In an effort to address, in Attorney General Jeff Sessions’ words, “the worst drug crisis in American history,” the U.S. Department of Justice (“DOJ”) and the Drug Enforcement Administration (“DEA”), are for the third straight year proposing to reduce the quantity of Schedule II opioid pain medications that can be manufactured. DOJ, Press Release, Justice Department, DEA Propose Significant Opioid Manufacturing Reduction in 2019 (Aug. 16, 2018). For 2019, in addition to reducing the Aggregate Production Quotas (“APQs”) of oxycodone, hydrocodone and fentanyl, DOJ/DEA also proposes to further reduce the quantities of morphine, hydromorphone and oxymorphone. Proposed Aggregate Production Quotas for Schedule I and II Controlled Substances and Assessment of Annual Needs for the List I Chemicals Ephedrine, Pseudoephedrine, and Phenylpropanolamine for 2019, 83 Fed. Reg. 42,164, 42,168 (Aug. 20, 2018).

We continue to be troubled by the paucity of scientific and medical support for this three-year trend that has resulted in a dramatic decrease in quotas for much needed pain medicine. Continuing to generally blame the opioid crisis for such reductions is in our opinion short-sighted and pre-supposes that simply reducing the amount of available inventory will reduce abuse and diversion. Moreover, we do not believe the DEA or DOJ is showing appropriate concern for legitimate patients and the impact on medical care.

The DEA must establish APQs on an annual basis which limit the total amount of a certain drug that can be manufactured in a given year. Moreover, each manufacturer must apply for an individual manufacturing quota and the sum of these quotas may not exceed the APQ.

The proposed APQ reductions in 2019 of the six opioids equate to between seven percent (morphine for sale) and 15 percent (oxymorphone for sale) compared to 2018 levels. DEA reduced the APQs for these opioids minimally in 2018, but had reduced them in 2017 by at least 27 percent of 2016 levels, with hydrocodone, fentanyl, morphine and oxymorphone levels reduced by at least 40 percent. The 2017 APQ reductions eliminated a 25 percent buffer that DEA had added to APQs annually between 2013 and 2016 to guard against shortages. See DEA, Press Release, DEA Reduces Amount of Opioid Controlled Substances To Be Manufactured in 2017 (Oct. 4, 2016).

These huge cuts in opioid production will eventually lead to shortages for legitimate medical use. The Attorney General, in discussing the proposed reductions, further observed that “President Trump has set the ambitious goal of reducing opioid prescription rates by one-third in three years.” DOJ, Press Release, Justice Department, DEA Propose Significant Opioid Manufacturing Reduction in 2019 (Aug. 16, 2018). We understand the rationale in proposing to reduce the quantity of highly abused opioids that will be manufactured next year and recognize that state Prescription Drug Monitoring Programs and the Centers for Disease Control and Prevention (“CDC”) opioid prescribing guidelines have led practitioners to prescribe these medications in fewer quantities. However, DOJ/DEA should not make the reductions simply to meet an arbitrary benchmark; the reductions must be based upon meaningful data.

We also note that these reductions come on the heels of DEA recently modifying the criteria it would use to establish quotas. Controlled Substances Quotas, 83 Fed. Reg. 32,784 (July 16, 2018). That rule, which became effective on August 15, 2018, adds two additional factors for consideration:

• The extent of any diversion of the controlled substance; and
• Relevant information obtained from the Department of Health and Human Services, including FDA, the CDC, and the Centers for Medicare and Medicaid Services, “and relevant information obtained from the states.”

However, this DEA rulemaking also fails to provide sufficient rationale or guidance on how DEA will determine what the “extent of any diversion” means. Also, the involvement of the states in the DEA quota process also raises more concern about the impact on DEA’s timely establishing of such quotas. For example, if one state raises objections about the quota for a drug, it appears that DEA may then need to hold hearings on the quota which could again result in delays in granting of individual manufacturing quotas.

In short, reducing the APQs in 2019 may lead to less opioid medications available for potential diversion from legitimate channels to misuse and abuse in 2019, but will also result in less supply that is available for the millions of patients who legitimately need them. Simply reducing the quantity of opioids manufactured does not in itself ensure that only legitimate patients, rather than those who would misuse and abuse the medications, will have access to them. There is the risk with reduced APQs that supply will not meet legitimate needs if doctors and other practitioners are not diligent about issuing prescriptions only to the patients who need them.

Written comments on the proposed APQs must be postmarked on or before September 19, 2018.

Last month, Representatives John Sarbanes (D-MD) and Bill Johnson (R-OH) introduced H.R. 6478, the “Biosimilars Competition Act of 2018.”  The bill would amend the Public Health Service Act (“PHS Act”) to require that certain agreements between biosimilar applicants and reference product sponsors be reported to the Department of Justice (“DoJ”) and to the Federal Trade Commission (“FTC”).  According to Rep. Sarbanes, the bill is intended to address so-called “pay-for-delay” agreements.

Specifically, H.R. 6478 would amend PHS Act § 351(l) to add item “(10)” to require the reporting of any agreement between a biosimilar applicant and a reference product sponsor, or an agreement between two or more biosimilar applicants, regarding the manufacture, marketing, or sale of the biosimilar product(s) for which a 351(k) aBLA was submitted to FDA, or the brand-name reference product. Such agreements also include agreements that are contingent upon, provide a contingent condition for, or that otherwise relate to an agreement regarding the manufacture, marketing, or sale of the biosimilar or reference products. Agreements that solely concern purchase orders for raw material supplies, equipment and facility contracts, employment or consulting contracts, or packaging and labeling contracts would be excluded from reporting under H.R. 6478.

While the House considers H.R. 6478, the United States Senate is considering legislation concerning the reporting of patent settlement agreements involving biosimilars. Specifically, S. 2554, the “Patient Right to Know Drug Prices Act,” would amend the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“MMA”) – and, in particular, Sections 1111-1118 – to require that certain agreements reached between biosimilar applicants and reference product sponsors be reported to the FTC. Section 1112 of the MMA requires that certain types of agreements executed on or after January 7, 2004 between a brand-name drug company and a generic drug applicant be filed with the FTC and the DoJ; MMA § 1113 states that “[a]ny filing required under Section 1112 shall be filed with the DoJ and the [FTC] not later than 10 business days after the date the agreements are executed;” and MMA § 1115 provides that the failure to timely file applicable agreements may result in a civil penalty of $11,000 for each day that a required filing has not been made. (For additional information on current FTC reporting requirements and reports, see here and here.)

The reporting requirements proposed in S. 2554 for biosimilar agreements would be similar to the requirements currently in place for drug products regulated under the FDC Act. S. 2554 is making its way through the Senate as calls for reporting of biosimilar agreements to the FTC have increased in the past couple of months (see here).

On August 13, 2018, Buffalo, New York-based Athenex Pharma Solutions, LLC and Athenex Pharmaceutical Division, LLC (Athenex) announced the launch of their vasopressin compounded formulation injection ready-to-use product line (see Press Release here). It also moved to intervene (either as of right or permissively) in a pending lawsuit filed in October 2017 by Par Sterile Products and Endo Par Innovation Company (Endo/Par) (blogged about here). In yet a third punch, Athenex also filed a declaratory judgment action against Endo/Par in the United States District Court for the Western District of New York alleging non-infringement and invalidity claims for several of the defendant’s Vasostrict® patents.

