These are unsettling times as COVID-19 impacts our personal and professional lives, as well as those that we love.  During these unprecedented times, Hyman, Phelps & McNamara, P.C. is pleased to bring you the next installment of the FDA Law Alert.  This is the fifth installment of our quarterly newsletter highlighting key postings from our nationally acclaimed FDA Law Blog.  Please subscribe to the FDA Law Blog to receive contemporaneous posts on government regulatory and enforcement activities affecting the broad cross-section of FDA-regulated industry.  As the largest dedicated FDA law firm, we are happy to help you or your clients navigate the nuances of the laws and regulations affecting them.

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COVID-19

• Impact on Clinical Trials: James Valentine, Dave Clissold, and Jeff Shapiro discuss FDA’s Guidance on Conduct of Clinical Trials of Medical Products during COVID-19 that addresses the unprecedented set of challenges that make conducting clinical trials difficult during a pandemic.  In a second post, the trio describes FDA’s update to the Guidance, which provides 10 responses to commonly asked questions.  This Q&A portion addresses two of the largest decisions sponsors must make as a result of this pandemic: (1) whether to continue the study and (2) whether to continue administering the investigational product.  Other Q&A’s address managing protocol deviations and amendments, helping navigate a number of contingency measures (e.g., initiating virtual visits, switching to home delivery or infusion of the investigational product, alternative monitoring), and documenting informed consent from a patient in isolation.

• State Regulations: Kalie Richardson describes in these posts (here and here) how certain states have issued COVID-19-related waivers or suspensions affecting pharmacy staffing, facility licensure, and controlled substances distribution and inventory.  These waivers meet the dual objectives of enhancing pharmacy response to the ongoing COVID-19 pandemic while also allowing pharmacy staff to responsibly practice social distancing.

• Postmarketing Reporting: Anne Walsh discusses FDA’s initiative to alleviate companies’ postmarketing reporting obligations for their routine, non-COVID-19-related products during a pandemic.  Recognizing that a pandemic can result in a shortage of FDA and industry resources and staff, FDA will exercise enforcement discretion for delayed reporting of certain required adverse events reports, with the expectation that such reports will be submitted within 6 months when operations resume to pre-pandemic levels.  Walsh’s key takeaways are for companies to document any inability to meet their obligations to submit postmarket reports and to develop a robust Continuity of Operations Plan to make seamless their decision-making should (heaven forfend) another pandemic occur.

• Compounding: In this post, Karla Palmer discusses FDA’s temporary guidance addressing the unprecedented disruptions to the supply chain caused by COVID-19 that permits the compounding of certain drug products for hospitalized patients by outsourcing facilities that have registered with FDA under FDCA § 503B.  Palmer discusses the 4 criteria outsourcing facilities must meet in order to avoid FDA action for compounding a drug product that is essentially a copy of an FDA-approved drug, for using a bulk substance not on FDA’s 503B Bulks List, or for not meeting cGMP requirements.  In a follow-up post, Palmer describes a second FDA guidance to address drug shortages during the pandemic.  This unprecedented policy allows 503A compounders to compound certain identified shortage medications for patients in hospitals without a prescription for an individually identified patient and essentially permits compounding for “office use.”

Other News

• Healthcare: In this post, Faraz Siddiqui, Michelle Butler, and Alan Kirschenbaum describe a recent court decision out of the D.C. District Court that construed the term “original new drug application” in a manner that may offer rebate relief to companies marketing drugs approved under FDA’s pre-Hatch-Waxman paper NDA policy as well as those approved under literature-based applications submitted under FDCA § 505(b)(2).
• Devices: Jeff Gibbs, Gail Javitt, and McKenzie Cato discuss FDA’s new approach to regulating pharmacogenomic (PGx) tests in this post.  FDA acknowledged that PGx tests could play a useful role in informing the selection or dosing of some medications for certain individuals and specifically recognized that gene-drug interactions could be adequately supported by professional guidelines, which is a step forward and a change from FDA’s prior communications.
• Cannabis: In this post, Larry Houck describes DEA’s March 23^rd Notice of Proposed Rulemaking (NPR) that would permit the issuance of additional registrations to manufacture marijuana for research and, notably, allow the agency to insert itself in the manufacturer-to-researcher equation by buying, taking possession of, and directing marijuana to researchers.  Houck discusses the NPR, subsequent U.S. obligations under the Single Convention on Narcotic Drugs of 1961, and possible implications of DEA being an active player in the marijuana enterprise.

In this post, Kalie Richardson describes the state regulatory landscape as it pertains to telemedicine and medical marijuana.  Several states, including Minnesota, Massachusetts, Ohio, and the District of Columbia, have issued policies waiving the requirement that patient certification be made only during an in-patient visit to be eligible for the state medical marijuana program.  Additionally, some states have deemed medical cannabis licensees as essential businesses that may remain open.

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Hyman, Phelps & McNamara, P.C. has its finger on the pulse of FDA law.  Our technical expertise and industry knowledge are exceptional in scope and depth.  Our professional team holds extensive experience with the myriad of issues faced by companies.  Please contact us with any questions you may have related to the issues described here or any other FDA-related issue affecting your industry.

On Wednesday, May 6, 2020, from 12:00pm-1:00pm (Eastern) the Maryland/Israel Development Center will hold a webinar, “Israeli COVID-19 Vaccine Developments.”  The event will discuss how Israel has mobilized its scientific and technological talents to address COVID-19, and will feature the following speakers:

• Yaky Yanai, CEO of Pluristem Therapeutics, who is working on a placenta-based cell therapy treatment for respiratory and inflammatory complications associated with COVID-19.
• Vered Kaplan, CEO of Orgenesis, a global biotech company, which is unlocking the potential of cell and gene therapy including anti-viral technologies relevant for COVID-19 to provide life changing personalized medical treatments at the point-of-care to patients.
• Dr. Mark Levitt, Medical Director from RedHill Biopharma, a specialty biopharmaceutical company that is working on an experimental drug, Opaganib, which has shown anti-viral and anti-inflammatory properties to help reduce lung inflammation in COVID-19 patients.

Zoom information will be given upon registration. For more information contact, bbogage@marylandisrael.org.  To register: https://midcisraelcovid19.eventbrite.com

As unfortunately happens during every national disaster or emergency, unscrupulous individuals and companies see an opportunity to make money.  A lot of it.  When that happens, there are always immediate calls to prosecute individuals and companies for “price gouging” certain products and taking advantage of the dire and devastating circumstances.  During natural disasters, it’s gasoline and generators; during a health emergency and pandemic, it’s PPE, hand sanitizer, and toilet paper.

Hyman, Phelps & McNamara, P.C. has worked extensively with clients on all aspects of federal government drug and device pricing (here, here) and state drug price reporting and the related penalties. We have worked with drug and device clients on whether certain price concessions or services constitute fraud and abuse, or whether they fit into a Department of Health & Human Services (HHS) safe harbor (here and here). And we’ve blogged about state laws targeting generic drug price gouging.  That is a long way of saying that HPM has done a great deal of work in the area of pricing.  To an already complicated system, Covid-19 has added a whole new layer of craziness for companies, adding a price-gouging regulatory framework that is a patchwork of little-used state laws, brand new federal and state executive orders, and a federal law that was passed during the Korean War, that applies to so-called essential commodities and services (which may or may not be defined, depending on what law or executive order you are looking at).

Some may find it surprising that there is no federal law that expressly prohibits price gouging. What we do have is the aforementioned Korean War-era law, the Defense Production Act, and the President signed an Executive Order on March 23rd instructing the HHS and the Department of Justice (DOJ) to enforce the anti-hoarding provisions of that Act.  The Attorney General also set up a Covid-19 Hoarding and Price Gouging Task Force, led by the US Attorney in the District of New Jersey, with assistance from the DOJ Antitrust Division’s Criminal Program.  On April, 24, 2020, DOJ indicted the first person under the Executive order alleging the hoarding of face masks, face shields, surgical gowns, and disinfecting products at a Long Island warehouse and selling them at inflated prices.  While the Federal Trade Commission (FTC) has been largely silent on price gouging and has never brought a price gouging case in its history (they have no express mandate to target excessive pricing) they are aggressively targeting companies for false Covid-19 treatment claims, false lenders targeting small businesses, and Covid-19 related robocalls.  My colleagues recently did an excellent blog post on the many recent enforcement actions by FTC, DOJ and the FDA.

