As we celebrate the 35th Anniversary of the Orphan Drug Act (see our 30th anniversary post here), periodic consideration of opportunities to reform and refine the approach to rare disease medical product regulation is warranted – similar to the review that occurred 10 years ago, which resulted in the establishment of the CDER Rare Diseases Program and first FDA public hearing on orphan drugs in June 2010.

In that spirit, Hyman, Phelps & McNamara, P.C.’s Frank Sasinowski (who serves as Vice Chair of the EveryLife Foundation Board of Directors) and James Valentine co-authored a proposal for building an FDA Rare Disease Center of Excellence (COE). The proposal will serve as a discussion document for the upcoming EveryLife Foundation 10th Annual Scientific Workshop. The proposal comes on the heals of the 21st Century Cures Act which provides FDA authority to establish COEs, as well as recent successes with the first COE in oncology.

The onus for this proposal, as well as the Scientific Workshop, is that because of the Orphan Drug Act, which provides incentives to make developing drugs for small numbers of patients financially viable, there has been increased investment in the research and development of medical products (drugs, biologics, and medical devices) to prevent and treat rare diseases, also known as orphan conditions. However, this influx has created unique regulatory challenges for FDA in providing regulatory oversight and in conducting review of marketing applications given that the development of products for these conditions present many unique challenges. There is no separate, lower or lesser legal or regulatory standard for approval of orphan products, so researchers and product developers and FDA alike must confront these issues throughout all phases of development and employ creative approaches to product development and review must be employed.

Given the unique challenges and, therefore, the unique expertise needed to advance the development and review of products for rare diseases, a Rare Disease COE would provide the necessary infrastructure to allow centers and offices across FDA to consistently and efficiently review novel products for these conditions. The proposed Rare Disease COE would involve a combination of three overarching organizational changes at FDA:

1. Establishment of a COE organizational unit within the Office of Medical Products and Tobacco with cross-Center responsibilities
2. Establishment of a Deputy Director for Rare Diseases within each review office/division across CDER, CBER, and CDRH
3. Establishment of a Rare Disease Advisory Committee

For more information on the details on the structure, function, and regulatory responsibilities of this Rare Disease COE, you can view the proposal here.

The EveryLife Foundation’s Scientific Workshop, which takes place this Thursday, September 13^th from 8:30 am until 4:00 pm has a robust agenda that brings together regulators, patient advocates, academia, industry, and other stakeholders to discuss both progress and continued challenges in the development and review of medical products for rare diseases. The day will culminate with a presentation by Mr. Sasinowski on this proposal for a Rare Disease COE, which will be followed by a panel discussion consisting of:

• Rich Moscicki, MD, Executive Vice President, PhRMA
• Paul Melmeyer, Director of Federal Policy, NORD
• Lucas Kempf, MD, Associate Director Rare Diseases Program, FDA
• Celia Witten, MD, PhD, Deputy Director, FDA CBER
• Alan Beggs, PhD, Director, The Manton Center for Orphan Disease Research

The workshop agenda can be found here, and you can register for the webcast is available here.

We hope this proposal and the workshop will initiate a dialogue about such possibilities to jumpstart brainstorming that may result in increased visibility for rare disease therapies and other related developments (e.g., a practical way to enhance and augment the prominence of surrogates and Accelerated Approval).

Back in June 2017, we introduced folks to a system we dubbed “ANDA Arbitrage.”  It’s an effort undertaken by a company called ANDA Repository, LLC to help companies potentially decrease annual user fee liability under the second iteration of the Generic Drug User Fee Amendments (“GDUFA II”).  Since then, we’ve hear the words “genius” and “entrepreneurial” used to describe the service.

As we quickly approach the October 1, 2018 deadline when the state of ANDAs solidifies and fee payments are due, we thought it would be a good time to remind some ANDA owners who have a small number of approved ANDAs, or who are just over the application count threshold for paying a higher ANDA Holder Program Fee, that there’s another option out there to consider.

GDUFA II significantly changed the user fee system and structure that had been in place under GDUFA I. Among other fees under GDUFA II, there’s the ANDA Holder Program Fee.  That fee is set up as follows: a firm and its affiliates pays one program fee each fiscal year commensurate with the number of approved ANDAs (both active and discontinued ANDAs) that the firm and its affiliates collectively own (see here).

The program fee to be paid each year depends on the number of ANDAs owned. Firms do not pay a per-ANDA fee.  Instead, the program fee is split into three tiers that represent different positions held by the firms and their affiliates within the market (i.e., small, medium, and large).  Specifically, FDC Act § 744B(b)(2)(E) states that:

if a person has affiliates, a single program fee shall be assessed with respect to that person, including its affiliates, and may be paid by that person or any one of its affiliates. The Secretary shall determine the fees as follows:

(I) If a person (including its affiliates) owns at least one but not more than 5 approved [ANDAs] on the due date for the fee under this subsection, the person (including its affiliates) shall be assessed a small business generic drug applicant program fee equal to one-tenth of the large size operation generic drug applicant program fee.

(II) If a person (including its affiliates) owns at least 6 but not more than 19 approved [ANDAs] on the due date for the fee under this subsection, the person (including its affiliates) shall be assessed a medium size operation generic drug applicant program fee equal to two-fifths of the large size operation generic drug applicant program fee.

(III) If a person (including its affiliates) owns 20 or more approved [ANDAs] on the due date for the fee under this subsection, the person (including its affiliates) shall be assessed a large size operation generic drug applicant program fee.

The statute (at FDC Act 744B(g)(5)) also includes certain penalties for failure to pay the ANDA Holder Program Fee:

(A) IN GENERAL.—A person who fails to pay a [ANDA Holder Program Fee] by the date that is 20 calendar days after the due date . . . shall be subject to the following:

(i) The Secretary shall place the person on a publicly available arrears list.

(ii) Any [ANDA] submitted by the generic drug applicant or an affiliate of such applicant shall not be received, within the meaning of section 505(j)(5)(A).