The 2017 Endo/Par lawsuit against FDA involves seeking a judicial determination about whether FDA’s inclusion of vasopressin (the active ingredient in Endo/Par’s FDA-approved drug product Vasostrict®) on FDA’s Section 503B Bulks List is appropriate. Endo/Par’s lawsuit also seeks a determination concerning whether FDA’s 2017 Section 503B Bulk Substances Interim Policy violates the Administrative Procedures Act’s notice and comment rulemaking requirements. Recall that Endo/Par stated in a press release earlier this year that, based on FDA’s January 2018 public statements reflecting the Agency’s “intent to alter its compounding policy and comply with the DQSA, as well as subsequent discussions among the parties’ counsel, Endo previously agreed to FDA’s request to stay the litigation until March 30, 2018.” (See Press Release here). After FDA’s publication of new draft guidance revisiting the 503B bulks nomination process in March 2018 and discussions between the parties, Endo/Par agreed to extend the stay of the lawsuit for an additional 180 days as “FDA works toward implementation of the new compounding policy.” Under the terms of the proposed stay, Endo stated that it “will retain the ability to terminate the stay by notifying FDA that it believes that an entity has commenced or is likely to commence bulk compounding of any vasopressin-containing drug product under Section 503B.” Most interestingly, FDA released a new Bulks List on July 25, 2018, here, which list still includes vasopressin on Bulks List 1.

FDA’s March 2018 draft guidance indeed seeks significant changes to the nomination process for bulk substances for use in Section 503B Outsourcing Facilities. FDA’s proposed changes come almost six years after implementation of the Drug Quality and Security Act (Title 1), which created Outsourcing Facilities, and almost four years after FDA published its detailed bulk substances interim policy… pursuant to which the compounding industry nominated hundreds and hundreds of bulk substances, and after FDA, with the assistance of the Pharmacy Compounding Advisory Committee (PCAC) already made determinations concerning the propriety of using those substances in compounded medications. After receiving a nomination for the bulk substance vasopressin, FDA added that substance to the list in the summer of 2017. That listing decision led to the Endo/Par lawsuit against FDA described above.

Next enters Athenex and its Motion for Intervention in the Endo/Par litigation. Evidently it was Athenex’s nomination for vasopressin that FDA reviewed (and thus added the substance to Bulks List 1) last July. Athenex’s Memorandum in Support of its Motion to Intervene describes the Company’s significant investment in, and commitment to, its 503B outsourcing facility operations, and its flagship compounded formulations, including ready-to-use vasopressin products. It also describes in detail how Athenex has devoted considerable financial and other resources to preparing compounded vasopressin products in reliance on FDA’s 2017 inclusion of the substance on Bulks List 1.

Athenex also notes that vasopressin been used intravenously in hospitals, mostly in emergency scenarios, from almost 100 years. Notwithstanding, Athenex alleges that after Par received FDA approval for its product, Par “leveraged its exclusivity to maximize sales,” and the “average wholesale price of intravenous vasopressin surged 3141% — from $4.27 to $148.40 per vial. (Memorandum in Support at 8, 21). From 2013 to the present, annualized sales increased from $4 to $400 million. We have heard this very familiar sounding Shkrellianesque tale through the years…but will the pricing trevails move the Court? Athenex also describes the many differences between the FDA-approved version (Vasostrict®) and compounded formulations of vasopressin, including the ready-to-use compounded form offered by Athenex.

In addition to other arguments supporting its intervention in the lawsuit, Athenex argues that compounding from bulk substances (nonsterile-to-sterile compounding) is safer than compounding using the approved product (i.e., using Vasostrict® in a sterile-to-sterile compounding process). And, it claims that, contrary to Endo/Par’s allegations, compounding with vasopressin is not unsafe and there is a clinical need for the compounded product. Athenex argues that because answers to these issues are also “central” to deciding the underlying lawsuit, the district court should grant its motion to intervene.

For those in the continuing compounding regulatory fray, these latest events are noteworthy. The Motion is, in turn, supportive of FDA’s efforts in the nomination process, and one could argue defends the Agency’s prior actions (and considerable efforts) involving its earlier bulks list determinations. It also challenges whether Endo/Par’s lawsuit is appropriate on its face because FDA’s earlier interim bulks policy is not “final agency action” upon which the lawsuit may be based. Furthermore, it states FDA’s decisions on bulk substance nominations to date, in particular the Agency’s exercise of enforcement discretion, is not reviewable by a court, at least at this point. Stay tuned for updates on this continuing saga.

Since 1992, the Food and Drug Administration’s (FDA’s) efforts to regulate laboratory developed tests (LDTs) have been one of the most controversial device regulatory topics.  We have written about this topic multiple times (see our list at the end of this post).

The focus of many of these posts has been FDA’s efforts to use guidance documents to regulate LDTs under the Federal Food, Drug, and Cosmetic Act.  In short, we have questioned the legality of those efforts, and given the constraints imposed by the existing legal framework, its desirability.

However, there is another way to approach LDT regulation: by enacting legislation.  That would address the legality issue, and, if properly crafted, its desirability.  A new law could provide an unassailable legal framework, while also addressing multiple concerns that have been raised: LDTs and kit manufacturers should be on a level playing field; the regulatory requirements should be based on the clinical role and risk of the test, not whether it was an LDT or distributed test kit; the role played by laboratories in innovation and meeting underserved populations; recognition that labs are already subject to extensive regulation under the Clinical Laboratory Improvement Amendments (CLIA); etc.  FDA was asked to provide Technical Assistance (TA) regarding legislation, the Diagnostic Accuracy and Innovation Act (DAIA), that is designed to accomplish these and other goals.

In response, FDA went much further than providing technical comments on the legislation.  FDA has instead advanced a different framework, with different statutory language, which would substantially change the regulatory regime for in vitro diagnostics (IVDs).  As FDA said in accompanying comments, the agency is “taking a fresh look at how the Agency is encouraging the development of innovative tests and continuous improvements to diagnostics already on the market.”  Underscoring that the TA is not just tweaking existing mechanisms, FDA says it “believes it is necessary to create pathways” (emphasis added).

The Medical Device Amendments of 1976 placed diagnostics into the same category as all other devices.  The definition of device included the term “diagnosis,” but otherwise did not recognize that IVDs existed except as part of the broader world of devices.  Although the statute has been amended multiple times since then, diagnostic products have continued to be lumped in with all other devices.  The issue that FDA has decided to address head on is whether that should continue.  And FDA answered with a strong “no,” by introducing novel concepts such as “priority review,” “precertification,” “provisional approval,” and “test groups.”

FDA’s TA document is not tinkering with the regulatory regime for IVDs. It is a revamp of how all IVDs should be regulated, LDTs and distributed diagnostic products alike.  (DAIA, of course, also proposed significant revisions to how diagnostic tests are regulated; the purpose of this blog is not to compare and contrast the new proposals.  Notably, the TA does not attempt to address the role of CLIA.)

For LDTs, it would mean a new regulatory framework.  Some labs have voluntarily submitted 510(k)s or premarket approval applications (PMAs) to FDA.  If FDA’s proposal were adopted, labs and manufacturers would be subject to the same criteria for when applications would need to be submitted.  Labs would also be subject to other FDA requirements beyond the submission of marketing applications.

Putting kits and LDTs on the same footing, though, is not the most striking aspect of the proposal.  Rather, it is FDA’s rewriting of the IVD regulatory process, both for entering and remaining on the market.  Many of the regulatory terms and constructs that have governed IVD regulation for decades ‒ would be discarded.  A whole new vocabulary would be adopted, complete with their own statutory definitions, e.g. “in vitro clinical test” and “developer” and “test group” and “analytical validity” and “first-of-a-kind.”  This legislation, although it borrows from some past concepts, should be viewed as revolutionary, not evolutionary.

We will be writing about more of the details later.  One example, though, suffices to show how FDA’s proposal would dramatically alter the regulatory system.  For 42 years, the primary route for FDA review of new IVDs has been the 510(k) premarket notification.  To obtain a 510(k) clearance, a company has had to show “substantial equivalence” to a “predicate device.”  Those terms ‒ 510(k), substantial equivalence, and predicate device ‒ have been part of regulatory lingo for over four decades.  Under FDA’s framework, they would disappear.