At the state level, 38 or so states (and some municipalities) have some form of price gouging law, and there is legislation pending in other states.  Like the Defense Production Act, these laws are usually triggered by the declaration of a state of emergency by the Governor. There are helpful summaries of the state laws at FindLaw and FMI – The Food Industry Association, among others.  In addition to the state laws, there have been quite a number of state Executive Orders issued within the last two months regarding price gouging.

These state laws, regulations and orders typically are enforced by the State Attorneys General, and fall into three categories:

• A percentage increase cap making it unlawful for anyone to raise prices on certain products by more than a certain percentage (usually ranging from 10% to 25%), with certain exceptions.
• A ban on “unconscionable” or “grossly excessive” price increases (sometimes defined, sometimes not)
• Outright prohibition of any increase that raises the price higher than what was offered before the emergency declaration.

In addition, private companies have also started policing price gouging through their own policies and litigation.

Given the regulatory chaos and laser focus of government and private entities on price gouging, it is clear that there is no safe harbor for price increases. Companies who are considering pricing decisions should consider the following:

• Has a state of emergency been declared?
• Is the product an essential commodity or service?
• Is the price excessive as defined by the state?
• Is the price the result of a justifiable cost increase to the seller? Many state laws have exceptions for situations that may include passing along cost increases from suppliers.

If a company is considering any pricing decisions, they should, among other things, be aware of all the applicable federal, state and local laws, and executive orders that might regulate your product, consult with counsel, focus on their costs, build in a typical (non-emergency) margin, and make sure those decisions are well-documented and justified.

Since HHS declared a public health emergency caused by COVID-19 in February 2020, there has been an overwhelming response to develop and market products to treat or mitigate the effects of the virus.  Unfortunately, bad apples still are out there preying upon consumer fears and peddling products that claim to prevent COVID-19 (not to mention charging exorbitant prices for these fraudulent goods – stay tuned for our forthcoming post on price gouging activities).  The federal government has used a variety of tools to quickly shut down these bad actors, from issuing Warning Letters, seeking temporary restraining orders, suing for damages, and bringing criminal charges.  The U.S. Food and Drug Administration (FDA) and the Federal Trade Commission (FTC), in conjunction with the Department of Justice (DOJ), have spearheaded these actions to stop companies from making unsupported claims about COVID for their FDA-regulated products.

Warning Letters

Since March 6 to the date of this blog post, FDA and FTC have issued 38 Warning Letters (WLs) to address myriad unapproved products marketed for the treatment and/or prevention of COVID-19.  These violative claims render the products unapproved new drugs as well as misbranded drugs under the Federal Food, Drug, and Cosmetic Act (FDC Act).  Representative claims include:

• “Essential Oils to Protect Against Coronavirus . . . There are a wide range of essential oils that have been clinically proven to possess antiviral properties.” WL to Quinessence Aromatherapy LTD (Mar. 6, 2020).
• “The most powerful anti-virus essential oils to provide defence (sic) against coronavirus include: Basil ● Bergamot ● Cajuput ● Cedarwood Virginian ● Cinnamon ● Clove Bud . . . .” Id.
• “Coronavirus (COVID-19, SARS-CoV-2) pandemic has no medical treatment. Natural antiviral herbs boost immunity & decrease virus virulence to achieve herd immunity.”  WL to Carahealth (Mar. 26, 2020).
• “Corona-Cure Antiseptic Nasal Defense kills viruses of the Coronaviridaefamily including the 2019 Novel Coronavirus and SARS at their point of entry into your body.”  WL to Corona-cure.com (Mar. 26, 2020).
• “Arsenicum album 30 could be taken as prophylactic medicine against Corona virus infections.” WL to Homeomart Indibuy (Apr. 1, 2020).

It is notable that there has been a disproportionate number of WLs issued to companies touting silver-containing products, such as toothpaste, colloidal mixtures, and essential oils.  The cited claims include:

• “[T]he patented Nano Silver we have, the Pentagon has come out and documented, and homeland security have said this stuff kills the whole SARS corona family, at point blank range. Well of course it does, it kills every virus.” WL to Free Speech Sys. LLC d/b/a Infowars.com (Apr. 9, 2020).
• “Boost Your Immune system . . . Colloidal silver is the key to protecting yourself from the corona virus. . . . [I]f you begin to show symptoms of the virus, up your doses to 5 times a day. In a medical system that is failing . . . there is no other solution to protecting yourself from the corona virus.”  WL to Gaia’s Whole Healing Essentials, LLC (Apr. 1, 2020).
• “Colloidal Silver in a Nebulizer, the type that is commonly prescribed by medical professionals for asthmatics and those with chronic lung problems . . . provides a real prevention regimen for a number of maladies – including the Corona Virus.” WL to JRB Enter. Grp. Inc. (Apr. 1, 2020).
• “[I]t’s actually widely acknowledged in both science and the medical industry that ionic silver kills coronaviruses. And it’s now known that the Chinese are employing ionic silver in their fight against the spread of the coronavirus.”  WL to Colloidal Vitality LLC (Mar. 6, 2020).
• “Even though there are no vaccines available to combat these coronaviruses, there is a home remedy of Colloidal Silver 100 ppm that has worked effectively on coronaviruses successfully for the last 123 years.” WL to Xephyr, LLC (Mar. 6, 2020).
• “Silver Solution has been proven . . . to kill every pathogen it has ever been tested on . . . and it can kill any of these known viruses[.]” WL to The Jim Bakker Show (Mar. 6, 2020).

These WLs require the targeted companies to respond by email within 48 hours with the specific steps they will take to address FDA’s and FTC’s concerns, and threaten legal action if the target does not immediately correct the violations cited in the letter.

Injunction Actions

To confront recidivist or particularly suspect actors, FDA can go straight to legal action without first issuing a WL.  On April 27, 2020, FDA filed a Complaint in Utah against Gordon Pedersen and two of his companies, My Doctor Suggests LLC and GP Silver LLC, alleging that the defendants fraudulently promoted their silver products for the treatment and prevention of COVID-19.  According to the government, the defendants began in February 2020 making claims through YouTube videos, podcasts, and websites that suggested that their silver products could destroy coronavirus and remove it from the body.  Specifically, defendants allegedly made claims that silver in the bloodstream could “usher” the virus out of the body, and that “it has been proven that Alkaline Structured Silver will destroy all forms of viruses, it will protect people from the Coronavirus.”  Complaint at 5.  The government also objected to defendant Pedersen purporting to be a medical doctor, appearing in a white coat with a stethoscope on the website, even though he does not hold a Doctor of Medicine degree and is not licensed as a medical provider in the State of Utah.

Interestingly, the government pointed to an admission from the defendant that “[w]e are not a cure for the coronavirus–there is none,” as evidence of reckless behavior, not as a disclaimer about the effectiveness of the products.  Id. at 9.  Also, the government charged the defendants with engaging in mail and wire fraud under 18 U.S.C. §§ 1341 and 1343, and not the base violation of marketing an unapproved or misbranded drug under the FDC Act.

Simultaneous with the filing of the Complaint, the government filed an ex parte motion seeking a temporary restraining order (TRO) “to a prevent continuing and substantial injury to the” victims of the fraud.  TRO at 8.  The government referenced the fact that defendant Pedersen had been fired in 2011 for making unsubstantiated promotional claims, and that he had been ordered to cease and desist from holding himself out as a “naturopathic doctor.”  Id. at 3-4.  The district court in Utah issued the TRO requiring defendants to immediately remove their sales listings for silver products on their own websites and on third-party sites like Amazon, and to file with the court documentation of their proceeds from the sale of these products since January 30, 2020.  A hearing is set for May 12 to address whether the court should enter a preliminary injunction against defendants.

FTC Settlements

And FTC also has used its independent authority to take action to stop fraudulent COVID claims.  On April 29, 2020, the U.S. District Court for the Central District of California issued a stipulated preliminary injunction against

Whole Leaf Organics, a California company marketing a supplement containing vitamin C and herbal extracts for the treatment, prevention, and cure of COVID-19.  According to FTC, the company made claims advertising that its product could “strengthen your immunity against . . . the coronavirus” and “combat . . . the coronavirus.”  Complaint at 6.  The company further represented that such COVID-19-related benefits were clinically or scientifically proven.  Id. at 5.  The making, dissemination, and advertising of such false representations constitute a deceptive act or practice in violation of FTC Act §§ 5(a) and 12.  Id. at 14, 15.