(iii) All drugs marketed pursuant to any [ANDA] held by such applicant or an affiliate of such applicant shall be deemed misbranded under section 502(aa).

(B) APPLICATION OF PENALTIES.—The penalties under subparagraph (A) shall apply until the fee required under subsection (a)(5) is paid.

For Fiscal Year 2019, the ANDA Holder Program Fee tier rates increased pretty significantly compared to Fiscal Year 2018:

That’s where ANDA Repository, LLC comes into the picture. . . .

Imagine a parking lot. The owner of a car that is not being used on a daily basis needs a parking space for that car.  In exchange for that parking space (and an annual fee) the car’s owner transfers title of the automobile to the parking lot owner.  The old owner of the car can, with appropriate notice, take back ownership when he decides that he wants to use the automobile again.  Provided the parking lot owner has enough cars, this can be a beneficial venture for all of the parties involved.

In the imagery above, the automobile owner is an ANDA sponsor (typically with a discontinued ANDA), and the parking lot owner and attendant is ANDA Repository, LLC. As a “large size” operation, ANDA Repository, LLC pays a flat ANDA Holder Program Fee regardless of how may ANDAs are owned.  In exchange for its services, ANDA Repository, LLC charges an ANDA sponsor an annual fee, which we understand is significantly less than the ANDA Holder Program Fee such ANDA sponsor would otherwise pay as a small or medium size operation.

If you’re interested in the program, you should reach out to ANDA Repository, LLC soon. The mechanism to communicate to FDA a transfer in ANDA ownership prior to October 1, 2018 should be relatively painless: (1) Transfer of Ownership Letters (Seller) and Acknowledgment of Transfer of Ownership letters (Buyer) to the Office of Generic Drugs; and (2) Email and call CDER Collections notifying them of the change in ownership.

A district court in Massachusetts scolded FDA for failing to meet a two-year deadline for issuing a final rule mandating color graphic warnings on cigarettes. This decision is important for the public health interests associated with the graphic warnings, but interesting for the loss dealt FDA under the Administrative Procedure Act (“APA”).

As background, the Family Smoking Prevention and Tobacco Control Act of 2009 required FDA to promulgate a final rule mandating color graphic warnings on cigarette packs and in cigarette advertising by June 22, 2011, i.e., two years after Congress enacted the statute. FDA issued a final rule within the two year time period requiring the use of nine text warnings accompanied by graphic images.  A group of tobacco product manufacturers and sellers promptly challenged the rule, alleging that it violated their constitutional right to free speech.  The district court agreed with industry, and the D.C. Circuit upheld the lower court’s decision and vacated the final rule in 2012.

A coalition of physician groups and cancer associations filed the instant suit to force FDA to follow the mandate of the Tobacco Control Act and issue new graphic warnings requirements. They alleged that FDA violated the APA because it “unlawfully withheld” agency action, or in the alternative, “unreasonably delayed” the final rule.  FDA explained to the court that following the 2012 D.C. Circuit decision, the agency formed a working group to research the text of warning statements.  In 2015, FDA contracted with a communications and marketing firm to develop new graphic warning image concepts that were tested in discussion groups.  FDA revised the warnings and then contracted a social science research firm to conduct focus group testing on the revised warnings.  FDA further modified the warnings in response to these results.  FDA explained to the court that additional research was being planned, including another round of focus group review, and two quantitative studies.  The research would then be used to support a formal rulemaking, which FDA estimated would conclude in November 2021.

The Honorable Indira Talwani agreed with the plaintiffs that FDA violated the APA because it both “unlawfully withheld” agency action, and “unreasonably delayed” the final rule.

“Unlawfully Withheld” Standard.  Plaintiff argued that the court should compel agency action here because Congress established a firm, enforceable deadline in the statute.  The district court agreed, highlighting the distinction that exists under the APA when the statute “impose[s] a date-certain deadline on agency action,” and not just a general admonition to act “within a reasonable time.”  The court found that FDA’s duty to promulgate a rule under the Tobacco Control Act is “nondiscretionary”: “Not later than 24 months after June 22, 2009, the Secretary shall issue regulations that require color graphics depicting the negative health consequences of smoking to accompany the label statements . . . .”  Even though FDA pointed to its original compliance with the two year deadline before vacatur, the court held that the vacatur “simply return[s] matters to where they stood before,” thus resetting the two-year clock.  The court stated that “it cannot be the case that the FDA has freed itself from Congressional mandates and may now take the opportunity to promulgate this rule at whatever pace it chooses.”

“Unreasonably Delayed” Standard.  The court also walked through the six TRAC factors, named after the D.C. Circuit Court case establishing the test for “unreasonable delay.”

1. the time agencies take to make decisions must be governed by a rule of reason;
2. where Congress has provided a timetable or other indication of the speed with which it expects the agency to proceed in the enabling statute, that statutory scheme may supply content for this rule of reason;
3. delays that might be reasonable in the sphere of economic regulation are less tolerable when human health and welfare are at stake;
4. the court should consider the effect of expediting delayed action on agency activities of a higher or competing priority;
5. the court should also take into account the nature and extent of the interests prejudiced by delay; and
6. the court need not find any impropriety lurking behind agency lassitude in order to hold that agency action is unreasonably delayed.

The court used reprimanding language in its opinion to describe the two year “detour” after the appellate decision vacating the final rule and the “gaps of time where little to no work was completed,” and noted that FDA’s current timeline proposes a period of “four times the initial amount of time set by Congress.” The court also noted that “FDA has not articulated a single higher priority” to justify the “competing priorities” required under the fourth TRAC factor, but requests that the court defer to FDA’s priority choices without regard to those dictated by Congress.  Thus, the court found there was “unreasonable delay” and ordered FDA to provide within three weeks (by September 26, 2018) an expedited schedule for issuing a final rule (including completion of studies, and notice-and comment rulemaking).  The court also offered time for plaintiffs to review and respond to FDA’s proposed schedule, and stated that it intends to direct further action following review of the schedule.