The concept of “predicate device” is dropped.  A new phrase is created: “test group.”  The squishiness of the term “predicate device” vanishes; a more precise and multifaceted term is created.   A test group means tests that have the following common elements: 1) the substance measured, 2) the type of specimen, 3) the test method, 4) the test purpose, e.g., screening or monitoring, 5) the disease or condition, 6) the patient population, and 7) the place of use, e.g., OTC or clinical lab.  Yet, the role the “test group” concept plays is not analogous to that of ‘predicate devices.’”  The TA is not simply displacing one definition with another, but falling within – or outside ‒ a “test group” has different consequences than being able to cite a single device as a predicate for a 510(k), e.g., it becomes a factor in determining whether a modification to a marketed device needs prior approval.

FDA’s TA will unquestionably be controversial.  There will certainly be numerous questions about the specifics.  One provision reads: “any interested person may obtain review, in accordance with section [appeals], of an order of the Secretary approving an application.”   As written, this would suggest third parties could readily challenge an approval obtained by another company, an outcome that FDA would not want.  Another example: limiting the criterion for exemption for rare diseases to fewer than 8000 patients in the U.S. who require testing will substantially limit the utility of this provision. And another one: The TA would also confer upon FDA the power to withdraw the approval of a product if “there is a reasonable likelihood that the in vitro clinical test would cause death or serious adverse health consequences, including by causing the absence, delay, or discontinuation of appropriate medical treatment.”  This would give FDA a power that it currently lacks for 510(k)-cleared tests, as well as tests that have gotten de novo authorization.

Rewriting the laws for IVDs is a complicated business, and every word needs to be scrutinized, both for what is intended and for potential unintended consequences.  There are multiple pieces to the new jigsaw puzzle FDA has proposed.  When all the pieces are placed together, will they create a coherent image?  In its transmittal explanatory note, FDA states, “DAIA could have the unintended consequence of creating inconsistencies in the marketplace.”  FDA’s proposal also needs to be carefully vetted for its own possible unintended consequences.

But beyond the question of the specifics of the legislation, there is the most basic question of all: should the laws governing the entry on to the market of IVDs be updated.  There are good reasons to say the answer is yes.

Over time, the fit between novel IVDs and the existing regulatory framework has become increasingly uneasy.  Today’s IVDs are much more heterogeneous than when the FDC Act was enacted.  IVDs play widely divergent roles.  They are evaluated in ways differently than most other products, with the need to show analytical performance.  (The TA has multiple provisions explicitly dealing with analytical testing.) Clinical performance is judged through different kinds of metrics, such as sensitivity and specificity, positive predictive value and negative predictive value, positive and negative percent agreement.  Those concepts don’t always align neatly with the language of substantial equivalence or even de novo.  Yes, other devices have their own vocabulary and requirements, but this issue of fit is even more pronounced for IVDs as a class of products.

More pressing, the rate of change in the industry is accelerating.  With next generation sequencing and proteomics and metabolomics and artificial intelligence and deep learning and liquid based biopsies (predicted to be a $2 billion market in four years) and other new tools and methods, the ability of IVDs to be cut or tugged into the standard regulatory Procrustean bed is fraying.  The challenge of squeezing these new tests into the existing framework is made even worse by the need for these IVDs to be updated rapidly.  The plodding model of obtaining 510(k) clearance/de novo/PMA using standards that do not take into account some of the unique attributes of IVDs, assess whether a change requires a new application (note that the guidance document for when to submit a 510(k) for changes devotes many pages to IVDs), and then submitting and waiting for a decision simply will not work for some of these new products, where the clinical market needs much faster modifications and updates.  The current approach also causes its own headaches for FDA and how it does reviews and allocates resources.  The statutory provisions governing regulation and product review should be more explicitly based on risk.

The momentum for overhauling the way IVDs are regulated is growing.  Multiple stakeholders have endorsed the concept. FDA’s TA is consistent with the principle that change is necessary, albeit there are numerous differences in approach and details.  FDA was asked for its views, and it was not going to throw away its shot by limiting itself to minor technical comments.

Last week, two of my colleagues began their blog post by quoting Foreigner.  For this post, a somewhat more obscure song reference (War of the Worlds) seems appropriate.  While I would not analogize FDA’s TA to post-apocalyptic Earth after a Martian invasion, the lines “In a brave new world  . . . We’ll start all over again” seem appropriate for labs, manufacturers, and FDA.

FDA Law Blog LDT Posts

• FDA Considers Fundamental Shift in Federal Oversight of Laboratories (link) – June 20, 2010
• FDA Reopens Oversight of Laboratory-Developed Tests Comment Period; Will Accept Comments Until September 15 (link) – August 19, 2010
• FDA Plans to Regulate Laboratory Developed Tests; Many Questions Remain as to Details of Regulatory Scheme (link) – July 27, 2010
• FDA Commissioner Calls for More Active FDA Regulation of Laboratory-Developed Tests, and ACLA Promptly Responds with a Petition Opposing FDA (link) – June 5, 2013
• FDA Notifies Congress of Draft Guidance Documents Regarding LDTs (link) – Aug. 4, 2014
• TRICARE Announces Demonstration Program that Would Expand LDTs Eligible for Coverage During 3-Year Period and Possibly Beyond; Coalition Urges FDA to Create Single Framework for both Diagnostic Kits and LDTs (link) – June 27, 2014
• Senators Send Letter to OMB Requesting Release of LDT Draft Guidance (link) – July 6, 2014
• FDA Issues Draft LDT Guidance Documents; Provides 120-Day Comment Period and will Host October Public Meeting (link) – October 2, 2014
• CDRH Holds Webinar on Draft LDT Guidances – Highlights that Guidances Hold More Questions than Answers (link) – October 28, 2014
• OIR Head Alberto Gutierrez Discusses Draft LDT Framework at Federal Laboratory Advisory Committee Meeting; Provides Additional Insights on Agency Plans to Regulate LDTs (link) – November 11, 2014
• LDT Battle Lines Drawn: FDA Announces Jan. 8-9 Public Meeting on LDT Framework; Lab and Medical Groups Send Letter to FDA Commissioner Urging Notice-and-Comment Rulemaking; FDA and Patient Groups Advocate for LDT Framework on Hill (link) – November 25, 2014
• As Part of Effort to Prepare 21st Century Cures Legislative Discussion Draft, House Committee Seeks Comment on FDA Proposed Framework to Regulate LDTs (link) – December 12, 2014
• As Snow Falls, We See a Flurry of Developments Related to FDA Efforts to Actively Regulate LDTs (link) – February 22, 2015
• Diagnostic Test Working Group Proposes Alternative to FDA’s LDT Framework (link) – April 16, 2015
• Molecular Pathologist Group Proposes Legislative Solution to Modernize CLIA, Including CMS/Third-Party Premarket Review, as Substitute for FDA’s LDT Framework (link) – August 14, 2015
• Back from Break: FDA Issues Letter to Pathway Genomics for Cancer Screening LDT; Proposed Legislative Alternatives to FDA Framework Continue to Emerge (link) – September 29, 2015
• FDA Plans to Issue Final LDT Framework in 2016; Subcommittee Members, CMS and FDA Officials Critique Proposed Legislative Approach that Would Give CMS LDT Premarket Review Authority (link) – December 20, 2015
• FDA Will Not Finalize Draft LDT Guidances in 2016 – But That’s Not the End of LDT Regulation (link) – November 21, 2016
• No Final LDT Guidance, But FDA Provides Insight into What a Future Guidance Might Contain (link) – January 26, 2017
• LDTs: The Saga Continues (link) – May 14, 2017

The American Conference Institute’s (“ACI’s”) popular “FDA Boot Camp” – now in its 32nd iteration – is scheduled to take place from September 26-28, 2018, at the Omni Parker House, in Boston, Massachusetts. The conference is billed as the premier event to provide folks with a roadmap to navigate the difficult terrain of FDA regulatory law.