The stipulated preliminary injunction prohibits the company, as well as its agents, employees, and attorneys, from making either express or implied representations that its product can “treat, prevent[], or reduce[] the risk of COVID-19” or claiming substantiation of such claims without the proper “competent and reliable scientific evidence” (i.e., human clinical testing).  Stipulated Prelim. Inj. at 5-7.  The injunction will be in place until the Commission either dismisses the administrative complaint, an appeals court overturns the injunction, or the Commission issues a final order.

Notably, this same company received a WL from FDA and FTC in November 2019, before the COVID-19 crisis, for marketing its CBD-containing products as dietary supplements.  According to FTC, the company did not stop making these claims, which is likely why this is the first CBD company that FTC targeted for litigation.

Criminal Charges

In an undercover operation, FDA’s criminal investigators caught a naturopathic physician selling products for $140 that he claimed could “stop” coronavirus.  Defendant Richard Marshall was charged on April 30, 2020, with a felony count of introducing a misbranded drug into interstate commerce.  The Criminal Complaint alleges Marschall, who has been convicted twice before for distributing misbranded drugs, billed himself as a “Health Coach” and promoted a “Dynamic Duo” of products that boost the immune system and “kills the virus.”  The U.S. Attorney’s Office COVID-19 Fraud Coordinator worked in conjunction with FDA’s Office of Criminal Investigations to bring this case against Marschall, who is required to make an initial appearance in the U.S. District Court for the Western District of Washington on May 12, 2020.

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We expect to see continued aggressive enforcement by the government to stop companies from taking advantage of desperate consumers during the COVID-19 pandemic.  We recommend companies in receipt of a Warning Letter act quickly to address those issues before they escalate to litigation, as there is little justification for these claims to avoid the severe penalties that can be levied by FDA and FTC.

* Law Clerk

We’re a little late to the party on this one (let’s just blame it on social distancing), but, after 10 years in the making, Transition Day has finally come and gone for protein products.  For the uninitiated, on March 23, 2020, all products approved as drugs under a New Drug Application that meet the definition of a “protein” officially became biologic products known as “deemed BLAs” in accordance with the Biologics Price Competition Act of 2009 (“BPCIA”).  Initially, these products were to exclude “chemically synthesized polypeptides,” but a last minute revision extended the transition to all protein products, defined as “any alpha amino acid polymer with a specific defined sequence that is greater than 40 amino acids in size.”  After a 10 year transition period, around 100 products officially transitioned and are now eligible to be reference products for biosimilars (with no exclusivity other than existing orphan drug exclusivity).  FDA’s electronic Orange Book database has now been purged of all “deemed BLAs” that transitioned on March 23, 2020.  However, for posterity, FDA has preserved the pre-transition Orange Book in its BPCIA edition, which provides all of the patent and exclusivity information that was current as of March  20, 2020.

But, as to be expected, not everyone is happy about the way FDA has handled this transition.  As soon as protein products “transitioned,” Teva was ready with a new lawsuit challenging FDA’s decision not to transition its Copaxone (glatiramer acetate) product to a deemed BLA.  According to its labeling, Copaxone, approved under NDA 020622 in 1996, is a product consisting of “acetate salts of synthetic polypeptides, containing four naturally occurring amino acids” that is indicated for the treatment of relapsing forms of multiple sclerosis (MS).  Two generic versions referencing Copaxone are on the market: one approved in 2015 and the other in 2017.

Back in February 2020, Teva submitted Comments on the Draft Guidance for Industry: The “Deemed to be a License” Provision of the BPCI Act – Questions and Answers” outlining its argument that Copaxone meets the statutory definition of “biological product.”  Teva’s Comments rested heavily on the chemistry of Copaxone’s active ingredient, glatiramer acetate.  Glatiramer acetate, Teva explained, is a “complex mixture of polypeptides having an overall standardized size and proportion of amino acids.”  While glatiramer acetate is chemically synthesized, when Congress repealed the BPCIA’s exclusion of chemically synthesized products from the definition of protein, Copaxone become eligible to be deemed a biological product.  And because the polypeptides have an average length of 40 to 100 amino acids, Teva argued, Copaxone is squarely within FDA’s definition of a biologic.  FDA did not respond directly to this comment.

As we approached the official “transition” date, FDA adopted its final list of “Approved NDAs for Biological Products That Were Deemed to be BLAs on March 23, 2020.”  Copaxone was not on it.  And while FDA said it would send letters to all sponsors of transitioning NDAs, Teva received no such letter for Copaxone.  Teva, therefore, filed suit against FDA.

Teva’s lawsuit closely tracks its Comments submitted to FDA in February 2020.  Like the Comments, the Complaint explains that glatiramer acetate is a chemically synthesized polypeptide with an average length of 40 to 100 amino acids.  Noting that FDA’s proposed definition of “protein” requires the amino acid polymer to have “a specific, defined sequence,” the Complaint suggests that FDA did not transition Copaxone because of a lack of a “specific, defined sequence.”  Indeed, as Teva acknowledges, FDA had previously stated in another context that “glatiramer acetate is distinguishable from proteins because ‘it does not … have a defined and specific sequence.’” Since making that statement, Teva notes, FDA has characterized products with similar properties as Copaxone as proteins, including Vitrase (hyaluronidase for injection) and Creon (pancrelipase).  Therefore, Teva concludes that Copaxone should be treated in the same way as similarly situated products – as a deemed BLA.  Further, even if FDA disagreed with this position, Teva argues that Copaxone should still have transitioned because, “at a minimum, it fits squarely into the catchall category of ‘an analogous product.’”

The Complaint alleges that FDA’s failure to transition the Copaxone NDA into a deemed BLA is arbitrary, capricious, and contrary to the BPCIA in violation of the Administrative Procedure Act.  Because FDA’s adopted definition of protein focuses only on the number of amino acids in the polymer, a definition that Copaxone inarguably meets, Teva contends that Copaxone must be transitioned to a deemed BLA.  In the alternative, Teva argues that Copaxone is an analogous product because it has a similar structure to myelin base protein—a transition product.  And because the plain language of the BPCIA states that that a previously approved NDA for a biological product “shall be deemed to be a license for the biological product under [section 351 of the PHSA] on the date that is 10 years after the date of [the BPCIA’s enactment],” FDA has no discretion not to transition a product meeting the definition of a biological product.  It therefore must convert a qualifying NDA for a “biological product” to a deemed license.

In an effort to show the harm caused by FDA’s failure to transition Copaxone to a deemed BLA, Teva is candid about its motivations: enforcement of its process patents.  As we explained several weeks ago, the biosimilar patent dance includes process patents in the exchange of patent information, permitting the enforcement of process patents prior to biosimilar launch.  This contrasts with the NDA/small molecule context, in which the act of submitting an ANDA is only an artificial act of infringement with respect to a drug substance or drug product patent—meaning that a process patent is not infringed until launch.  Teva’s Complaint explains:

Had FDA transitioned the COPAXONE NDA to a deemed license, Plaintiffs could assert the Teva Ltd. process patents against any biosimilar applicant based upon the filing of a biosimilar application, because the filing of the application is an artificial act of infringement with respect to (inter alia) the process patents.  Under the ANDA process, by contrast, Plaintiffs cannot sue for an artificial act of infringement based upon the filing of an ANDA, because Teva Ltd.’s patents are not for “a drug” or “the use of [a drug].” 35 U.S.C. § 271(e)(2)(A). Instead, Plaintiffs must wait to sue until a generic applicant actually infringes a patent by “us[ing]” or “sell[ing]” the patented process; or “sell[ing],” “offer[ing],” or “import[ing]” glatiramer acetate made with the patented process; or until such an infringement is certainly impending. Id. § 271(a), (g).

This distinction allows biosimilar manufacturers more leeway for pre-launch patent enforcement.  This is important because launch of a lower cost alternative is typically a bell that cannot be unrung: once a product is launched, the holder of an infringed patent can recover monetary damages, but it’s almost impossible to fully remove already-launched infringing product from the market.  Therefore, enforcement of a process patent prior to launch has tangible benefits for sponsors, particularly where the manufacturing process may be integral to the safety and efficacy of a product.