Given the deference typically afforded agencies in their statements of what is a reasonable timeline, this case is a notable win for challenges to agency (in)action. It will be interesting how much FDA’s new schedule shaves off its initial proposed deadline of November 2021, and whether FDA will use this “expedited” schedule as a basis for pushing other competing priorities on the backburner.

FDA’s Commissioner Scott Gottlieb, M.D., announced last Friday, September 7, 2018, FDA’s publication of its revised draft Memorandum of Understanding (“MOU”) between states and FDA addressing interstate shipment of compounded medications. This is the third draft MOU published by FDA that involves interstate shipment of compounded medications; recall FDA’s first attempt was way back in 1999 (which received over 6,000 comments) (see our previous post here). FDA’s third attempt is quite different than its first two attempts both in terms of its definition of what is an “inordinate amount” of compounded products shipped interstate, and how States and FDA are supposed to regulate those compounders that may ship inordinate amounts of compounded medications interstate.

Section 503A of the Federal Food, Drug, and Cosmetic Act (“FDCA”) requires FDA and states to enter into a MOU (developed in consultation with the National Association Boards of Pharmacy (“NABP”)) that addresses the distribution of inordinate amounts of compounded drug products interstate, and provides for appropriate investigation by a State agency of complaints relating to compounded drug products distributed interstate. See FDCA Section 503A. If the State does not enter into the MOU, then that State’s compounders are significantly limited to a ceiling of distributing or dispensing only 5% of their compounded medications interstate. FDA will not enforce this so-called 5% rule unless and until the MOU is finalized and made available to the States for their consideration and signature. FDA is proposing a 180-day period at this point to allow States to consider and sign the final MOU, but that period is subject to comment and may change upon publication of the final MOU.

New Definition of ”Inordinate Amounts”: The “50 Percent Threshold”

The purpose of the draft MOU remains generally the same: It sets forth how and when States must investigate and report to FDA compounding complaints, adverse events and compounders that ship interstate “inordinate amounts” of compounded medications. Unlike prior versions, the new draft MOU appears to be more of a practical, risk-based information collection and reporting guideline, and sets an “inordinate amount” threshold for further investigation, and not a “limit.”

For example, with respect to an “inordinate amount” determination, States do not simply “report” pharmacies and compounding physicians to FDA once they reach a certain limit on compounded medications shipped interstate (which was proposed to be 20% in 1999 and 30% in 2015). Instead the MOU would require states to do the following:

• Identify on an annual basis, using surveys, reviews of records, or other available mechanisms, compounding pharmacists that distribute inordinate amounts of compounded drugs interstate by collecting information regarding the following:
  • Total number of prescription orders for compounded drug products distributed or dispense intrastate, and
  • Total number of prescription orders for compounded drug products distributed interstate.
• If the state becomes aware of a physician who is distributing compounded drug products interstate, coordinate with the State’s appropriate regulator of physician compounding using similar state collection of:.
  • Total number of prescription orders for compounded drug products distributed or dispense intrastate, and
  • Total number of prescription orders for compounded drug products distributed interstate.
• For pharmacies or physicians that have been identified as distributing inordinate amounts of compounded drug products interstate, collect information regarding the following:
  • Total number of prescription orders for sterile compounded drugs distributed interstate
  • Number of States in which the compounded pharmacy or physician is licensed or into which the compounding pharmacy /physician distributes
  • Whether the state inspected for or found during the most recent inspection that the pharmacy /physician distributed compounded products without a prescription.
• Notify FDA if the State identifies any pharmacy or physician within its jurisdiction that has distributed inordinate amounts interstate; and
• Provide FDA certain information identified in the MOU that the State collected concerning those physicians and pharmacies it believes are distributing inordinate amounts interstate.

And here is the proposed definition of “inordinate amount”:  The revised MOU draft states that a pharmacy or physician is considered to have distributed an inordinate amount interstate if the number of prescription orders for compounded drug products in any calendar month is greater than 50 percent of the number of prescription orders for compounded drug products dispensed or distributed both interstate and intrastate.

The calculation includes only compounded drug products, unlike the 2015 draft where it included both compounded and finished drug products.

Concerning use of the term “distribution,” FDA states it revised this definition from the prior draft based on industry comments and that “distribution” now means:

[A] compounder has sent a compounded drug product out of the facility in which the drug is compounded. This may include but not be limited to delivery or shipment to a physician’s office, hospital or other healthcare setting for administration, and dispensing the drug product by sending it to a patient for a patient’s own use.

Based on comments received, FDA also has proposed to exclude from the definition of “distribution” the act of “dispensing that occurs at the facility in which the drug was compounded.” This act of “dispensing but not distribution” will not be a prescription that is included in the pharmacy’s “50 percent threshold” determination. Thus, FDA seems to differentiate dispensing and distribution, at least to some degree, according to whether the transaction is via mail or occurs in person. We shall see whether FDA’s explanation is now satisfactory or whether this issue will continue to provide controversial fodder and frustration for those in the industry that believe a plain reading of FDA’s regulations and the statute plainly demonstrates that “dispense” and “distribution” are different concepts than FDA’s proposed “new” definitions here.

The general takeaway for this blogger on the MOU saga, however, is that FDA’s new draft leaves more leeway to States to collect information necessary to make inordinate amount determinations, investigate its pharmacies, and report certain pharmacies that compound inordinate amounts to FDA. Unlike the former draft, FDA states it does not intend to take action against a compounder that breaches a 50 percent threshold, but instead it proposes that States collect information identified above, and provide it to FDA to help “inform FDA’s inspectional priorities.” The proposed draft would require States to maintain records of complaints, investigations, and responses to the same for at least three years after completion of the investigation. FDA notes that the revised draft does not include “specific directions to the States on how to conduct their investigations of complaints. Rather, as recommended by comments to FDA previously, the details of such investigations are left to the States’ discretion.”