ACI’s FDA Boot Camp will provide you not only with the essential background in FDA regulatory law to help you in your practice, but also key sessions that show you how this regulatory knowledge can be applied to situations you encounter in real life. A distinguished cast of presenters will share their knowledge and provide critical insights on a host of topics, including:

• The organization, jurisdiction, functions, and operations of FDA
• The essentials of the approval process for drugs and biologics, including: INDs, NDAs, BLAs, OTC Approval, the PMA process and the Expedited Approval Process
• Clinical trials for drugs and biologics
• Unique Considerations in the approval of combination products, companion diagnostics, and stem cell therapies
• The role of the Hatch-Waxman Amendments in the patenting of drugs and biologics
• Labeling in the drug and biologics approval process
• Off-Label use and a New World Order
• cGMPs, adverse events monitoring, risk management and recalls

Highlights from this year’s program include an up-to-the-minute “Ripped from the Headlines” section covering recent hot issues such as the FDA Reauthorization Act, states attempts to affect drug pricing, and the potential effects of the mid-term elections on federal legislation and FDA regulations.

Hyman, Phelps & McNamara, P.C.’s Kurt R. Karst and Axinn, Veltrop & Harkrider LLP’s Suchira Ghosh will present in a session titled “Navigating the Approval Process for Drugs and Biologics.”

FDA Law Blog is a conference media partner. As such, we can offer our readers a special 10% discount. The discount code is: P10-999-FDAB18.  You can access the conference brochure and sign up for the event here.  We look forward to seeing you at the conference.

As readers of this blog know, the Agricultural Marketing Service of the USDA (AMS) is mandated to implement the 2016 National Bioengineered Food Disclosure Standard (“NBFDS” or the “Standard”). Congress set a time line for AMS to take certain actions toward implementing the Standard.  AMS, however, has had trouble staying on schedule.  Although the Agency was required to issue the final regulation and standard for disclosure statements on bioengineered (BE) foods by July 2018, in fact it issued the proposed rule barely three months before that deadline.  It is, therefore, no surprise that AMS did not meet its statutory deadline.  And it is questionable whether AMS will be able to complete the rulemaking any time soon.  According to the latest count, it received more than 14,000 comments to the proposed NBFDS rule.

Meanwhile, the Center for Food Safety (CFS) has consistently acted to keep pressure on AMS, and move the rulemaking along. In September, 2017, CFS sued AMS for failing to release in a timely manner the results of a study on possible technical challenges to obtaining BE information through electronic or digital disclosure methods mandated by NBFDS.  Shortly after CFS filed its complaint, AMS did release the study results.

On July 3, 2018, CFS again sued the government in connection with the NBFDS. This time it sued the Office of Budget Management’s (OMB’s) for its alleged failure to produce records in response to CFS’s FOIA request.  As described in the complaint, CFS submitted a FOIA request to OMB on May 3, 2018 and as of early July, a mere two months later, had not received the requested documents.

Now, a week ago, two days after the statutory deadline, CFS (together with the Center for Environmental Health) has again sued AMS. This most recent suit alleges that AMS has unreasonably delayed the BE labeling rulemaking and has failed to meet the mandatory deadline set by Congress, in violation of the Administrative Procedures Act (APA) § 702.  In their complaint, Plaintiffs take the position that AMS’s “failure to implement a national disclosure standard is withholding information from the public, a practice that is inimical to the democratic process. U.S. consumers have already waited decades for mandatory GE labeling, and further delay of the final rule has caused still more harm to the public and the stakeholders.”

Plaintiffs ask that the Court order AMS “to finalize and issue the regulations implementing the statute as soon as reasonably practicable, according to a Court-ordered timeline.” They further ask that the Court retain jurisdiction to ensure compliance with the ordered time line.

We will be monitoring further developments.

Well, we haven’t quite waited the lifetime that Foreigner did, but it’s exciting nonetheless. Only about one year after signing the provisions into law, FDA announced the approval of the first generic drug with a Competitive Generic Therapy (“CGT”) designation: ANDA 211067 for potassium chloride oral solution in 20 and 40 MEQ/15 mL strengths. Created to expedite the development and approval of generic drugs for reference products that lack significant competition, a CGT designation offers applicants benefits, like enhanced communications with FDA officials, expedited ANDA review, and potential eligibility for CGT exclusivity. A reference product that lacks significant competition is one for which there is no more than one approved ANDA for a specific reference product listed in the Orange Book.

In announcing the approval of Apotex ANDA 211067, FDA Commissioner Gottlieb touted the effectiveness of the Agency’s new Drug Competition Action Plan, explaining that the product was approved in its first cycle of review. Potassium chloride oral solution is intended for the treatment and prevention of hypokalemia (low potassium blood levels) in patients on diuretics when dietary management with potassium-rich foods is insufficient or diuretic dose reduction is not possible.

We haven’t yet seen the ANDA Approval Letter or any approval materials, and there are several Potassium Chloride products listed in the Orange Book. Only one of the Potassium Chloride products is included on the current List of Off-Patent, Off-Exclusivity Drugs, FDA’s “hit list” for generic manufacturers, published in December 2017 (another Potassium Chloride product was included on the original June 2017 list, but because an ANDA referencing the NDA has been approved since the previous list publication, it was moved to the Appendix). By deductive reasoning, the Reference Listed Drug (“RLD”) for Apotex’s ANDA is Potassium Chloride approved under NDA 206814 in December 2014. Apotex’s version is the second approved generic drug referencing NDA 206814, with another generic drug manufacturer receiving approval of ANDA 210041 without CGT status on July 19, 2018.

Apotex’s CGT-designated ANDA additionally received CGT exclusivity, which provides a “first approved applicant” for a product with “inadequate generic competition” with 180 days of exclusivity. A “first approved applicant” is defined in the statute as (1) any applicant with an ANDA approved on the first day that any ANDA for a designated CGT is approved; (2) that is not eligible for Paragraph IV 180-day exclusivity; and (3) is not a drug for which all drug versions have forfeited eligibility for 180-day exclusivity. 21 U.S.C. § 355(j)(5)(B)(v)(III)(bb). “Inadequate generic competition” is defined as a drug for which there is no more than one approved ANDA for the corresponding reference product. 21 U.S.C. § 356h(e)(2). Assuming Apotex starts commercially marketing within 75 days of approval, a subsequent generic will not be approved to market for 180 days after launch. However, this exclusivity will not preclude the marketing under ANDA 210041, which received approval prior to the Apotex even though Apotex is technically the “first approved applicant.” This is because “first approved applicant” applies only to CGT-designated applicants.

Apotex has only 75 days to start commercially marketing to block the approval of other applicants for 180 days, but nothing in the statutory language precludes FDA from approving other applicants prior to Apotex’s commercial launch (and the triggering of CGT 180-day exclusivity). The statute prohibits FDA from approving subsequent applicants only if the first approved applicant has commenced commercial marketing. And applicants approved prior to Apotex’s commercial launch wouldn’t be blocked from marketing during Apotex’s 180- day exclusivity period because the statute blocks only the approval of a subsequent applicant for 180 days after commercial launch – not the marketing. Contrast this with Paragraph IV 180-day exclusivity, which blocks the approval of a subsequent applicant after a first applicant has submitted an application containing a Paragraph IV certification thereby preserving the first applicant’s exclusivity until commercial launch or forfeiture.

Once Apotex actually starts commercially marketing, the CGT exclusivity will block the approval of all applications for the RLD. This too differs from 180-day exclusivity for Paragraph IV filers, which blocks approval of only ANDAs containing Paragraph IV certifications.

Apotex has significant incentive to start commercial marketing as soon as possible, but it will be interesting to see how all of these potential scenarios play out if Apotex delays.