Unsurprisingly, generic manufacturers have intervened.  Sandoz filed an Unopposed Motion to Intervene on April 17 citing the implications a Copaxone transition would have on Sandoz’s  approved ANDA.  Sandoz brought its ANDA to market in 2015 after 10 years of patent infringement litigation with Teva (which somehow included litigating process patents).  As an ANDA, Sandoz could theoretically recoup that investment, as a generic can be automatically substituted for a therapeutically equivalent brand product, but biosimilars “do not enjoy the same market advantages as therapeutically equivalent ANDA products,” causing Sandoz to “lose its ability to compete effectively in the market with Copaxone.”  And, of course, it would deny MS patients automatic substitution of an affordable alternative.

Teva’s argument—that the plain language of a statute limits FDA’s discretion—is one that has had some recent success against FDA.  Genus Medical Technologies recently prevailed against FDA on the question of whether FDA has discretion to regulate a device as a drug.  Spoiler alert: it does not (though FDA has appealed).  This question here is similar.  However, there is a lot of room here for FDA to argue that Copaxone does not meet the definition of “biologic;” whereas, in the Genus matter, FDA expressly admitted that the product met the definition of a device.  As such, there is a possibility that a court could view this more of a question of science than discretion or fair application of a statute.  And courts often defer to FDA in matters of science.  Adding another wrench in this case is that it has been assigned to Chief Judge Beryl A. Howell, who recently held that FDA’s application of the three-year exclusivity statute was arbitrary and capricious, suggesting that FDA does not necessarily win on Chevron Step 2 in her court.  This could be a close case, and we’re looking forward to seeing how it plays out.

A little more than ten years ago, on March 31, 2010, the Drug Enforcement Administration published its  Interim Final Rule (IFR) with request for comments, titled “Electronic Prescriptions for Controlled Substances” (Docket No. DEA-218, RIN 1117-AA61). The rule became effective June 1, 2010, and is codified at 21 CFR parts 1300, 1304, 1306, and 1311.

The IFR revised DEA regulations so that practitioners have the option to electronically prescribe  controlled substances. The regulations also permit pharmacies to receive, dispense, and archive these electronic prescriptions. Thus, the regulations give practitioners and pharmacies the ability to better utilize technology for prescribing and dispensing controlled substance prescriptions while maintaining DEA’s “closed system of controls on controlled substances.”  The IFR sets forth approaches to “identity proofing” (i.e., verifying that the user of an electronic prescription application is who he or she claims to be) and “logical access control” (i.e., verifying that the authenticated user has the authority to perform the requested action).

The 2020 Federal Register notice succinctly summarizes the many requirements listed in the IFR that are designed to minimize the potential for the diversion of controlled substances through misuse of electronic prescription applications:

• Identity proofing (verifying that the user is who he or she claims to be). This includes the  process for obtaining authentication credentials (after verification) for practitioners to sign and issue a prescription.  For individual practitioners, this is done by a federally approved third party credential service provider (CSP) or certification authority (CA).
• Two-factor authorization credentials (two “factors” are required for a practitioner to use their credential to use an EPCS). One factor must be knowledge-based (something only the practitioner knows) and the other factor can be biometric data, a hard token, a “hardware key” stored on a device, etc.  Both factors must be entered into the system containing the application before the system will allow the practitioner to issue the prescription.
• Logical access controls (i.e., verifying that the authenticated user has the authority to perform the action). This only allows DEA registrants or other authorized individuals under the CSA to electronically sign controlled substance prescriptions.  The approach to logical access controls is different for individual and institutional practitioners.
• Any electronic application used to prescribe controls must create and preserve an audit trail.
• The transmission of electronic prescriptions to the pharmacy, including mechanisms to ensure the prescription is not filled twice.

The 2020 Notice states that the 2018 SUPPORT Act requires that DEA – within one year of its  enactment (… oops!) – must update the biometric component of the multifactor authentication for EPCS.  This requirement is part the SUPPORT Act’s provision to require (with a few exceptions) the e-prescribing of drugs prescribed on or after January 1, 2021.  Note that many states already mandate EPCS independent of the SUPPORT Act’s 2021 deadline.  For example, New York’s EPCS law became effective in 2016, and over 25 other states now require EPCS.

Given the significant changes in technology since publishing the IFR, numerous public comments, and many questions posed to DEA over the last decade, the Agency is seeking public comment on nine specific issues, which are generally described below.  The Notice itself contains more details on the issues for which DEA is seeking comment.

1. Whether there are safe and secure alternatives to the current two-factor authentication process? Are practitioners using universal second factor authentication (U2F)? If so, how?  Are practitioners using cell phones as a hard token, or as part of the two-factor authentication? Is short messaging service (SMS) being used?
2. The current approach to identity proofing, and whether clarification of the IFR, especially concerning CSPs would be helpful.
3. The current approach concerning institutional practitioners and identity proofing. DEA is interested on how institutional practitioners conduct identity proofing on remote practitioners.
4. Logical access controls: The IFR requires that any setting of or change to logical access controls related to the issuance of controlled substance must be an auditable event. Is there a way make this less burdensome for practitioners?
5. The current requirements for how institutional practitioners must establish logical access controls for EPCS applications (focusing on the “two individuals” requirement).
6. Whether users have experienced a security incident and whether they have had difficulties reporting the same.
7. Any aspects of the IFR or other EPCS areas where further clarification would be helpful. Here, DEA is interested in issues with workflow and the adoption of EPCS, types of devices used, problems with two factor identification (and much more…).
8. Comments on biometric authentication for those entities that have utilized it, or any alternatives to biometric authentication.
9. Comments on failed transmissions of EPCS, alternative means used, and concerns, if any.

It will be interesting to observe how many comments are received, especially given the number of states that already require EPCS, and how widespread its use is nationwide.  Notwithstanding, are any of the specific issues of interest to you?  Are you considering submitting a comment?  Let us know! Comments must be received on or before June 22, 2020.  

Under the Public Readiness and Emergency Preparedness Act (“PREP Act”), manufacturers, distributors, and health care providers acting to address the COVID-19 crisis can be protected from products liability suits related to the use of certain products.  The Act provides immunity “from suit and liability under federal and state law with respect to all claims for loss caused by, arising out of, relating to, or resulting from the administration to or use by an individual of a covered countermeasure if a Declaration has been issued with respect to such countermeasure.”   In light of questions surrounding the scope of liability protections, the Department of Health and Human Services (HHS) issued an “omnibus” Advisory Opinion to address “most questions and concerns about the scope of PREP Act immunity.”  (This supplements the Advisory Opinion HHS issued specific to PREP Act immunity for licensed pharmacists who order and administer COVID-19 serology tests.)

It is evident throughout the 9-page Advisory Opinion that HHS views PREP Act immunity as broad.  Importantly, HHS reinforces that a “reasonable belief” standard confers immunity even if all the requirements are not met:

[A]n entity or individual who complies with all other requirements of the PREP Act and the conditions of the Secretary’s declaration will not lose PREP Act immunity – even if the medical product at issue is not a covered countermeasure – if that entity or individual reasonably could have believed that the product was a covered countermeasure.

Advisory Opinion, at 2 (emphasis added); see also id. at 4.  The opinion similarly advises that immunity results even if a person does not meet the definition of “covered person” as long as the person “reasonably could have believed” that she was a covered person.  This good faith/reasonable belief standard is extremely helpful given the constantly evolving requirements in the Emergency Use Authorizations FDA is issuing to address COVID-19.

Also helpful are the hypotheticals contained in the Advisory Opinion, many of which are only borderline hypothetical:

• If a covered person purchases 500,000 tests or respirators “that appear to be authorized under an EUA” and has taken reasonable steps to substantiate the authenticity of the products, but it turns out that the products are in fact counterfeit, PREP Act immunity still applies for losses arising out of the use of the counterfeit product.
• If a pharmacy allows its licensed pharmacists to order FDA-authorized COVID-19 tests and has taken reasonable compliance measures to ensure current licensure, but it turns out that one of the pharmacists is not currently licensed, the pharmacy would still be immune against a lawsuit relating to that pharmacist’s use of the COVID-19 test.
• If a distributor of Personal Protective Equipment (PPE) sources product from a new supplier in a “good-faith attempt” to deliver PPE, and the distributor takes “reasonable precautions” to assess the new supplier’s facility and compliance with quality control processes, HHS states that there can be no “willful misconduct” by the distributor.

