian livestock. The proposed avian livestock living standards set maximum indoor and outdoor stocking densities to ensure the birds have sufficient space to engage in natural behaviors, and essentially prohibit  what are often referred to as screened-in “porches.”. Generally, these porches consist of small enclosures placed just outside of the chicken houses.  Chickens can access these porches from inside the chicken house. However, according to opponents of the use of porches, these porches are not what consumers would consider access to the outdoors.  The proposed rule would make such porches an item of the past.  An outstanding item for which AMS requests feedback is the implementation of the outdoor access requirement (instead of porches).  In one of the three options, AMS would give existing facilities for layers 15(!)  years to come into compliance with the outdoor access requirements.

Transport of animals — The proposed rule adds new requirements on the transport of organic livestock to sale or slaughter.

Slaughter — The  proposed rule adds a section clarifying how organic slaughter facility practices and USDA Food Safety and Inspection Service regulations work together to support animal welfare.

AMS will host a virtual listening session on Aug. 19 from noon to approximately 2 p.m. EDT.  The deadline to register for oral comment is 11:59 p.m. EDT, Aug. 15. https://www.ams.usda.gov/event/listening-session-organic-livestock-and-poultry-standards.

Comments to the proposed rule may be submitted until Oct. 11, 2022.

Those of us who work frequently on FDA inspections of drug and medical device manufacturing facilities have noticed an uptick in regular inspections after a dramatic falloff during the first two years of COVID.  That impression was corroborated this week at the GMP by the Sea conference when Douglas Throckmorton, Deputy Director for Regulatory Programs at FDA’s Center for Drug Evaluation and Research, stated that domestic FDA inspections of facilities have been performed at “standard operational levels” since October 2021.  He added that FDA’s foreign offices have also resumed performing inspections for nearly six months now, except in China, where Zero-COVID policies complicate logistics and scheduling.

More surprising was Dr. Throckmorton’s statement that one area of FDA inspections has been deliberately and significantly reduced from pre-COVID levels: inspections that are required of facilities manufacturing drug products or drug components (like Active Pharmaceutical Ingredients) prior to approval of a new Drug Application, Abbreviated New Drug Application, or Biologics License Application.  These are called Pre-Approval Inspections, and, when COVID difficulties would otherwise delay inspections leading to drug approvals, numerous applicants have struggled with trying to expedite these inspections, or to convince FDA that the PAIs are unnecessary.  Dr. Throckmorton stated that the number of required PAIs has been reduced by about 50%, as a result of re-examining the necessity of so many PAIs (he said PAIs used to be required for about 20% of applications).

Both he and Alonza Cruse, the Director of the FDA office responsible for, among other things, facility inspections (he heads the Office of Pharmaceutical Quality Operations), emphasized that a lot of the changes effectuated in response to COVID will be permanent.  The agency has re-examined whether, from a risk perspective, so many on-site inspections are necessary, either because the risk of problems at a particular facility is low, or because alternatives (such as records inspections or what FDA refers to as “remote interactive evaluations”) can substitute for on-site inspections.

Mr. Cruse also mentioned that FDA has been putting a premium on performing PAIs – or on finding alternatives – to permit FDA to take action on drug applications by the PDUFA (Prescription Drug User Fee Act) and GDUFA (Generic Drug User Fee Act) date goals.

In response to my question, Mr. Cruse said that FDA has performed probably fewer than 10 of what FDA calls “Remote Interactive Evaluations” at drug manufacturing facilities since the FDA guidance was issued permitting these forms of virtual inspections.  Mr. Cruse pledged that the frequency of these inspections would increase.

The GMP by the Sea conference is a regular conference (it was held annually until COVID hit) sponsored by PharmaConference (www.pharmaconference.com).