We talked to our friend, Terri Stewart of Abraxeolus Consulting (and former VP of Global Regulatory Policy, Intelligence & Compliance at Teva Pharmaceuticals) about how the CGT program came about. Terri is credited with developing the CGT pathway (and therefore, we’ll say she’s the Mother of the CGT Program). Here’s what Terri had to say:

In 2015, Congress began paying very close attention to rising prices of several older medicines. After oversight hearings to examine the steep price increases of medicines such as Daraprim, Epipen, Nitropress, and Isuprel, they passed legislation that would impose an additional rebate or consumer price index (CPI) penalty on generic medicines that increase their prices beyond the rate of inflation. However, this did little to solve the underlying problem, due in large part to the fact that these medicines, while on the market for decades, were brand drugs. Generic manufactures had either not targeted or not successfully gotten approval for these medicines, the step the health system relies upon to decrease prices. When the FDARA legislation presented an opportunity to once again address the issue and create a way to insert competition into the market it was the Schrader and Bilirakis offices that sought the advice of the pharmaceutical industry to find a new policy. I worked closely with their staff to develop what is today the Competitive Generic Therapy exclusivity, an incentive not for the filing of an ANDA for one of these older medicines but a benefit that is bestowed upon approval. Since passage of the legislation, I have discussed with many in the industry the impact that this has had on product selection and in may ways the return for these medicines of the promise of generic drugs – to insert competition into the market.  We often take for granted the impact that generics have for patients until we see these instances where they are not present within the life cycle of a medicine. With today’s first approval under the new pathway, I am hopeful that our efforts to solve one of the key drug pricing issues of today will continue to be successful.

Thanks Terri! We look forward to seeing additional CGT approvals and what new and interesting 180-day exclusivity issues might arise.

Last month, FDA announced the creation of a new Drug Shortage Task Force, intended to address continuing shortages of medically necessary drug products. The Task Force expands FDA’s existing group focused on drug shortages and, according to Commissioner Scott Gottlieb, will “delve more deeply into the reasons why some shortages remain a persistent challenge.” Indeed, drug shortages have been a critical issue for years, yet some shortages linger despite FDA’s regulatory focus and the serious impacts on healthcare.  It is unclear whether the new Drug Shortage Task Force will uncover any new causes of shortages, as these have been the subject of considerable investigation and scholarship already – a more important goal is the Task Force’s aim of seeking new solutions to address those causes.

The Agency’s recent announcement came on the heels of its Annual Drug Shortages Report to Congress, which reported 39 new drug shortages in 2017. It also responds to a June 15, 2018 letter from a bipartisan group of U.S. Senators requesting FDA to:

[D]evelop a report and recommendations to Congress regarding the root causes of drug shortages and the authorities FDA and other agencies need to address these causes and ensure that appropriate supplies of essential medications are always available.

In comments discussing the creation of the Drug Shortage Task Force, Commissioner Gottlieb implied that new strategies may be in the works relating to federal reimbursement policies, which would attempt to address the economics that often contribute to or perpetuate drug shortages. Namely, Commissioner Gottlieb said that FDA, the Center for Medicare and Medicaid Services, and the Department of Veteran’s Affairs, would be investigating how they could adjust reimbursement policies to increase investment in manufacturing for certain drugs prone to shortage.

Even before its recent announcements on the establishment of the Drug Shortage Task Force, FDA had renewed its focus on manufacturing quality metrics programs, announcing a Quality Metrics Feedback Program after a lengthy hiatus. One of the primary goals of quality metrics programs is to predict and prevent supply disruptions that can cause drug shortages.  However, as we noted earlier this year, the Agency’s most recent guidance on such programs seemed to take a step back from the goal of requiring drug manufacturers to establish a quality metrics program.  The Feedback Program seeks information from applicants and manufacturers who have voluntarily implemented quality metrics programs.  Industry initially objected to a mandatory quality metrics requirement as overly burdensome, at least as proposed by the Agency in 2015, and the Agency’s current statutory authority to implement such a requirement is ambiguous. The Senators’ recent bipartisan request, specifically seeking information on “authorities FDA and other federal agencies need” may encourage FDA to seek a legislative fix to the latter problem, at least.

Of course, FDA cannot prevent or resolve every problem that leads to a critical drug shortage – at least not within its current statutory authority. CDER Deputy Director for Regulatory Affairs, Dr. Douglas Throckmorton, made that clear in his recent detailed description of three ongoing drug shortages. We would welcome the thoughts of our readers as to the feasibility of FDA’s current ideas to combat critical drug shortages, and any new strategies to address shortages that have not been discussed here.

As readers of this blog may recall, last year, FDA issued a draft guidance describing how FDA would prioritize enforcement and regulatory actions regarding homeopathic drug products marketed in the United States. This new guidance document, once finalized, would replace the compliance policy guide, CPG 400.400, which had been in use for approximately three decades.

FDA’s new draft guidance was not well-received by the homeopathic community. Comments submitted show a concern about the loss of the CPG 400.400 which provided clear guidance about the manufacturing and marketing of homeopathic drug products. In contrast, the new guidance was considered vague and created uncertainty.

Concerned that the new guidance would reduce the access to homeopathic products, Americans for Homeopathy Choice submitted a Petition to FDA requesting that FDA convert the existing CPG to regulations and establish an advisory committee.

Americans for Homeopathy Choice is a non-profit advocacy organization that “exist[s] to ensure consumer access to homeopathic medicines that meet the standards for strength, quality, and purity set forth in the Homeopathic Pharmacopoeia of the United States.”  The organization previously met with FDA and submitted detailed comments to the draft guidance. Their Petition is the organization’s response to FDA’s invitation for alternatives to its approach in the draft guidance.

The three main requests by the organization are 1.) Withdrawal of the 2017 draft guidance; 2.) the establishment of an advisory committee consisting of licensed or certified homeopathic practitioners and academicians and consumers of homeopathic medicines; and 3.) The establishment of regulations for homeopathic products by converting a slightly modified CPG. In the interim, the current version of the CPG would continue to be the guiding document.

Comments may be submitted through Jan. 28, 2019.

On June 26, FDA announced a public meeting to discuss the implementation of the Nutrition Innovation Strategy (NIS), a broad initiative intended to promote public health through efforts to empower consumers to make better and more informed decisions about their diets and health, foster the development of healthier food options, and expand the opportunities to use nutrition to reduce morbidity and mortality due to chronic disease. The public meeting took place on July 26.  Agenda items included updating standards of identity (SOIs), ingredient statements (naming of ingredients) and consumer education.

FDA Commissioner Scott Gottlieb’s opening remarks focused on standards of identity and were consistent with his written statement released immediately after the remarks. Dr. Gottlieb repeated and elaborated on his concerns regarding plant-based products using dairy related terms.

During the remaining presentations, discussions, and comments, SOIs were by far the most frequently mentioned topic. Besides the issue of using defined terms from SOI regulations in naming of products that do not meet the SOI, discussions addressed a need for a revision of SOIs to allow innovation of healthier options (e.g., some standards do not allow salt replacement by salt substitutes); questions as to the purpose of SOIs (is it related to nutrition or to assure authenticity of the food, or both); and consumer understanding, including how on-line purchasing will affect the need for, and understanding of, SOIs.  A recurrent suggestion was for FDA to consider amendments that applied to all SOIs (horizontal regulations) instead of reviewing and revising the more than 300 SOI regulations one by one.

Comments related to ingredient statements were limited and included vitamin naming (last year, DSM petitioned FDA to permit declaration of vitamins by letter and number rather than by chemical name), and use of all caps (which presumably makes the ingredient statement difficult to read).

The breakout sessions titled Claims and Statements Used on Food Labels / Icon for “Healthy” highlighted the need for a reconsideration of the “healthy” claim, as well as the wide diversity of opinion on what constitutes “healthy” and how the term should be defined. Concerns about the icon related to competition with other icons and potential overconsumption of foods carrying the icon.  Several individuals expressed a need to do consumer research as well as consumer education.

Discussions regarding claims generally suggested that FDA needs to consider moving away from a focus on nutrients to a focus on food groups and positive claims because consumers foods rather than nutrients as such.

Opinions on consumer education also greatly varied as to how FDA can promote healthy eating in general. Again, there appeared to be support for a focus on food groups rather than on nutrients. The role of influencers via social media was also brought up.

The 40 plus public comments included comments encouraging FDA to enforce the SOIs for milk and other dairy products, comments opposing the strict interpretation of dairy and other terms, and comments about medical foods.