FDA is also distinguishing between compounders of non-sterile and sterile compounds in light of the fact that it is collecting information of the types of compounds to likely assist with its risk-based enforcement approach (recognizing the significantly different risk profiles for these products). FDA’s continued quest to know whether compounders of “inordinate amounts” are obtaining valid individually identified patient prescriptions demonstrates FDA will be watching this issue.   States must consider whether compounders that may exceed the 50 percent threshold are also falling short of the individually identified prescription requirement in 503A. Comments are due in 90 days.

States must notify FDA within three business days (versus the former proposed 72 hours) after receiving any complaints related to a compounded product distributed interstate involving a serious adverse product quality issue or adverse drug experience, and provide FDA with specific information about the complaint. FDA states it has staff on call 24 hours a day to receive information in emergency situations.

On August 17, FDA announced that the Animal Drug and Animal Generic Drug User Fee Amendments of 2018 had been signed into law. As the name of the law suggests, it reauthorizes the Animal Drug User Fee Act (ADUFA) and the Animal Generic Drug User Fee Act (AGDUFA) programs administered by FDA. Not so obvious is that the amendment also impacts FDA’s review of animal feed ingredients. Specifically, section 360 concerns the review and approval process for animal food ingredients.  Among other things, the amendment removes Section 1002(a) of the Food and Drug Administration Amendments Act of 2007 (FDAAA). This section required FDA to establish ingredient standards and definitions with respect to pet food. Lacking a clear definition of pet food, FDA interpreted the provision broadly as to require ingredient standards and definitions for animal food ingredients.

As discussed in a prior posting, FDA announced a strategy for the required ingredient review only in 2015. Briefly, FDA had planned to align ingredient listings in the Official Publication (OP) of the Association of American Feed Control Officials (AAFCO) with the agency’s regulatory process and requirements.” Based on a comprehensive review of the OP, the Agency would establish as its own standards and definitions any AAFCO definitions for ingredients that are approved by the agency as food additives or that are Generally Recognized as Safe (GRAS). For the remaining AAFCO ingredient definitions, FDA would review available data and determine whether they supported an animal food additive approval or GRAS conclusion. There remained uncertainty about how FDA would manage the strain on resources; estimates suggested FDA might have to address about 500 ingredients. Now three years later, section 1002(a) has been removed. Section 306 also addresses several aspects of the animal food additive approval process. FDA must develop pre-submission guidance for companies. A draft guidance must be published in the next 18 months, and FDA is directed to finalize, withdraw or reissue this guidance no later than one year after closing of the comment period for the draft guidance. The law also amends FDC Act § 409 to clarify that FDA must review applicable foreign reports of investigations and data on animal food ingredients when submitted by petitioners as part of an animal food additive petition. It remains to be seen if these actions will speed up the food additive approval process (currently it takes 3-5 years to obtain approval).

On August 30, 2018, the United States District Court for the Eastern District of California granted the State of California’s Motion to Dismiss a Complaint filed on December 8, 2017 by the Pharmaceutical Research and Manufacturers of America (PhRMA) seeking declaratory and injunctive relief against implementation and enforcement of California Senate Bill 17 (SB 17). We previously blogged on SB 17 here and PhRMA’s lawsuit here. PhRMA’s original Complaint can be accessed here. SB 17, which went into effect on January 1, 2018, imposes notification and reporting requirements on pharmaceutical manufacturers for certain price increases on their products sold to state purchasers, insurers, and PBMs in California. Further information on the implementation of SB 17 can be found on the California Office of Statewide Health Planning and Development (OSHPD) website here.

Briefly, PhRMA’s lawsuit challenged SB 17 on three distinct constitutional grounds. First, PhRMA alleged that SB 17 violates the Commerce Clause by regulating interstate commerce. Compl. at 3. Second, PhRMA alleged that SB 17 violates the First Amendment by compelling manufacturers to speak and in a manner that expresses viewpoints that are neither speaker- nor content-neutral. Id. at 4, 26. Third, PhRMA argued that SB 17 is unconstitutionally vague, in violation of the Fourteenth Amendment Due Process Clause. Id. at 5, 18, 31.

The district court dismissed PhRMA’s Complaint on procedural grounds without reaching the merits of the constitutional arguments. California argued that the court lacked subject matter jurisdiction under Federal Rules of Civil Procedure (FRCP) Rule 12(b)(1), asserting that Gov. Brown must be dismissed as a party because he was immune from suit pursuant to the Eleventh Amendment. California asserted that states are generally immune from civil suits, but that such suits may be brought against a state’s officers acting in their official capacities seeking to enjoin the enforcement of a state law when a state officer has a “direct connection” with the enforcement of the particular law. Defs.’ Memorandum of Points and Authorities in Support of Motion to Dismiss at 9, PhRMA v. Brown, No. 2:17-cv-02573 (E.D. Cal. Jan. 26, 2018) [hereinafter Memorandum]; see also Ex Parte Young, 209 U.S. 123, 157 (1908). In the present matter, California argued that Gov. Brown did not have a direct connection with the enforcement of SB 17, but rather only had “general oversight” over the state’s executive branch. Memorandum at 9.

The district court agreed with California and dismissed Gov. Brown as a party. PhRMA’s Complaint argued that Gov. Brown has a direct connection with the enforcement of SB 17 because he signed SB 17 into law and bears responsibility for its enforcement. Memorandum and Order at 6, PhRMA v. Brown, No. 2:17-cv-02573 (E.D. Cal. Aug. 30, 2018) [hereinafter Order]. However, the court disagreed, concluding that this amounted to no more than general oversight. Id. at 7.