To benefit from this broad coverage (and as a matter of best practices during this pandemic), it is important to have good documentation to support the reasonableness of a company’s decisions.  HHs also recommends that key information be made available to purchasers of these products so that they can make more informed decisions with better transparency.

While it seems like all of FDA is consumed with responding to the current COVID-19 crisis, the agency is still managing to continue its work in other areas.  Earlier this week, FDA issued a final guidance, titled Nonbinding Feedback After Certain FDA Inspections of Device Establishments, which outlines the process for obtaining FDA feedback on proposed remedial actions in response to observations issued on a Form 483, the Agency’s Inspectional Observations Form, following an inspection.  Notably, the final version of the guidance is essentially the same as the draft issued on February 19, 2019, which we blogged about here.

Specifically, the final guidance does nothing to address the concern we raised in our prior post: this program creates a lose-lose situation for industry.  While the admissions could be used in an enforcement action or a products liability lawsuit to demonstrate knowledge of a problem, a failure to request available feedback could be used to show negligence or willful ignorance of the same.  But even in requesting such feedback, FDA acknowledges that it “may not adequately address the cause of the problems that led to the inspectional observations, and additional action may be warranted.”  FDA, Guidance for Industry, Nonbinding Feedback After Certain FDA Inspections of Device Establishments, 8 (April 22, 2020).  Nor does FDA’s feedback prevent additional observations or regulatory action.  Ultimately this guidance does little to create an effective method of gaining feedback from FDA.

Last week FDA published a much needed guidance document addressing compounding by outsourcing facilities of shortage medications for patients confined to hospitals.  Yesterday FDA took an unprecedented step (see Section 503A guidance) and recognized, during the COVID emergency (or until FDA withdraws the policy), Section 503A compounders may compound certain identified shortage medications for patients in hospitals without a prescription for an individually identified patient.  Section 503A has always permitted compounders to compound copies of shortage medications (which are not, by definition, “essential copies” of commercially available drug products).  Never before has FDA permitted Section 503A pharmacies to compound such medications for so-called “office use.”  There are some important caveats, however, to what seems like a generous policy during this unprecedented and critical time.

FDA does not intend to take action against a Section 503A pharmacy for compounding a shortage medication, or for providing a drug to a hospital without obtaining a patient-specific prescription, if all of the circumstances in the guidance are present (and the other conditions of Section 503A are met).

Some important highlights: (1) The hospital must attempt to first obtain the product from an outsourcing facility; (2) if the hospital and pharmacy are not owned or controlled by the same entity, the pharmacy must note the COVID emergency on the order, and must request and obtain from the hospital within one month the “records” of the patients for whom the products are used (state law permitting); and (3) pharmacies must pay particular attention to some the very short beyond use dates set forth in the guidance (that are inclusive of any sterility tests) (Attachment B).

Thus, FDA is not “dispensing” altogether with the prescription/order requirement; instead, it is permitting pharmacies not affiliated with a hospital to obtain patient information “later.”  Although FDA has not permitted this in the past (although compounders have both requested and engaged in obtaining patient names “after the fact”), one does wonder whether this limitation is necessary to “protect” patients right now (given the other limitations such as short beyond use dating).

FDA’s conditions under this temporary policy include the following:

1. The compounded drug product must appear on the Appendix A list and contain only one of the active ingredients listed there.
2. The compounded drug is provided directly to a hospital, which informs the pharmacy that:
   • The hospital is treating patients with COVID-19; and
   • The hospital has made reasonable attempts and has not been able to obtain:
     • Adequate supplies of an FDA-approved drug product containing the same active ingredient for the same route of administration, and
     • Adequate supplies of a product made by an outsourcing facility containing the same active ingredient for the same route of administration.
3. The compounded drug product is labeled with a default beyond-use-date (BUD) in accordance with the table in Appendix B, except that the pharmacy uses a shorter BUD:
   • If literature/scientific information, or commercially available product labeling for a similar drug indicates that the drug product may not be physiochemically stable for the duration of the default BUD period, in which case the pharmacy uses such shorter BUD, or
   • If the pharmacy has been unable to obtain a sufficient supply of personal protective equipment (PPE) that it typically relies on to assure compliance with the insanitary condition provision in the FD&C Act (or PPE that is equivalent or better), in which case the pharmacy applies BUDs of 24 hours for products stored at room temperature and 3 days for products stored refrigerated. (See guidance for PPE and compounding here)
4. If the pharmacy and hospital are not owned/controlled by the same entity, the pharmacy: (1) marks the order with a notation indicating that the drug is provided to the hospital to treat patients during the COVID-19 public health emergency; and (2) requests that the hospital provide, to the extent allowed by applicable laws, the records that identify the patients to whom the drugs were administered and document such request within one month of sending the compounded drug to the hospital.
5. Before providing the drug product to the hospital, a State-licensed pharmacy notifies the following State authorities, and the State authorities inform the pharmacy that they do not object:
   • The State authority that regulates pharmacy compounding in the State where the pharmacy is located, and,
   • If different, the State authority that regulates pharmacy compounding in the State where the hospital is located.

The following substances – products that are aqueous solutions for injection (like the Section 503B limitation) – may be used in compounding (see Appendix A).  Compounders should check the list frequently for additions or subtractions to the list.

• Cisatracurium besylate
• Dexmedetomidine hydrochloride
• Etomidate
• Fentanyl citrate
• Furosemide
• Hydromorphone hydrochloride
• Ketamine hydrochloride
• Lorazepam
• Midazolam hydrochloride
• Norepinephrine bitartrate
• Rocuronium bromide
• Vancomycin hydrochloride
• Vecuronium bromide

Note that compounders (under Sections 503A and 503B) are always permitted per the relevant statutory sections to compound drug products on FDA’s published shortage list because those listed products are not “commercially available.”  The big difference here is FDA’s temporary waiver of the prescription requirement for Section 503A pharmacies, under the specific conditions listed in the guidance.

Given the broad deference afforded to federal agencies, it is rare when a court overturns an agency action challenged under the Administrative Procedure Act (APA).  In a recent decision, however, a court found that a regulation issued by the U.S. Department of Agriculture (USDA) violated the APA because it was not a “logical outgrowth” of the interim final rule that USDA had published for notice and comment.  The APA permits an agency to issue a revised final rule if the changes “are in character with the original scheme” of the proposed rule and the final rule is a “logical outgrowth” of the notice and comments from the proposed rule.   Because these conditions were not satisfied, the court held that the notice provided in the proposed rule was inadequate and that the final rule violated the APA.

In 2010, Congress enacted the Healthy, Hunger-Free Kids Act, revamping the nation’s school lunch program to increase servings of vegetables, fruits and whole grains, provide age-appropriate calories, remove trans fats, and limit levels of sodium. Schools were to gradually reduce the amount of sodium in school meals by meeting certain USDA targets over a period of ten years and to provide more whole grains. In 2017, however, the USDA proposed an Interim Final Rule to delay the sodium-reduction targets and maintain waivers from the whole grain requirement, but did not propose abandoning the whole grain requirements. Then in 2018, the USDA issued a Final Rule that eliminated the sodium-reduction targets for schools and removed the requirement that all grains be whole grain-rich. The Center for Science in the Public Interest brought this case against the USDA alleging several violations of the Administrative Procedure Act.

In its opinion, the U.S. District Court for the District of Maryland discussed each of the challenges Plaintiff raised to support vacating and remanding the Final Rule to USDA for further proceedings. Center for Science in the Public Interest v. Perdue, No. GJH-19-1004, 2020 U.S. Dist. LEXIS 64336 (Hazel, J.) (D. Md. Apr. 13, 2020).  Plaintiff made several arguments:

• that the Final Rule was inconsistent with federal law,
• that it reflected unexplained and arbitrary decisionmaking,
• that it represented an unacknowledged and unexplained change in position, and
• that USDA did not appropriately respond to public comments.