During the wrap-up, FDA mentioned that it will try to summarize the breakout sessions’ discussions and will place the summary in the docket. Meanwhile, the Agency encouraged submission of comments and suggestions to the docket. The deadline for submissions is Aug. 27, 2018.

With one paragraph in a Summary Judgment Order issued last week, the Northern District of California further expanded the patent safe harbor under 37 U.S.C. § 271(e)(1). Though not a huge leap from previous safe harbor decisions, the Order in Nevro Corp. v. Boston Scientific Corp. held that use of a patented invention in clinical trials falls within the safe harbor provision “even after the patients have completed their participation in the trial.”  Docket No. 16-cv-06830 (N.D. Cal. July 2018).

In this case, Nevro sued Boston Scientific alleging infringement of its patents relating to Nevro’s Senza and HF10 spinal cord stimulation systems.  The Senza is a spinal cord stimulator using high-frequency pulses rather than low-frequency, approved for marketing by FDA in May 2015 with labeling stating that the device is superior to conventional spinal cord stimulators using low-frequency therapy.  Boston Scientific manufactures a competing spinal cord stimulator, the Spectra WaveWriter, as well as the Precise with Multiwave system.  Nevro sued Boston Scientific for patent infringement in 2016 asserting that Boston Scientific infringed its patents covering methods for delivering spinal cord stimulation therapy at frequencies between 1.5 kHz and 100 kHz in its use of high-frequency therapy with Boston Scientific’s spinal cord stimulation devices.  Both parties filed cross-motions for summary judgement with respect to these patents.

Because Boston Scientific used high-frequency spinal cord systems only in a clinical trial, the Court determined that its use of Nevro’s patented technology was protected by the patent safe harbor codified in 35 U.S.C. § 271(e). The safe harbor protects the use of patented technology in the development and approval of a drug:

It shall not be an act of infringement to make, use, offer to sell, or sell within the United States or import into the United States a patented invention . . . solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs or veterinary biological products.

In Eli Lilly & Co. v. Medtronic, Inc., 496 U.S. 661 (1990), the Supreme Court read the safe harbor to include all inventions rather than only drug-related inventions because the safe harbor must be read in conjunction with the patent term restoration provisions in 35 U.S.C. § 156.  In time, the standard for the applicability of the safe harbor extended to any use of the patented technology as long as it is “reasonably related” to FDA approval. Abtox v. Exitron Corp., 122 F.3d 1019, 1029 (Fed. Cir. 1997).

Use of information obtained under the exemption – even if not related to regulatory approval – is also protected under the safe harbor as long as the initial use is related to regulatory approval. See Telectronics Pacing Sys. v. Ventritex, Inc., 982 F.2d 1520, 1523-24 (Fed. Cir. 1992).  In 2012, the Federal Circuit explained that the safe harbor will still protect use even if a non-infringing alternative exists.  Momenta Pharms., Inc. v. Amphastar Pharms., Inc., 686 F.3d 1348 (Fed. Cir. Aug. 3, 2012), the Federal Circuit explained that the safe harbor will still apply even if a non-infringing alternative exists.

Building from this safe harbor framework, Nevro v. Boston Scientific explained that use of the patented invention in a clinical trial is clearly reasonably related to the development and submission of information to FDA for device approval.  Continued use of the invention after the clinical trial ends is necessarily included in the safe harbor because FDA “specifically approved a trial plan” that allowed patients to continue using the treatment protected by the safe harbor even after the relevant data for FDA submission was obtained and the trial concluded.  Further, international standards for medical research require trial sponsors to allow participants to access the studied treatment even after the trial’s conclusion.

The Court here marginally extends the safe harbor to include the continued use of a patented invention even after the trial has ended and no further data will be submitted to FDA since it is still “reasonably related” to an FDA submission. This makes sense: the safe harbor is clearly intended to protect research and encourage innovation; denying clinical trials protection from a safe harbor is therefore nonsensical.  While continued use after the clinical trial may seem like more of a reach, denying such protection would preclude the continued treatment of the studied population – a consequence that would inherently deter other patients from participating in clinical trials down the line.  Given the congressional intent to encourage innovation and the safe harbor cases preceding Nevro v. Boston Scientific, this result is only logical.

Earlier this month, FDA published a Notice of Availability for its Draft Guidance entitled, Field Alert Report Submission, Questions and Answers. We have previously blogged about Field Alert Reporting (FAR) requirements here and here.

The draft guidance makes recommendations to NDA and ANDA holders regarding the submission of information to FDA during a FAR. The FAR is described in the guidance as part of “…an early warning system to protect patient health.”

What follows are a few potentially useful nuggets of information from the draft guidance:

• To determine whether a chemical, physical, or other change or deterioration in the distributed drug product is “significant” as per the regulatory requirements, the applicant should evaluate the potential impact of the change or deterioration on the drug product’s identity, strength, purity, stability, and efficacy, and how that change or deterioration could impact an individual using the product.
• Information about “packaging or components” used in the manufacture of the distributed drug product that meet the criteria outlined in the FAR regulation (i.e., not just the drug product itself or its labeling) necessitate the submission of a FAR.
• Although the submission of a follow-up FAR and a final FAR are recommended, they are not required. Only the initial FAR is required. The information in the follow-up and final FAR is used by FDA to assess the risk to public health and the adequacy of the firm’s response.
• Aseptic process simulation failures for a distributed drug product require a FAR when the failure indicates a potential problem related to sterility assurance that requires an investigation, including an assessment on the impact of distributed drug product that has been produced since the last successful media fill.
• Even if the root cause of a problem related to a distributed drug product is identified and corrected within three working days, the applicant must still submit a FAR if the problem had originally met the criteria under 21 CFR 314.81(b)(1).
• The undertaking of a recall does not absolve the applicant of the responsibility to perform a FAR, if the issue with the drug product which led to the recall meets the criteria for a FAR under 21 CFR 314.81(b)(1).
• FARs associated with multiple NDAs/ANDAs need to be submitted on separate Forms (Form FDA 3331a), one for each NDA/ANDA.
• Ultimate responsibility for submitting the FAR rests with the NDA/ANDA holder, even if certain steps in the manufacturing, holding, packaging, labeling or distribution of the drug product in question are contracted out to other parties.
• Failing to submit a required FAR within the three working day timeframe is not only a violation of 21 CFR 314.81(b)(1), but also a violation of section 505(k) of the Federal Food, Drug and Cosmetic Act (FDCA) as well as section 301(e) FDCA.

We will keep you posted on any interesting comments posted to the docket for this draft guidance, as well as the publication of any revised or final guidance documents by the agency.

Monday was a big day for those monitoring whether and when FDA will add certain previously nominated bulk substances to its various “Bulks Lists” for Section 503A pharmacies and Section 503B outsourcing facilities. As previously blogged about here, back on March 23, 2018, FDA announced it was “revisiting” the Section 503B Bulks List nomination process, discussing clinical need and “medical justification” for those substances, in particular those that include components of approved drugs.  FDA provided a 60-day comment period on its new process as well.  Notwithstanding the conclusion of the comment period, and no FDA action yet on the nomination process itself, FDA announced yesterday that it was revising the 503A and 503B lists to add substances to the lists, move substances among the lists, and remove others from the lists altogether.  While we roundly applaud FDA’s long-awaited efforts to act on nominations for bulk substances that were the subject of submissions and in the “queue” for review for a year or more (as this surely enables greater patient access to certain substances),  we remain confused as to why FDA has not made a final determination concerning exactly what its nomination and review process will be for Section 503B Bulks prior to taking this next step (especially considering the draft guidance the Agency just issued in March 2018, and given that the industry comment period just ended).

Bulks List Changes

FDA’s revised interim Bulks Lists for Section 503A and Section 503B are here and here.  FDA summarizes the July 2018 changes on the final pages of those lists – definite reads for any compounder.