California also argued that PhRMA lacked standing to bring the lawsuit against the Defendants and, therefore, failed to state a claim upon which relief can be granted pursuant to FRCP Rule 12(b)(6). In order to meet the jurisdictional requirements of Article III of the U.S. Constitution, a plaintiff must demonstrate that it has standing to bring the lawsuit. An association, like PhRMA, has standing to bring a lawsuit on behalf of its members “when its members would otherwise have standing to sue in their own right, the interests at stake are germane to the association’s purpose, and neither the claim asserted nor the relief requested requires the participation of individual members [in the lawsuit].” Memorandum at 10 (quoting Friends of Earth, Inc. v. Laidlaw Envtl. Servs., Inc., 528 U.S. 167, 181 (2000)). Here, California asserted that PhRMA merely alleged the operation of SB 17 would injure its members if the reporting requirement was triggered by a price increase or that its members may refrain from increasing product prices to avoid the reporting requirement. Order at 9. California also stated that PhRMA’s factual allegations of harm to its members were not actual but predicated on how OSHPD applies certain provisions of SB 17. Id.

Again, the court agreed with California and dismissed the lawsuit for lack of standing. Id. at 10. The court held that PhRMA’s assertions regarding the potential harm that may be incurred by its members were speculative, citing “a long-settled principle that standing cannot be inferred argumentatively from averments in the pleadings,” but must be based on allegations of facts essential to demonstrate jurisdiction. Id.

PhRMA’s Complaint was dismissed without prejudice and the court granted leave to PhRMA to amend its Complaint within 30 days to plead additional facts to address these procedural defects. We will continue to track developments in this litigation.

We recently came into possession of a small stack of Letter Decisions issued by the Exclusivity Board in the Center for Drug Evaluation and Research – the “CDER Exclusivity Board” – and decided that a series of posts on each decision would be an entertaining way to delve into and discuss various issues that arise with both 5-year New Chemical Entity (“NCE”) exclusivity and 3-year new clinical investigation exclusivity.

By way of background, the CDER Exclusivity Board was established to “oversee certain exclusivity determinations, including whether and what type of exclusivity should be granted and the appropriate scope of exclusivity grants,” and to ensure consistency and accuracy among exclusivity determinations.  The Board has been in existence for quite some time.  While it’s been almost 6 years since FDA publicly announced, in Fall 2012, the establishment of the Board (see our previous post here), the Board had already issued decisions before then (for example, with respect to the availability of 3-year exclusivity for an NDA supplement for VANCOCIN (vancomycin HCl) Capsules (NDA No. 050606) – see here).

During the past 6-plus years, the CDER Exclusivity Board has issued scores of Letter Decisions (and there are more to come – see, e.g., page 26 here, as well as a recent Citizen Petition [FDA-2018-P-3284]).  Not all of the Board’s Letter Decisions are publicly available, and those that are public are not always easy to find as they can be buried in NDA Approval Packages.  But we’ve been able to rustle up some of them.

First up is the CDER Exclusivity Board’s October 2016 Letter Decision on eligibility for 5-year NCE exclusivity for E-Z-HD (barium sulfate) Powder for Oral Suspension, 98% (w/w). FDA approved E-Z-HD under NDA 208036 – a “literature-based” 505(b)(2) application – on January 11, 2016 for use in double contrast radiographic examinations of the esophagus, stomach and duodenum to visualize the gastrointestinal tract in patients 12 years and older.

NDA 208036 was (and continues to be) identified in FDA’s drug approval database as a “Type 7 – Drug Already Marketed without Approved NDA” application. FDA’s MAPP 5018.2, titled “NDA Classification Codes,” describes a “Type 7” NDA as follows:

A Type 7 NDA is for a drug product that contains an active moiety that has not been previously approved in an application, but has been marketed in the United States. This classification applies only to the first NDA approved for a drug product containing this (these) active moiety(ies).

Type 7 NDAs include, but are not limited to:

(1) The first post-1962 application for an active moiety marketed prior to 1938.

(2) The first application for an active moiety first marketed between 1938 and 1962 that is identical, related or similar (IRS) to a drug covered by a Drug Efficacy Study Implementation (DESI) notice.

(3) The first application for an IRS drug product first marketed after 1962.

(4) The first application for an active moiety that was first marketed without an NDA after 1962.

Whether the Type 7 (mis)classification or something else triggered a review by the CDER Exclusivity Board is unclear; however, the Board’s Letter Decision provides a nice reference tool for a point we’ve made in the past: An analysis of NCE exclusivity eligibility requires more than just consulting Drugs@FDA and the Orange Book, because those databases are incomplete. It requires, at the very least, a look-back at all NDAs approved by FDA under FDC Act § 505 since the FDC Act was signed into law by President Roosevelt on June 25, 1938, including those many, many NDAs whose approvals were withdrawn in the early 1970s under FDA’s NDA “clean-up initiative” (35 Fed. Reg. 11,929 (July 24, 1970)).

And that’s exactly what the CDER Exclusivity Board did in determining that E-Z-HD is not eligible for 5-year NCE exclusivity. According to FDA:

At least one drug product, Metabarin, containing barium sulfate as its active ingredient has been previously marketed under an NDA in the United States. On December 2, 1948, C.S.C. Pharmaceuticals, a division of Commercial Solvents Corporation, submitted an application (NDA 6624) for Metabarin under section 505(b) of the FD&C Act.  The application became effective on December 9, 1948.  As described in NDA 6624, Metabarin, an oral suspension, is a barium contrast medium used in the roentgenographic (X-ray) visualization of the esophagus, stomach, and intestinal tract.  The NDA indicates that Metabarin contains 99.656% barium sulfate (USP) along with a suspending agent, intended to provide a high degree of dispersibility, and two flavoring agents. . . .