The Court sided with the USDA on all these allegations.  Of note, the Court applied Chevron analysis to determine whether the final rule is inconsistent with federal law.  The Court found that the relevant federal statutes do not unambiguously support either party’s suggested interpretation of the applicable Dietary Guidelines, so under step 2 of Chevron, the Court determine that the USDA’s action was based on a permissible construction of the statute, which is entitled to “substantial deference.”   Not surprisingly, the Court deferred to USDA’s interpretation of the federal laws governing school meals.

The Final Rule’s ultimate failing, however, was based on the Court’s determination that the Final Rule was not a “logical outgrowth” of the Interim Final Rule.

Under the APA, an agency is permitted to revise a final rule after initial notice of the proposed rule “if the changes in the original plan ‘are in character with the original scheme,’ and the final rule is a ‘logical outgrowth’ of the notice and comments already given.”   The proposed rule must enable the public “to discern what [is] at stake.”  But “if the final rule ‘substantially departs from the terms or substance of the proposed rule,’ the notice is inadequate.”  

2020 U.S. Dist. LEXIS 64336, at *9-10 (citations omitted).

On the issue of the sodium intake levels, the Interim Final Rule focused exclusively on delaying compliance requirements, not abandoning the compliance requirements altogether as the Final Rule did.  Similarly, the Interim Final Rule did not discuss eliminating the final sodium target, which the Final Rule did.  Thus the Court found that the Final Rule’s “elimination of the Final Sodium Target is not a logical outgrowth of the Interim Final Rule’s focus on delaying compliance requirements.”

Similarly with respect to whole grains, the Interim Final Rule specifically retained the requirement of one-hundred percent whole grains, while also extending the availability of an exemption to this requirement upon request.  In the Final Rule, the USDA changed what was a limited, case-by-case exemption into a new rule across the board abandoning the whole grains requirement altogether.

While extremely considerable deference is provided to federal agencies where a complex and highly technical regulatory program is concerned (and for those who spent time with the sodium intake guidelines, it certainly qualifies as that), that deference does not absolve the agency of the necessary requirements under the APA to provide sufficient notice of the Final Rule – especially, as here, when an agency completely changes its position between the Interim and Final Rules.

FDA issued a much needed guidance document addressing compounding by outsourcing facilities for hospitalized patients during the COVID-19 emergency.  Like its other recent guidance documents addressing the COVID-19 pandemic, this guidance sets forth FDA’s temporary policy — for compounding certain drug products for hospitalized patients by outsourcing facilities that have registered with FDA under FDCA section 503B (21 U.S.C. § 353b). It will remain in effect for the duration of the emergency or until withdrawn by the Agency.

FDA states that many hospitals are currently “experiencing difficulties accessing FDA-approved drug products used for patients with COVID-19.” Guidance at 3. Because a significant number of cases of individuals suffering from COVID-19 involve hospitalizations, certain FDA-approved drug products may become unavailable.  FDA typically addresses drug shortage situations through working with the global supply chain, but due to the “unprecedented disruptions to, and demands on” the supply chain, and in order to better respond to “evolving regional conditions,” FDA asserts that flexibility is needed, on a temporary basis, to ensure that patients received needed treatment when hospitals cannot obtain FDA-approved drugs. Thus,

[a]s a temporary measure during the public health emergency related to COVID-19, or until FDA otherwise withdraws or revises this guidance, FDA does not intend to take action against an outsourcing facility for compounding a drug product that is essentially a copy of an approved drug, for using a bulk drug substance that is not on FDA’s 503B Bulks List, or for not meeting CGMP requirements with regard to product stability testing and the establishment of an expiration date … when all of the [circumstances listed in the guidance] are present.

Guidance at 3-4 (emphasis added).

These circumstances include:

1. The compounded drug product appears on the list, attached as Appendix A to the Guidance, of drugs used for hospitalized patients with COVID-19 and contains only one of the active ingredients listed there.
2. The compounded drug product is provided directly to a hospital that informs the outsourcing facility it: (i) is treating patients with COVID-19, and (ii) has made reasonable attempts to obtain an FDA-approved drug product containing the same active ingredient for the same route of administration and has been unable to do so. (We recommend that the outsourcing facility maintain documentation of communications concerning the hospital’s “reasonable attempts” to obtain the FDA-approved drug product, although FDA’s guidance does not specifically require such documentation.)
3. The bulk drug substances that the outsourcing facility uses to compound the drug product must be in compliance with section 503B(a)(2)(B) through (D), regarding conformance with applicable USP monographs, sourcing from facilities registered with FDA under FDCA section 510, and must be accompanied by certificates of analysis (as is required for any bulk substance used by an outsourcing facility notwithstanding the COVID-19 emergency). For reference, the text of FDCA section 503B is attached here.
4. The outsourcing facility’s practices regarding stability testing and expiration dates must meet the conditions for enforcement discretion described in Appendix B to the guidance (Stability/Expiration Dating For Compounded Drug Products) and Appendix C (Conditions Under which FDA Generally Does Not Intend to Take Regulatory Action Regarding Stability Testing and Expiration Date Requirements).

Any outsourcing facility undertaking to compound drug products pursuant to this guidance should pay particular, careful attention not only to FDA’s list of permissible ingredients (Attachment A), but also to the guidance’s details concerning stability testing and expiration dating for products set forth in Attachments B and C.

Because the list of substances in Attachment A may be updated throughout the crisis period, those intending to rely on the guidance for compounding should frequently check Attachment A for additions or deletions to it.  As with other guidance, the Agency has published during the public health emergency, the guidance is being implemented immediately, but it remains subject to comment in accordance with the Agency’s good guidance practices. FDA provides the following email address to the extent there are questions concerning the guidance:  compounding@fda.hhs.gov.

In some news that is not about Emergency Use Authorizations, how to make a DIY face mask, or even about COVID-19, the Alcohol and Tobacco Tax and Trade Bureau (TTB) published a final rule amending its regulations governing the labeling and advertising of wine, distilled spirits, and malt beverages on April 2, 2020.  And yes, the new regulations eliminate the distinction between fruit wines and citrus wines and allow citrus wines to now be called “fruit wines.”

By way of quick background, the TTB is the primary federal agency that regulates alcohol, but it is part of a complex system of both federal and state regulation.  At the federal level, the TTB is joined by the FDA, USDA, FTC, and CBP in regulating beverage alcohol.  At the state level, each of the 50 states has the ability to regulate the distribution and sale of alcohol within their states, courtesy of the 21st Amendment to the Constitution.

The TTB first proposed modernizing the regulations in late 2018 and issued a proposed rule for comment (Notice No. 176: Modernization of the Labeling and Advertising Regulations for Wine, Distilled Spirits, and Malt Beverages, Nov. 26, 2018).  The final rule released on April 2, 2020 addresses the 1000+ comments TTB received.  The final rule does not address all the proposed changes.  Instead, it focuses on liberalizing and clarifying the regulations, and at the same time making the transition to the new regulations easier for manufacturers because the new regulations:

• do not require any current labels or advertisements to be changed
• were generally widely supported by commenters and stakeholders
• can be implemented relatively quickly, and
• will either give more flexibility to industry members or help industry members understand existing requirements

Specifically, the rule implements, among other things, the following proposed changes:

• an expanded alcohol content tolerance for distilled spirits to plus or minus 0.3 percentage points from between 0.15 and 0.25 depending on the product
• brand label placement flexibility for distilled spirits
• removing the current prohibition of age statements for most types of distilled spirits
• allowing vintage dates for wine imported in bulk, and
• removing the prohibition against the term “strong” for malt beverages

In addition, the rule identifies which proposals TTB did not adopt, including:

• the proposal to define an “oak barrel” for purposes of aging distilled spirits
• the proposal to require that statements of composition for distilled spirits specialty products list components in intermediate products
• the proposal to require that distilled spirits statements of composition (indicating the category of spirit) list distilled spirits and wines in order of predominance, and
• the proposal to adopt new policies on the use of cross-commodity terms (for example, imposing restrictions on the use of various types of distilled spirits terms, including homophones of distilled spirits classes, on wine or malt beverage labels)

In the category of an attempted clarification that did not work as drafted, TTB did not finalize its proposal to incorporate into the regulations the jurisdictional interaction between FDA determinations that a product is adulterated and TTB’s position that such products are mislabeled.  Commenters appeared to misunderstand this proposal and believed that TTB was proposing to take on a new role of interpreting FDA requirements.  This was not the case, and the TTB’s longstanding position that its review of labels and formulas does not relieve industry members from complying with FDA regulations regarding food additives, ingredient safety, and suitable container materials.  So, even if TTB approves a label, the company must still ensure that all ingredients in the product comply with FDA regulations. See our prior post here for more information.