PCAC Meeting 

FDA also announced that will hold a meeting of its Pharmacy Compounding Advisory Committee on September 12, 2018, and address six substances that were nominated for use in compounding by 503A facilities: alpha lipoic acid, coenzyme Q10, creatine monohydrate, pyridoxal 5 phosphate, choline chloride and quercetin dihydrate.

Collaboration Efforts with Two Universities

The Agency also announced two new research collaborations (with University of Maryland and Johns Hopkins University) to support development of the Bulks List for Section 503B, and to “help inform public understanding of the use of bulk drug substances in compounding.” The press release can be viewed here. These institutions are two of FDA’s Center of Excellence in Regulatory Science and Innovation (CERSI) partners.  Specifically, FDA stated:

• The University of Maryland will be working closely with medical specialty groups and researching information about the use of drug products including certain bulk drug substances historically and in current clinical practice.
• The Johns Hopkins University will systematically study available safety and effectiveness information on certain bulk drug substances for use in compounding drug products for patients with autism spectrum disorder.

Cesium Chloride Risk Alert and Move to List 2

FDA also addressed in its press release a “compounding risk alert” that it issued for cesium chloride and its response to a citizen petition filed by Public Citizen. FDA issued the compounding risk alert to warn health care providers, compounders and patients of certain dangers compounding using the bulk substance cesium chloride. FDA noted that cesium chloride is sometimes used by cancer patients notwithstanding a lack of evidence of its safety and efficacy for that or any use. The Agency also cited serious adverse events associated with use of the substances and other cesium salts that include abnormal heart rhythms (arrhythmias), low potassium (hypokalemia), seizures, fainting (syncope), cardiac arrest and death.  Relatedly, FDA stated that it  intends to move cesium chloride to category 2 under the FDA’s interim policy on compounding with bulk drug substances under Section 503A because  it raises “significant safety risks in compounding.” If the Agency encounters a compounder using a substance in category 2, it “intends to take action, such as issu[ing] a warning letter or. . .seiz[ing]. . . product.”

Lastly, FDA noted that it responded to a citizen petition filed by Public Citizen related to cesium chloride, and that it granted the petition in part, but it did not mention that it responded after Public Citizen filed a lawsuit against FDA for failing to take action on that petition since 2016 and after FDA found that the substance presented “serious safety concerns.” Public Citizen’s press releases are here and here.

Just like last year when it held a public hearing and rolled out the Generic Drug Action Plan, FDA is following its recent announcement of the Biosimilar Action Plan with a Public Hearing on competition in the biologics market entitled Facilitating Competition and Innovation in the Biological Products Marketplace.  This hearing seeks input from the public on how FDA can enhance efforts to increase access to the innovative treatment options in the biological products marketplace.  The Public Hearing will be held at FDA on September 4, 2018 from 9 a.m. to 5 p.m. and will involve presentations from public stakeholders rather than Agency officials or invitees.

FDA is looking for information and comments from a broad group of stakeholders (i.e. patients, researchers, healthcare providers, manufacturers, professional organizations, and the public) on how the Agency can best facilitate greater availability of biosimilar and interchangeable products while balancing competition and innovation. FDA is particularly looking for input on Agency goals enumerated in the Biosimilar Access Plan (explained here): facilitating efficient development of biosimilar and interchangeable products; developing information resources and tools to streamline development; enhancing efficiency of FDA review of biosimilar and interchangeable products; providing additional clarity about FDA’s regulation of biological products; increasing stakeholder understanding of biological products; and addressing attempts to “game” FDA requirements or otherwise delay market entry of competing biological products.

FDA also raises several questions about additional steps with respect to the regulation of biological products. These questions are on topics of interest to stakeholders of all types, such as biosimilar access to markets, use of the Purple Book, ensuring marketplace confidence, costs of studies required for approval, non-U.S.-licensed comparators, and product lifecycle incentives.

Not surprisingly given the subject matter, FDA’s questions seek to balance incentives for innovation with access to biosimilar and interchangeable products. FDA specifically asks what it can do to ensure an appropriate balance with respect to multiple licensed conditions of use.  Presumably, this is to address the concerns that have been raised by innovators for years about the fairness of carve-outs.

Interestingly, FDA raises questions about the potential application of “umbrella exclusivity” under the exclusivity provisions for reference products section 351(k)(7) of the Public Health Service Act. Previously addressed in the 1989 Proposed Rule implementing ANDA regulations, umbrella exclusivity attaches to all versions of the active moiety or innovative change entitled to such exclusivity rather than only the specific drug product that received approval. Approval of a new dosage form or other types of changes does not destroy exclusivity.  FDA ultimately decided to adopt this interpretation of exclusivity under the Hatch Waxman Amendments and is now considering whether it would help shield certain biologics that are not otherwise eligible for exclusivity under section 351(k)(7)(c).  FDA is hoping to hear arguments in favor and against umbrella exclusivity with a robust discussion of its impact on innovation and market entry.

The Public Hearing will be held at FDA’s White Oak location. Those interested in attending or presenting at the hearing should register by sending an email to OMPTfeedback@fda.hhs.gov by August 14, 2018. Requests for participation in the open public hearing will be accepted until 9 a.m. on Tuesday, September 4, 2018.

On July 10, 2018, the Court of Federal Claims found the Department of Veterans Affairs’ (“VA’s”) interpretation of the Trade Agreements clause to be arbitrary and capricious in Acetris Health, LLC v. United States, No. 18-433C (Fed. Cl. July 10, 2018) (the “Decision”). This action arose out of the VA’s rejection of an offer by Acetris Health (“Acetris”) in response to a solicitation to supply Entecavir Tablets to the VA and the Department of Defense. Acetris sued the United States seeking declaratory and injunctive relief. The Decision came on cross-motions on the administrative record.  (The government moved to dismiss Acetris’ bid protest for lack of standing. The Court disagreed, finding that Acetris did have standing to pursue its claims. Id. at 2-3.)

Before getting to the specifics of this case, we note that it is one of two actions filed by Acetris regarding these issues. The second action was brought by Acetris in the Court of International Trade (No. 1:18-cv-00040-RWG) and seeks a reversal of administrative rulings made by Customs and Border Patrol (“CBP”).  Notice of Issuance of Final Determinations Concerning Certain Pharmaceutical Products, 83 Fed. Reg. 5118-39 (Jul. 7, 2017).  Acetris had submitted requests for rulings from CBP on the country of origin of a number of products, including Entecavir Tablets. In those rulings, CBP determined that the country of origin of each of the products was the country of origin of its active pharmaceutical ingredient (“API”), finding that the manufacturing processes to put the products into final dosage form, which occurred in the United States, did not constitute substantial transformation of the API. This second action is ongoing.  (The government recently answered the complaint. Dispositive motions, if any, are due by July 17, 2019, and a trial, if necessary, is currently scheduled to begin October 17, 2019.)

Legal Background

We thought it would be useful to provide background on the various statutes and definitions at issue in this case.

The Buy American Act (“BAA”) generally restricts the goods that can be acquired by the federal government to “manufactured articles, materials, and supplies that have been manufactured in the United States substantially all from articles materials, or supplies mined, produced, or manufactured in the United States.” 41 U.S.C. § 8302(a). The Federal Acquisition Regulation (“FAR”), which implements this and other statutory provisions, uses the term “domestic end products” to describe the products that can be procured in accordance with the BAA, though that term is not used in the statute. See FAR 25.001(a)(1). A domestic end product is defined as “[a]n end product manufactured in the United Sates if–(i) [t]he cost of its components mined, produced, or manufactured in the United States exceeds 50 percent of the cost of all its components . . . or (ii) [t]he end product is a [commercially available off-the-shelf (“COTS”)] item.” Id. 25.003. A COTS item is a commercial item (which is an item of a type that is customarily used by the general public and has been offered for sale to the general public) that has been sold in substantial quantities in the commercial marketplace and offered to the government under a contract in the same form in which it is sold in the commercial marketplace. See id. 2.101. Most pharmaceutical products would likely be considered COTS items.