The FD&C Act and FDA’s regulations preclude eligibility for 5-year NCE exclusivity when the drug contains an active moiety that has been previously approved in an application under section 505(b) of the FD&C Act. E-Z-HD contains barium sulfate, the sulfate salt of barium, as its active ingredient.  The active moiety in E-Z-HD is barium.21 Likewise, barium sulfate is the active ingredient and barium is the active moiety in Metabarin.  As noted above, the NDA for Metabarin became effective in 1948 and was deemed approved through the 1962 Amendments to the FD&C Act.  FDA’s regulations make clear that a drug product that is the subject of an application that was “deemed approved” under the 1962 Amendments is considered to be approved in an application under section 505(b) of the FD&C Act for purposes of determining whether certain products qualify for 5-year NCE exclusivity under section 505(c)(3)(E)(ii) and 505(j)(5)(F)(ii) of the FD&C Act.  Therefore, because the active moiety in E-Z-HD has been previously approved in an application under section 505(b) of the FD&C Act, i.e., the Metabarin NDA, E-Z-HD does not contain a new chemical entity and is not eligible for 5-year NCE exclusivity.

FDA is able to review drug approvals going back to 1938 because the Agency has a tool at its disposal that most folks do not have: the so-called “Ever-Approved List.” The Ever-Approved List a list of drug products purported to have been approved by FDA since 1938 under a marketing application submitted pursuant to FDC Act § 505.  Fortunately, we have a copy of the Ever-Approved List, which we understand the Agency will now supply through a FOIA request (though you might what to specify whether or not you would like the nearly 5,400-page PDF list or the Excel database. . . or perhaps both).  The list certainly comes in handy when speculating about the prospects of 5-year NCE exclusivity (see our previous post here).

In its fourth enforcement letter of 2018, the Office of Prescription Drug Promotion (OPDP) takes aim at a marketed drug’s sell sheet solely on the basis of misleading efficacy claims, the first letter to do so in over 3 years.

The letter, issued August 16 to Ascend Therapeutics, asserts that promotional statements claiming EstroGel (estradiol gel) provides the lowest effective dose of estradiol therapy are misleading as there are other estrogen therapies approved for the same indications with lower doses. While the letter is fairly unremarkable in content, the concept of an enforcement letter based solely on efficacy claims is something that we have not seen in several years.

In June 2015, OPDP issued a letter to Ascend about misleading promotion for EstroGel through omission of important risk information. Since this letter, OPDP continued the trend in each of its letters about marketed products, citing risk communication issues, even where OPDP also took aim at efficacy presentations.

In looking back at this trend, we saw that after a letter in August 2015, OPDP enforcement took a hiatus for the remainder of that year. This coincided with Pacira Pharmaceutical’s September 8, 2015 filing of a Complaint against FDA [hyperlink to 12/15/15 blog post] seeking to prevent FDA from bringing an enforcement action against the company for truthful and nonmisleading speech. In December 2015, FDA rescinded a September 22, 2014 OPDP Warning Letter issued to Pacira. We suspected that OPDP’s 2016 enforcement letters were carefully crafted to avoid issues raised in the Pacira case as well as other First Amendment cases (and FDA losses) brought by industry (see our previous post here).

Do we think that OPDP’s recent letter marks a shift in this approach? Not really. Given the particular statements at issue, we think that OPDP felt confident about the misleading nature of the “lowest dose” claims given the approval of lower dose products. We also note that the promotion meets several stated OPDP priorities for enforcement (e.g., Boxed Warning product, product cited for past violations). The takeaway for industry is that pushing the envelope on efficacy still needs to fall within a gray area – overtly misleading claims may still trigger enforcement, particularly if promotion falls within a stated OPDP priority.

Comment one, comment all! As part of FDA’s ongoing effort to clarify the classification for medical device accessories (see our previous posts here, here, and here), on August 17, 2018, FDA issued a notification  requesting comments on a proposed list of accessories that FDA believes are suitable for classification in Class I, separate from their higher-classification parent device.

As mentioned in our previous posts, FDA’s approach to classifying medical device accessories has led to a confusing regulatory scheme in which some accessories are being over-regulated because they were classified according to the parent device (which may be riskier than the accessory) while other accessories have their own separate classification regulations.

In order to further clarify classification of accessories, on August 18, 2017, section 707 of the FDA Reauthorization Act of 2017 (FDARA; Pub. L. 115-52) amended section 513(f) of the Federal Food, Drug, and Cosmetic Act (FDC Act) and, among other amendments, created a process for FDA to reclassify certain accessories, including proposing a list of accessories suitable for distinct classification into Class I. In accordance with the procedures established by FDARA, FDA published the notification that includes an initial list of eight accessories that the Agency believes are suitable for Class I and is seeking public comment.  These eight accessory types are: (1) gastroenterology-urology accessories to a biopsy instrument; (2) penile implant surgical accessories; (3) ureteral stent accessories; (4) biliary stent, drain, and dilator accessories; (5) suprapubic catheter accessories; (6) implanted mechanical/hydraulic urinary continence device surgical accessories; (7) air-handling apparatus accessory; and (8) corneal inlay inserter handle.

FDA mentions that it considered accessory types appropriate for inclusion on this list if:

1. they are not for use in supporting or sustaining human life, or of substantial importance in preventing impairment in human health;
2. they do not represent a potential unreasonable risk of illness or injury; and
3. general controls alone would be sufficient to provide a reasonable assurance of safety and effectiveness of the accessory (e.g., design controls are not required).

The Agency’s notification states that it is open to considering additional accessory types that meet the criteria above and interested parties should comment with their recommendations and rationales for inclusion on the final list.

FDA’s notification also, separately and somewhat unrelated to the proposed list, clarifies its policy regarding orthopedic manual surgical instruments that are appropriately classified as Class I pursuant to 21 C.F.R. § 888.4540. According to the Federal Register notice, instruments that are designed for use with a specific orthopedic implant are generally accessories to the parent device, not Class I orthopedic manual surgical instruments.  In addition, FDA states that these implant-specific instruments are typically included in the same premarket submission as the parent device (e.g., 510(k) or PMA).  On the other hand, FDA considers orthopedic manual surgical instruments to be those that are for “general use” apparently meaning that they are capable of use with more than one implant type.  FDA’s rationale appears based, in part, on the fact that the implant-specific instruments should be subject to design controls to ensure they are safe and effective for use with the parent device (e.g., orthopedic implant).  Therefore, they would not be eligible for Class I.