The Inflation Reduction Act of 2022 (“IRA”) has now passed both the Senate (on August 7) and the House (on August 12), and is headed to President Biden for signature.  We have prepared a slide deck that summarizes Subtitle B of the IRA, entitled “Prescription Drug Pricing Reform.”  The slide deck is available here.  The major provisions of Subtitle B, which are described in more detail in the slides, are briefly outlined below:

• Price negotiation under Medicare Parts B and D: For each year starting in 2026,  the Department of Health and Human Services (“HHS”) will negotiate the selling prices of a certain number of selected high-expenditure single-source drugs and biologics.  The number will begin in 2026 with 10 drug covered under Medicare Part D and will increase annually to 20 Part B and 20 Part D drugs by 2029 and thereafter, with the selected drugs accumulating from year to year.  Drugs that have been approved within the previous 7 years and biologics that have been approved within the previous 11 years cannot be selected for negotiations.  The negotiations will result in a Maximum Fair Price (“MFP”) that the manufacturer must make available to providers furnishing the drug under Medicare Part B or pharmacies dispensing the drug under Part D.  The MFP cannot exceed a statutory ceiling based on a percentage of the drug’s non-federal average manufacturer price (“NFAMP”), with the percentage decreasing the longer the drug has been on the market.
• Inflation rebates under Medicare Parts B and D: Starting in 1Q 2023, mandatory quarterly rebates will be imposed on manufacturers of single-source drugs and biologics covered under Part B that have price increases exceeding the rate of inflation. Similarly, for the fiscal year starting October 1, 2022, mandatory annual rebates will be imposed for certain Part D drugs, biologics, and biosimilars with price increases exceeding the rate of inflation.
• Medicare Part D redesign: The IRA changes Medicare Part D starting in 2025 by lowering the patient out-of-pocket (“OOP”) limit to $2,000, adjusted annually in subsequent years. The coverage gap will be eliminated, and the relative contributions of Medicare, Part D plans, the enrollee, and the manufacturer toward the costs of a drug will change for the periods before and after the OOP threshold is reached.  The current Coverage Gap Discount Program will be replaced by a new manufacturer discount program, through which drug manufacturers subsidize 10% of the enrollees’ brand drug costs below the OOP limit and 20% of the costs above that limit.
• Insulin: Any insulin approved under an NDA or BLA and covered under Medicare Part D or a Medicare Advantage plan will have no deductibles starting in 2023 and will have a monthly limit of $35 on copayments.  Starting July 1, 2023, the IRA will also limit to $35 the total monthly contribution by a Medicare Part B beneficiary for insulin purchased through a durable medical equipment (“DME”) supplier.
• Vaccines: Starting in 2023, Medicare Part D will cover all adult vaccines approved by the Advisory Committee on Immunization Practices (“ACIP”) without any deductible or coinsurance.  The same will be required under state Medicaid and CHIP programs by October 1, 2023.
• Biosimilar payment: The IRA will, for a five-year period, increase the Medicare Part B add-on payment for biosimilars for which the average sales price (“ASP”) does not exceed the ASP of the reference biologic.
• OIG PBM rebate regulation: Until January 1, 2032, the HHS OIG may not implement its 2020 regulation that amended the antikickback law safe harbors to exclude manufacturer rebates to Part D plans (and their PBMs) unless they are passed through to pharmacies.

Much has been written in the press and by analysts about the impact that these provisions will have on drug innovation, drug manufacturer revenues, and patient access.  Rather than adding to these predictions, we’d like to focus on what, to us, is ground-breaking about the IRA:  for the first time, mandatory price controls are imposed on drugs in the U.S.  With one recent and minor exception (see our blogpost here), all of the government discount and rebate programs heretofore have been founded on agreements between the government and manufacturers.  These agreements are voluntary, and in exchange for signing them a manufacturer obtains the benefit of coverage or procurement under federal health care programs.  The Congressional sponsors of these programs deliberately made them voluntary precisely in order to avoid imposing price controls, consistent with the traditional view in the U.S. that price controls distort markets and reduce competition.  They also hoped to avoid Takings Clause or other constitutional challenges.  Those constraints have now been abandoned.  Under the IRA, the obligations to negotiate and adhere to an MFP and pay inflation rebates to Medicare are mandates, enforced by excise taxes and/or monetary penalties – in the case of the MFP requirements, draconian monetary penalties.  Manufacturers receive no benefits in exchange for the inflation rebates.  In return for providing the MFP, manufacturers of selected drugs do receive coverage, but high utilization drugs are certain to have coverage anyway.  Adding to their compulsory nature, many elements used in the determination of the mandated discounts, including the number of units subject to inflation rebates, whether a drug is a rebatable drug, and the amount of an inflation rebate, will be determined unilaterally by HHS with no dispute process and no possibility of administrative or judicial review, which are precluded in the law.