As indicated in the title of the post, we haven’t seen the last of the modernization, as TTB does plan to address the remaining issues in the 2018 proposal at a later date.

During the COVID-19 pandemic, there is widespread agreement that one of the most important steps the government can take is to enable widespread testing of patients.  Many experts have cited the lack of access to a sufficient number of tests as a fundamental flaw in the response to the unfolding pandemic.  Yet, FDA has announced a new policy that will exacerbate this problem.

In recent weeks, the FDA has taken multiple steps to facilitate access to COVID-19 testing.  For example, the agency has issued Emergency Use Authorizations (EUAs) to over 30 molecular tests.  On March 16, FDA issued a policy that also allowed laboratories to begin offering laboratory-developed tests (LDTs) for 15 days prior to submission of an EUA and during the pendency of FDA’s review of the EUA.  (As readers of the blog know, we have long been critical of FDA’s limitations on LDTs, but the topic of LDTs and COVID-19 is for another day.)

In that same document, FDA also allowed companies to begin offering point of care serological tests without prior FDA review, provided that the test is validated, the test report includes certain required disclaimers, and the company has submitted a notification to FDA.  The combined effect of these and other steps has been to increase access to COVID-19 tests.

The point of care serological test policy, in particular, allowed companies to proceed to market quickly with easy-to-use IgG and IgM antibody tests, which provide information about exposure to COVID-19.  However, FDA has started instructing companies that their review of the notification is required prior to commencing distribution, and that review is taking one to two weeks.  This will likely lead to a delay in the availability of additional point of care serological tests.

In addition, FDA recently issued a statement that significantly curbs the ability of serological tests to play a meaningful role in addressing the COVID-19 pandemic.

Given their ease of use, serological tests generally do not need to be used in labs.  Instead, they can be used at the point of care, including doctors’ offices, urgent care centers, and drive-through testing centers, providing rapid information about COVID-19 status to the health care provider and patient.  Allowing tests at the point of care greatly facilitates patient access, as compared to having samples sent to a laboratory and then awaiting test results.

While FDA’s policy on March 16 addressed the FDA status of serological tests, it was silent about the status of these tests under the Clinical Laboratory Improvement Amendments (CLIA).  CLIA is a separate law that governs laboratory testing.  Among other elements, CLIA requires that tests be performed in appropriately certified laboratories, unless the test is categorized as “waived.”  High-complexity tests can only be performed in those laboratories that are certified as high-complexity, which is a small minority of labs in the U.S.

FDA announced its new policy on serological tests as a response to a Frequently Asked Question (FAQ) on its website (see FAQ webpage here).  In the FAQ response, FDA states:

While FDA has indicated that [tests offered prior to or without an EUA] may be appropriate for use in clinical laboratories and by healthcare workers at the point of care, the policies in the Policy for Diagnostic Tests for Coronavirus Disease-2019 do not provide a CLIA categorization and do not override any CLIA requirements.  Therefore, in accordance with CLIA, tests offered under these policies are considered high complexity by default until or unless they are authorized and deemed to be appropriate, through an EUA authorization or general FDA review processes, to be performed as moderate or waived complexity tests.

This language may be opaque, but the impact is not: serological tests offered by manufacturers under the policy discussed above can only be performed in high-complexity laboratories.  In other words, these tests – which are designed to be used at the point of care – can only be run in facilities that hold high-complexity CLIA certifications.  Serological test samples could be collected at the point of care, but they would need to be transported to a high-complexity certified laboratory for testing, which defeats the purpose of a simple, rapid test.  The result is reduced access to most serological tests.

In a separate FAQ, FDA clarified that tests that have been authorized for point of care use via an EUA will be considered CLIA-waived and could be used in settings like doctors’ offices or drive-through testing sites (so long as these settings have CLIA certification to perform waived tests).  As of today, there are only three EUAs in which FDA has authorized point of care use (the Xpert Xpress SARS-CoV-2 Test, Accula SARS-CoV-2 Test, and ID NOW COVID-19 Test).

Bizarrely and inconsistently, yesterday the Department of Health and Human Services touted a new policy that ostensibly expanded testing by pharmacists.  The statement says, “In an effort to expand testing capabilities, we are authorizing licensed pharmacists to order and administer COVID-19 tests to their patients.  The accessibility and distribution of retail and independent community-based pharmacies make pharmacists the first point of contact with a healthcare professional for many Americans.  This will further expand testing for Americans, particularly our healthcare workers and first responders who are working around the clock to provide care, compassion and safety to others.”

The tests that pharmacists are most likely to offer, though, are point of care serological tests without EUAs, which means they are high-complexity tests under CLIA.  Unless local pharmacies and chain pharmacies are part of high-complexity CLIA-certified labs, under FDA’s FAQ, they will not be able “to order and administer COVID-19 tests to their patients.”  In other words, what HHS gave with one hand, FDA took away with the other.

We appreciate that FDA cannot simply ignore CLIA.  However, given that FDA and other parts of the government have waived multiple requirements during this National Emergency, it is striking that FDA’s current policy – and by extension HHS’ – is to block serological testing for COVID-19 in the locations where it is most needed and would be most helpful.

Ultimately, responsibility for this disjointed, uncoordinated policy rests with HHS, since FDA, CLIA, and the new policy on pharmacies all are under HHS’ purview.  In the past couple weeks, HHS has issued enforcement discretion policies for a number of issues in response to the COVID-19 pandemic, including the Federal Anti-Kickback Statute, telehealth, community-based testing sites, and HIPAA.  To avoid roadblocks to serological testing access, HHS should issue a similar enforcement discretion policy related to test complexity limitations under CLIA.

From the enactment of the Medicaid Drug Rebate Statute in 1990 until last year, a term appearing in the statute – “original new drug application” – caused  controversy and uncertainty.  The term was not defined in the statute and the legislative history shone no light on it.  Yet it had enormous fiscal implications for drug companies under the Medicaid Drug Rebate Program (MDRP).  Until April 2019, innovator drugs, which are subject to a substantially higher per-unit rebate than non-innovator drugs, were defined as drugs approved under an “original new drug application.”  This begged the question, what is an original NDA over and above an NDA?  The term obviously did not include an ANDA, but what about NDAs that are not original in that they rely on previously approved applications or data that are not original to the applicant, such as a section 505(b)(2) application or a literature based application?  In February 2016, CMS issued a final regulation construing an “original NDA” as simply an approved NDA,  “unless CMS determines that a narrow exception applies.”  42 CFR 447.502.  In subregulatory guidance, CMS advised that narrow exceptions would only be granted for drugs that were approved under FDA’s paper NDA policy prior to 1984 or under literature‑based 505(b)(2) applications, and that had no patent protection or statutory exclusivity.  For drugs on the market as of April 1, 2016, the regulation established a deadline of April 1, 2017 for requesting a narrow exception.  Manufacturers could also submit requests for up to one year after the launch of a new drug or after an acquisition of a drug.  Effective April 1, 2019, a statutory amendment codified CMS’s interpretation by deleting the word “original” and codifying the narrow exception process.

Why then are we posting an article about a term that no longer exists in the U.S. Code?  The reason is that a recent decision of the D.C. District Court construed the former term in a manner that may offer rebate relief to companies marketing drugs approved under FDA’s pre-Hatch Waxman paper NDA policy, and those approved under literature based applications submitted under FDC Act section 505(b)(2).  The case, STI Pharma v. Azar, No. 18-cv-1231 RDM, 2020 U.S. Dist. LEXIS 49618 (D.D.C. Mar. 23, 2020), concerned STI’s Sulfatrim, an antibiotic suspension with pediatric indications.  The drug was originally approved in January 1983 as a paper NDA.  Its approval was based on its chemical equivalence and bioequivalence to Bactrim Suspension, which had been approved a decade earlier.  STI purchased Sulfatrim from an intervening owner in 2011 and began marketing it two years later.  Because the drug was approved under an NDA, STI categorized the drug as an innovator multiple source drug, which subjected it to higher rebates than noninnovator multiple source drugs.