This policy appears to be more than a mere “clarification,” and those in the orthopedic implant and instrument market will want to carefully consider their current instrument classification. According to FDA’s policy, there are now three types of orthopedic manual surgical instruments: (1) those that are appropriately classified under 21 C.F.R. § 888.4540 because they are for “general use;” (2) those that were included in a parent-device premarket submission and are appropriately Class II or III consistent with the parent device classification; and (3) those that were included in a parent-device premarket submission but may be over-regulated based on the parent device’s classification.

With regard to this third group, companies have two options:

1. Comment on FDA’s proposed list to recommend adding such instruments to FDA’s final list of Class I accessories. Any proposal should include a clear justification for why the proposed accessory type meets the criteria for Class I.
2. Request separate accessory classification of such instruments via section 513(f)(6)(D) of the FD&C Act.

Going forward, if an orthopedic company has a new instrument that will be referenced in a parent-device premarket submission, the company can request classification of the instrument separately from the parent device in the parent device’s 510(k) or PMA in accordance with section 513(f)(6)(C) of the FD&C Act (as described in FDA’s accessory classification guidance).

The comment period on the proposal ends on October 16, 2018. In addition to comment on FDA’s proposed list of Class I accessories, companies should feel open to commenting on FDA’s policy regarding orthopedic manual surgical instrument.

As we previously reported, the most critical issue facing the animal cell cultured industry is a need for clarity on which federal agency – FDA or USDA – will exercise jurisdiction over which aspects of production and distribution. Earlier this year, the discussion heated up when the U.S. Cattlemen’s Association filed a Petition asking USDA to define meat so that it would exclude products created by animal cell culture. .  Other parties in the animal industry, however, argued that USDA should assert jurisdiction over these products to level the playing field.   Then, maybe somewhat unexpectedly to some in the industry, FDA announced a public meeting that suggested that FDA was claiming jurisdiction. Subsequently, on June 27, 2018, there was a congressional briefing on cellular agriculture on Capitol Hill, hosted by Research & Development (R&D) Caucus co-chairs, Representative Bill Foster (D-IL) and Representative Barbara Comstock (R-VA). In addition, there were several legislative efforts to place cell cultured meat and poultry under USDA jurisdiction.

An Aug. 23, 2018 letter to President Trump cosigned by Memphis Meats and the North American Meat Institute (NAMI) suggests a possible solution to this turf war. In the letter, NAMI and Memphis Meats propose that FDA should have oversight of pre-market safety evaluations for cell-based meat and poultry products. Then once safety is established, USDA should regulate cell-based meat and poultry products, as it does with all other meat and poultry products.  In certain respects, the proposed approach is not new.  In fact, with new ingredients intended for use in meat or poultry a similar approach is applied; under an MOU established in 2000, FDA and USDA cooperate in the review of such ingredients.

The authors of the letter suggest that the proposed approach plays into the strengths and experience of both agencies. They request a combined meeting between the White House, USDA, FDA and both conventional and cell-based meat and poultry industry stakeholders.

We will be monitoring developments.

An interesting Citizen Petition popped up earlier this week in which pharma giant Pfizer has requested FDA guidance on sponsor communications about biosimilar products.  This is not a new campaign for Pfizer, who has emphasized the need to address anticompetitive exclusionary practices, “misinformation,” and market access issues with respect to biosimilars for at least the last year. Pointing to the same anticompetitive behavior that FDA Commissioner Gottlieb has admonished recently in both the biosimilar and the generic space, Pfizer raises concerns that the lack of market confidence in biosimilars resulting from the proliferation of false and misleading information by reference product sponsors has stymied market acceptance and uptake.

We’re used to seeing big pharma companies on the other side of these types of petitions – brand name sponsors are more often accused of exclusionary behavior than attempting to combat it. But the biosimilar market is a different beast than the traditional small molecule generic market.  With resource-rich companies acting as both reference product and biosimilar sponsors, the game can be played a little differently.  Indeed, Pfizer has approval for two biosimilars, RETACRIT (epoetin alfa-epbx) and NIVESTYM (filgrastim-aafi), and is a commercial partner to Celltrion Healthcare with respect to INFLECTRA (infliximab-dyyb), in addition to several BLAs.

Looking to Europe’s “robust” uptake of biosimilars, Pfizer’s Citizen Petition posits that payer incentives and inducements to switch patients to biosimilars is an effective strategy to encourage widespread acceptance of biosimilars. Though Pfizer praised FDA’s efforts to foster biosimilar development and adoption, including the recently announced Biosimilars Action Plan, the Citizen Petition cited the payer reimbursement policies and the dissemination of false or misleading information about biosimilars as the biggest obstacles to biosimilar acceptance in the U.S. Pfizer recognizes that payer decisions about reimbursement are outside of the FDA’s purview, but instead encourages FDA to take steps to ensure that reference product sponsors disseminate only truthful and nonmisleading information in an effort to help shape payers’ views on biosimilars and their reimbursement.

Specifically, Pfizer alleged that “certain reference product sponsors . . . disseminate false and misleading information that casts doubt about the safety and efficacy of biosimilars in the minds of patients and prescribers.” The Citizen Petition includes examples of some of the alleged false and misleading information disseminated by reference product sponsors that undermines public confidence in the safety and effectiveness of biosimilars, including:

• A textual summary comparing biosimilars to generics on a sponsor’s website explains that “FDA requires a biosimilar to be highly similar, but not identical to the [reference product]”, but fails to state that an approved biosimilar must have no clinically meaningful differences from the reference product.
• A recent tweet suggesting that biosimilars are not the same as the biologics they reference: “Biologics or biosimilars? It’s not just apples to apples. While #biosimilars may be highly similar to their #biologic reference products, there’s still a chance that patients may react differently. See what you’re missing without the suffix: http://bit.ly/2G2zGTa.”
• A patient brochure stating that a “biosimilar is not approved as interchangeable . . . ” and “switching or alternating back and forth between the interchangeable biologic and [the reference product] would not cause any changes in safety or how well the treatment works – no infliximab biosimilar has yet proven this.”