The Trade Agreements Act (“TAA”) allows the federal government to waive the BAA restrictions so that eligible products of designated countries would be treated as favorably as United States products. See 19 U.S.C. § 2511(a); see also FAR 25.402(a)(1). The federal government has exercised its TAA authority and waived the BAA restrictions for acquisitions meeting an acquisition value threshold and covered by trade agreements such as the World Trade Organization Government Procurement Agreement (“WTO GPA”) and Free Trade Agreements (“FTAs”). See FAR 25.402(a)(1), (b). For an acquisition covered by the WTO GPA, federal government purchases are restricted to “U.S.-made or designated country end products” unless there are no offers received for such products or the offers received are insufficient. Id. 25.403(c)(1). A “U.S.-made end product is “an article that is mined, produced, or manufactured in the United States or that is substantially transformed in the United States into a new and different article of commerce with a name, character, or use distinct from the article or articles from which it was transformed.” Id. 25.003. A “designated country end product” is an end product from the groups of countries subject to the identified trade agreements. See id.

For this case, the key term is “U.S.-made end product.” According to the Court, based on various provisions of the FAR, “domestic end products” are a subset of “U.S.-made end products.” In other words, a U.S.-made end product can be either a “domestic” end product or a “non-domestic” end product. Reading the definition of a U.S.-made end product and a domestic end product together, the Court finds that a “non-domestic” end product is a product that is substantially transformed in the United States. See Decision at 2-3.

Factual Background

According to the Decision, on March 28, 2018, Acetris submitted an offer to the VA in response to a solicitation for bids for a national contract for Entecavir Tablets. The solicitation incorporated by reference the Trade Agreements clause found at FAR 52.225-5 and included a Trade Agreements Certificate. The Trade Agreements clause contained the VA’s determination that the WTO GPA and FTAs applied to the acquisition and that “only U.S.-made or designated country end products” could be supplied under the contract.” FAR 52.225-5(b). Consistent with the Trade Agreements clause, the Trade Agreements Certificate required an offeror to certify that “each end product . . . is a U.S.-made or designated country end product” as defined in the Trade Agreements clause. The VA also directed offerors to make an additional certification not required by the Trade Agreements clause, that is, “whether or not the end product offered in response to this solicitation is [TAA] compliant.” The solicitation also required offerors to identify the country of origin for the end product and the API.

The Acetris bid was ultimately rejected by the VA. According to the Decision, “the VA informed [Acetris] that it had rejected [Acetris’] proposal ‘because the manufacturing location’ of [Acetris’] Entecavir Tablets–India–‘is not a [TAA] designated country.’” Decision at 10 (citation omitted). In documentation prepared by the VA that described its source selection decision, the VA relied on the CBP decision finding the country of origin of Entecavir Tablets to be India as there was no substantial transformation in the U.S. or a TAA designated country. Id. at 10-11.

Decision

The legal standard in a bid protest case provides that “a reviewing court shall set aside the agency action if it is ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.’” Id. at 19 (citations omitted).

Acetris asserted that the VA improperly: “(1) construed and applied the solicitation’s Trade Agreements clause, (2) included a provision in the solicitation that was contrary to the Trade Agreements clause, and (3) relied on the CBP’s country-of-origin determination rather than independently construing and applying the solicitation’s Trade Agreements clause.” Id. at 20.

On the first claim, the Court agreed with Acetris’ argument that the Trade Agreements clause allows the VA to purchase U.S.-made or designated country end products and that all domestic end products qualify as U.S.-made end products. The Court found that the record made it clear that the VA did not consider the term “U.S.-made end product” to include domestic end products, which caused the VA to misconstrue the Trade Agreements clause to give priority to TAA-compliant products as assessed by the TAA rule of origin test over what it viewed as non-TAA-compliant drugs, based on its flawed interpretation. See id. at 23. The VA’s failure to properly construe the Trade Agreements clause was arbitrary, capricious, and contrary to law.

On the second claim, the Court agreed with Acetris that it was arbitrary and capricious for the VA to require manufacturers to certify that the offered products were Trade Agreements Act compliant. Id. at 23-24. However, the Court found that the VA was entitled to direct offerors to identify the country of origin of the product as it “is relevant (even if not sufficient) to determining whether the Entecavir Tablets qualified as U.S.-made end products of a domestic nature (manufactured in the United States), U.S.-made end products of a nondomestic nature (substantially transformed in the United States), or designated country end products.” Id. at 24.

On the third claim, the Court agreed with Acetris that the VA should have made its own determination regarding whether the offer complied with the Trade Agreements clause rather than relying on the CBP’s prior ruling. In coming to this decision, the Court stated that “it is apparent that CBP is empowered to determine whether a product is ‘wholly’ manufactured in a foreign country in accordance with the [TAA’s] rule of origin, but is not empowered to determine the threshold question of whether an offered product is a U.S.-made end product (particularly, whether an offered product is a domestic end product) pursuant to the Trade Agreements clause.” Id. at 25-26.

The Court granted most of the relief requested by Acetris. The Court declared the following:

• The term ‘U.S.-made end product,’ as used in the Trade Agreements clause, includes ‘domestic end products,’ as that term is defined in the FAR.
• The VA’s failure to construe the term ‘U.S.-made end product,’ as used in the Trade Agreements clause, to include ‘domestic end products,’ as that term is defined in the FAR, was arbitrary, capricious, and contrary to law.
• It was arbitrary and capricious for the VA to require manufacturers to certify that the offered products were ‘[Trade Agreements Act] compliant.’
• The VA’s failure to independently assess whether plaintiff’s Entecavir Tablets qualified as U.S.-made end products under the Trade Agreements clause was arbitrary, capricious, and contrary to law.

In addition, the Court enjoined the VA in future procurements from:

• construing the term ‘U.S.-made end product’ in the Trade Agreements clause as excluding products manufactured in the United States (in other words, domestic end products), and
• relying on CBP rather than independently ascertaining whether an offered product is manufactured in the United States (in other words, a domestic end product) pursuant to the definition of the term ‘U.S.-made end product.’

Id. at 31.

Any appeal of the decision would be made to the Federal Circuit and would need to occur within 60 days from the date of the decision – i.e., by September 9, 2018.

Follow-Up

There appear to be at least a couple of questions that remain unanswered by this Decision.

First, the Court did not weigh in on how the VA should interpret the term “manufactured in the United States” that is present in the definition of a domestic end product. If the VA were to interpret this term similarly to substantial transformation, Acetris may be back in the same place it was before. However, if a broader definition is used, then the Acetris Entecavir Tablets could be considered to be a U.S.-made end product that could be considered for award regardless of the country of origin of products in competing offers. Acetris argued that the Court should declare that the term “manufactured in the United States” should have the same meaning as that in the definition of “place of manufacture” in the clause implementing the BAA, that is “the place where an end product is assembled out of components, or otherwise made or processed from raw material into the finished product that is to be provided to the Government.” FAR 52.225-18. If this definition were to be used, a pharmaceutical put into final dosage form in the United States would be considered a domestic product and therefore a U.S.-made end product, even if the API were manufactured in a non-designated country. However, the Court did not address Acetris’ proposed definition or otherwise address the proper interpretation of “manufacturer in the U.S.,” leaving it to the VA to do so.

Second, the issue of the interpretation of substantial transformation that has been advanced by the CBP for pharmaceutical products was not addressed by the Court because it was not raised by Acetris in this case. (It is the subject of Acetris’ case that is pending before the Court of International Trade.) Interestingly, although the TAA was intended to permit consideration of offers of designated country end products in a non-discriminatory manner compared to U.S.-made end products, this Decision coupled with the current CBP interpretation of substantial transformation would result in differential treatment of a product with API from India that is put into final dosage form in the United States compared to a product with API from India that is put into final dosage form in a WTO GPA country such as France. The former would be considered a U.S.-made end product as a result of being a domestic product, while the latter would not be considered a designated country end product because of the lack of substantial transformation in a designated country.

We will continue to follow these two cases and provide updates as we have them.