After CMS published its 2016 Final Rule adopting the narrow exception approach, STI timely requested a narrow exception to classify Sulfatrim as a noninnovator multiple source drug despite its approval under an NDA, and CMS granted the request effective from April 1, 2016, when the CMS “narrow exception” rule took effect.  However, STI requested CMS’s permission to treat Sulfatrim as a noninnovator multiple source drug status retroactively to the fourth quarter of 2013, when STI first began marketing Sulfatrim.  CMS denied STI’s request, explaining that “[a] drug category change pursuant to a narrow exception request approval does not apply to reporting periods prior to the effective date of the Final Rule because the narrow exception did not exist before that date.”  STI Pharma, 2020 U.S. Dist. LEXIS at *19.

STI challenged CMS’s reading of the statute, arguing that Sulfatrim was a “noninnovator multiple source drug” because FDA approved the drug based on its equivalence to the previously approved Bactrim Suspension.  In other words, Sulfatrim and Bactrim Suspension are equivalent drugs, and the “original” NDA was granted for Bactrim Suspension — not Sulfatrim. CMS agreed that this is a permissible reading of the MDRP statute, and, indeed, that is the interpretation CMS itself adopted in the 2016 Final Rule.

Contrary to both parties’ briefs, the Court did not believe that it had to weigh in on the reasonableness of CMS’s interpretation of the MDRP statute.  Rather, according to the Court, “the case can and must be decided at Chevron step one.”  Id. at *23.  Under Chevron Step One, the Court used the same analysis it would have applied “in the absence of an administrative interpretation of the statute” to determine whether Congress has unambiguously expressed an intention on the precise question at issue.  Id. at *24.

According to the Court, the ordinary meaning of “original NDA” and “innovator drug” cannot include duplicate drugs, like Sulfatrim, that were approved under the pre-1984 paper NDA process.  Sulfatrim could not be the “original NDA” because “Sulfatrim was not the source, beginning, or the product or model from which copies are made. Rather, Bactrim was.”  Id. at *29.  Sulfatrim’s approval documents repeatedly refer to Sulfatrim as a “generic version of the Bactrim product,” and a “duplicate NDA for [Bactrim].” The Court also noted that “innovate,” the verb form of the term “innovator,” in its ordinary meaning, is “to introduce as or as if new.”  Id. at *34. Courts have used innovator interchangeably with pioneer, novel, non-generic drugs.  The Court agreed with STI that this “common understanding of the word ‘innovator’ shows ‘that Congress did not intend to classify duplicate generic drugs as innovator multiple source drugs.’”  Id. at *35 (emphasis in original).

The Court concluded that the traditional tools of statutory interpretation “reveal[ed] a ‘single right answer’ to the meaning of the statute.”  Id. at *40.  Accordingly, the Court held that “CMS’s decision declining to reclassify Sulfatrim as a noninnovator multiple source drug for the period from 2013 through 2016 must be set aside as not in accordance with law.”  Id.

This case has obvious relevance to companies that, like STI, were granted a narrow exception by CMS but told that it would not be applied retroactively before April 1, 2016.  Such companies now have grounds for requesting a retroactive reclassification for periods prior to that date.  However, the case also has relevance to companies that market drugs that might have been candidates for a narrow exception, but the company for one reason or another failed to meet CMS’ April 1, 2017 regulatory deadline for requesting one.  Under the court’s reasoning, such a drug – for example a duplicate drug approved under FDA’s paper NDA policy – was not an innovator drug according to the plain meaning of the statue until the 2019 amendment.

It’s no secret that FDA’s review and approval metrics are closely watched.  In fact, these metrics are integral to evaluating whether FDA has met the commitment to industry it made during Prescription Drug User Fee Act (“PDUFA”) negotiations.  As explained in our summary of the 2017 reauthorization of PDUFA, for fiscal years 2018-2022, FDA has committed to reviewing 90 percent of new molecular entity (“NME”) NDAs in 10 months and 90 percent of new priority NDAs in 6 months of the filing date (60 days after actual submission); for non-NMEs, the review goals are 10 months and 6 months after submission, respectively.  At the direction of Congress, the GAO just released a new report evaluating exactly how FDA is doing in meeting these goals.

The bottom line: Application review times largely reflect agency goals.  The GAO reached this conclusion based on its analysis of 637 NDAs and BLAs submitted to the Center for Drug Evaluation and Research throughout fiscal years 2014 and 2018.  Oddly, the GAO Report does not explain much about its conclusion that “review times largely reflect agency goals,” mentioning only in a footnote that “FDA completed its initial review of 97 percent of NDAs within the time frames established under its PDUFA goals—a greater percentage than the 90 percent goal stated in its PDUFA V and VI commitment letters.”  There are, however, some exceptions – though fewer than one might think.  The GAO identified only 5 NDAs for which the review time was exceptionally long in comparison to the PDUFA goal date.  GAO excluded these NDAs from its some of its analyses based on FDA’s explanation that “these reviews were substantially delayed because of complicated manufacturing site issues, complicated legal and regulatory issues, or emerging public health issues requiring last minute advisory committee meetings” – conditions that GAO “deemed sufficiently unusual to exclude these five NDAs from further statistical analyses of review times.”

Much of the GAO Report’s focus is on the differences between applications that may impact goal dates.  The Report explains that goal dates are directly related to four key features of NDAs: whether the NDA receives priority review designation; whether the NDA involves an NME; whether the applicant submitted a major amendment; and whether the NDA qualifies for one of FDA’s expedited programs (such as Accelerated approval, Breakthrough designation, or Fast track designation, all of which are available for NDAs for drugs intended to treat serious or life-threatening conditions).  Thirty-two percent of the 637 NDAs included in the GAO review had a priority review designation; 36 percent involved a new molecular entity; 12 percent involved a major amendment; and 18 percent qualified for one expedited program while 9 percent qualified for two or three.   These key features, the Report explains, directly affect the timing of review because they dictate the PDUFA goal date.

The GAO Report also explains that the features that affect goal dates impact some review divisions more than others.  As such, the Report examines the distribution of NDAs with these key features across review divisions and analyzes the differences in time taken to complete initial reviews between divisions.  The analysis found that each division differed in the average number of days to complete an initial review of an NDA, but these differences reflected the differences in the key features of the NDAs (i.e. priority review, expedited programs, major amendments, and NME status) submitted to each division.  Unsurprisingly given the goal date commitments, NDAs with key features that resulted in shorter goal dates had shorter review times.  Controlling for these differences in goal dates, the GAO Report found that most of the divisions’ average review times were similar to (within 2 weeks of) each other.  However, the Hematology and Oncology divisions reviewed about 2 or 3 weeks faster than other divisions.

The Report includes a breakdown of the applications submitted to each division with details about the number of applications with each key feature.  FDA’s Oncology and Hematology divisions reviewed the greatest number of NDAs—while still reviewing faster than other divisions—closely followed by the Antiviral Division, the Anti-infective Division, the Metabolism and Endocrinology Division, and the Anesthesia, Analgesia, and Addiction Division.  The distribution of NDAs with key features varied significantly across divisions, which led to differences in the review time for each division as well.  For example, fifty-six percent of the Anti-Infective Division’s NDAs had priority designation, mandating a faster review time, while thirty-seven percent of the Gastroenterology and Inborn Errors Division’s NDA were priority.  With this difference in priority workload, the median time taken to complete an initial review of an NDA by the Anti-infective division was about two months faster than the Gastroenterology and Inborn Errors division.

Finally, in response to a request from Congress, the Report also details actions FDA has recently taken to evaluate and facilitate the use of different sources of evidence to support NDAs.  As a result of the 2016 Cures Act, FDA started implementing initiatives, including the Real-World Evidence Program, Patient-Focused Drug Development, Complex Innovative Trial Designs, Drug Development Tool Qualification Programs, and Model-Informed Drug Development.  Because the amount and nature of the evidence needed can be an important determinant of when and whether new therapies become available to the public, these programs can impact review times.  While implementation is still in progress for all of the initiatives—meaning only minimal data was available for GAO review—the GAO did note that there has been an increase in discussions with the Agency relating to these new initiatives.

The GAO Report included four appendices of interesting data.  For those of you that have the time while social distancing, it could make for some noteworthy quarantine reading.