While opinions may differ on the wisdom of mandatory drug price controls as a matter of health care policy, there can be no doubt that, with the IRA, they are here now.  The dam having been breached, we are likely to see more of them in the future.

For years, FDA has been wrestling with questions about what patents should be listed in the Orange Book, but, as we have reported, FDA has made little to no progress on addressing those questions.  One of those pressing questions that remains unanswered involves the listing of REMS patents in the Orange Book.  While FDA asked for Comments in 2020 about whether REMS patents, among others, “are in fact the type of patents that must be submitted” for listing in the Orange Book, FDA has not yet taken a position on the issue.  With no guidance from FDA, sponsors have listed their REMS patents in the Orange Book, requiring follow-on sponsors to certify to those REMS patents upon submission of their 505(b)(2) NDAs or ANDAs.  Though the Agency has not officially blessed listing REMS patents in the Orange Book, a recent lawsuit challenges FDA’s facilitation of such a listing by requiring a patent certification to a REMS patent listed in the Orange Book where the proposed follow-on developed its own REMS and proposed to carve-out the method of use claimed in the listed REMS patent.  Essentially, the lawsuit asks, does FDA have the authority to compel patent certifications where a section viii statement has been filed?

In July, Avadel CNS Pharmaceuticals (“Avadel”) sued FDA (here and here) over a 16-page decision requiring Avadel to certify to a method-of-use REMS patent listed in the Orange Book with use code, U-1110, a “method of treating patients with a prescription drug using a computer database in a computer system for distribution”—or as Avadel puts it, “the use of a ‘computer database.’”  Avadel submitted a 505(b)(2) NDA for Lumryz, a sodium oxybate drug product referencing Jazz Pharmaceuticals’ Xyrem.  Xyrem is listed in the Orange Book with multiple patents, including the aforementioned method-of-use patent, U.S. Patent Number 8,731,963 (the “’963 patent”), which describes Jazz’s single, centralized REMS drug distribution database with use code U-1110.  Because Avadel intended to use its own REMS rather than Jazz’s, Avadel did not certify to the ‘963 patent but instead submitted a section viii statement confirming that the patent does not “claim a use for such drug for which the applicant is seeking approval.”  Despite this section viii statement, FDA, more than a year and a half after NDA submission—525 days to be exact—ordered Avadel to certify to the ‘963 patent based on the conclusion that the Lumryz REMS’s use of four computer databases for distribution overlaps with the U-1110 use code.  In other words, because the U-1110 use code describes the use of “a computer database in a computer system for distribution,” and because the proposed Lumryz REMS will use four computer databases for distribution, FDA determined that the patent does claim a use for which the applicant is seeking approval.

Avadel certified to the ‘963 patent “under protest” in June 2022, Jazz sued Avadel for infringement of the ‘963 patent on July 15, 2022, and FDA tentatively approved the Lumryz NDA on July 18, 2022.  Because Jazz timely sued Avadel, the lawsuit triggered a 30-month stay, which effectively precludes final approval of the Lumryz NDA until the expiration of the patent in June 2023.

Looking at an almost-one-year delay before final approval of Lumryz, Avadel filed suit against FDA alleging that FDA violated the Administrative Procedure Act by requiring certification to the ‘963 patent and thereby delaying final approval.  Avadel argues that the decision whether to file a patent certification or a section viii statement rests solely in the “opinion” of the new drug “applicant” under the plain language of the statute set forth in 21 U.S.C. § 355(b)(2), and FDA therefore lacks statutory authority to “second-guess Avadel’s decision to file a patent statement, rather than a patent certification.”  Accordingly, Avadel argues that FDA does not have legal basis to compel a patent certification to the ‘963 patent.

First, Avadel explains that the U-1110 use code “does not describe the use of any drug, much less sodium oxybate,” and thus does not trigger the patent certification requirement.  Nor does FDA have the authority to look beyond the Lumryz labeling to its REMS document for a use that overlaps with the listed use code, Avadel argues.  Finally, Avadel explains that its REMS does not use “a computer database in a computer system for distribution,” but uses multiple computer databases to implement the Lumryz REMS and therefore does not overlap with the U-1110 use code.  Thus, Avadel believes that FDA’s decision ordering Avadel to submit a patent certification with respect to the ‘963 patent is arbitrary, capricious, an abuse of discretion, not in accordance with law, in excess of statutory jurisdiction and authority, and short of statutory right.  In a second claim, Avadel also alleges that FDA’s prolonged review of the Lumryz NDA unlawfully withheld agency action.

The argument that the statute does not provide FDA authority to require a patent certification rather than a section viii statement is interesting.  Textually, it makes sense.  After all, 21 U.S.C. § 355(b)(2) calls for certification based on “the opinion of the applicant and to the best of his knowledge.”  This seems to delegate decision-making authority regarding the proper patent certification to the applicant.  But under this interpretation, FDA would not be able to disagree with a sponsor’s certification decision, which seems like it could be ripe for abuse—and really pretty impractical.  That said, practicality doesn’t have anything to do with statutory interpretation.

Another interesting question this suit raises is whether FDA can look beyond the labeling to determine whether a section viii carve-out is acceptable.  Because FDA regulations state that a patent certification is necessary “[i]f the labeling of the drug product for which the application is seeking approval includes an indication or other condition of use that, according to the patent information submitted under section 505(b) or (c) of the Federal Food, Drug, and Cosmetic Act and § 314.53 or in the opinion of the applicant, is claimed by a method-of-use patent,” (emphasis added) Avadel argues that FDA’s review of the Lumryz REMS document to assess the use code overlap—rather than the Prescribing Information alone—violated FDA regulations.  This is an important question because FDA frequently assesses the propriety of use code carve-outs in Citizen Petitions and, in that assessment, often looks at the impact of a carve-out on doctors’ prescribing decisions.  If FDA is not permitted to look beyond the confines of the Prescribing Information to assess a carve-out, FDA likely could not rely on the implications of the omission of that carved-out language beyond the actual instructions for use in the labeling to the foreseeable use of those instructions.

Further, Avadel’s suit is also challenging the propriety of listing REMS patents in the Orange Book when that patent doesn’t cover a specific drug product.  Indeed, Avadel questions whether a patent certification for the REMS patent as the use code in question “does not describe the use of any drug, much less sodium oxybate” and therefore should not “trigger a patent certification” under section 505(b).  If a patent shouldn’t trigger a certification, it follows then that that patent shouldn’t be in the Orange Book.  Thus, it seems that this lawsuit implicitly challenges FDA’s current approach—or lack thereof—to listing in the Orange Book (and thereby requiring certification to) patents that don’t explicitly claim the drug substance.

If the Court opines on whether REMS patents that do not claim the drug product specifically should be listable in the Orange Book, the District Court of D.C. will join the First Circuit in exploring the types of patents that should be eligible for listing in the Orange Book.  The First Circuit, in 2020, was the first to weigh in on the propriety of listing patents in the Orange Book when, in the context of an antitrust case, it declared that device component patents that do not explicitly claim the drug product cannot be listed in the Orange Book.  Though FDA has since opened a docket to explore the issue of these types of patents in the Orange Book, the Agency’s inaction may result in the court deciding the issue on FDA’s behalf.