According to Pfizer, these statements create confusion as to biosimilarity and interchangeability, inflate the risks associated with a physician-directed switch to a biosimilar, and cast doubt of the safety and efficacy of biosimilars generally.

To address these concerns, Pfizer’s Citizen Petition requests that FDA publish Guidance advising on communications characterizing reference products and biosimilars. The Guidance should address misleading representations and suggestions that biosimilars are not as safe or effective as corresponding reference products; misleading comparisons and implied reference product superiority claims; and claims that sow mistrust among patients and physicians in biosimilar products.  Additionally, Pfizer asks FDA to provide examples of communications that would not be considered false or misleading in addition to clarification that a biosimilar sponsor may discuss with physicians and in promotional materials clinical and other data for a biosimilar product whether or not such data is included in the biosimilars labeling.

Given FDA’s commitment to biosimilars and to addressing the high costs of medicines, it wouldn’t be surprising if the Therapeutic Biologics and Biosimilars Staff is already hard at work establishing some sort of guidelines for communication about the relationship between biologic reference products and biosimilars. Indeed, FDA has emphasized the need to develop “effective communications to improve understanding of biosimilars among patients, clinicians, and payors.” But it’s still early in the implementation of the Biosimilar Action Plan, and FDA will be hearing many more suggestions about the biosimilars marketplace next week.

For regular readers of compounding news on our FDA Lawb Bog, the “bulks” saga for outsourcing facilities continues with a whirlwind of activity.

A bit of background: FDA published a new bulk substances list for Section 503B outsourcing facilities on July 23, 2018, where vasopressin somewhat surprisingly remained on FDA’s Bulks List 1.  Proposing to compound using vasopressin, outsourcing facility Athenex, Inc., successfully intervened in the Endo/Par federal district court lawsuit against FDA over the Section 503B Bulks List, and its inclusion of vasopressin in particular (see our previous posts here and here).  Athenex also filed a motion for a declaratory judgment against Endo/Par in New York federal district court.  On August 25, 2018, the U.S. District Court for the District of Columbia lifted the stay in the Endo/Par federal lawsuit at the request of the parties.  Yesterday, Endo/Par filed a Motion for Preliminary Injunction in its D.C. lawsuit.

Throughout its blistering Memorandum in Support of its Motion for Preliminary Injunction filed in that case, Counsel for Plaintiffs dubs FDA’s Section 503B interim Policy on Bulk Substances a “Bulk Compounding Decree,” which it claims is “flatly violative of the law.” It further states that FDA is permitting compounders to “sidestep” the drug approval process –an interesting legal theory given FDCA Sections 503A and 503B explicitly exempt compounders from FDA’s drug approval process (i.e., FDCA Section 505).

FDA published today its Notice of Intent to remove vasopressin from Section 503B Bulks List 1.  In addition to seeking to remove vasopressin from the list, FDA’s Notice also addresses its intent to not include two other substances on Section 503B’s Bulks List 1.  These substances are bumetanide and nicardipine hydrochloride.  FDA had previously placed bumetanide, vasopressin, and nicardipine hydrocholoride on Bulks List 1 after those substances were originally nominated under FDA’s published 2014 nomination process (see our previous post here).  Notwithstanding FDA’s original Bulks List I decision for all three substances, reflecting FDA’s determination the substances met FDA’s prior published interim criteria for inclusion on the list, FDA seems to have changed its mind.  (Note Bumetanide was nominated back in June 2017 by QuVa Pharma, the same entity that nominated vasopressin).  FDA’s motivation (at least in part) for seeking an exclusion of vasopressin from Bulks List 1 likely is the renewed interest in and continuation of the Endo/Par lawsuit.  However, we are left guessing why FDA seeks the early cut for the other two substances.  FDA also acknowledges in footnote 11 of its Notice that the Drug Quality and Security Act (DQSA) requires notice and comment rulemaking when seeking to include a drug substance on the Bulks List, yet not when it intends to remove the substance after the nomination and evaluation process.  FDA states it will take input from both public comments and its Pharmacy Compounding Advisory Committee (PCAC).  It will also continue to review the clinical need determinations for these and other nominated substances, and intends to evaluate nominated bulk substances on a rolling basis.

We continue to wonder why (and possibly how…) FDA can publish its proposal to eliminate three substances from its Bulks List 1 for Section 503B facilities when FDA has not yet issued final guidance on the nomination process itself (recall FDA’s latest draft guidance on the process, published in March 2018, here).  FDA also relies on its proposed draft nomination process (and not its prior process to which the three bulks substance nominations at issue adhered) to show why these three substances should not be used in compounding (i.e., whether the approved drug product sufficiently meets patients’ clinical needs, whether there is a showing of clinical need by the compounded formulation that is unmet by the approved product etc.).  FDA’s prior nomination process did not include such a rigorous clinical need review compared to what FDA now seems to now expect.

FDA is accepting comments on the three substances for the next 60 days after publication of today’s Notice intending to exclude the substances. Will FDA now receive comments addressing the clinical need component for compounded versions of vasopressin, bumetanide, and nicardipine hydrochloride?  And, other than vasopressin, why did FDA choose to remove these two other bulk substances?  Does the Agency intend to review every single substance on Section 503B’s Bulks List 1 to determine whether their first “clinical need” determination was correct, or that the nominator otherwise made an adequate showing?  Will FDA conduct such a review using its “old” nomination process, from 2014, which facilities relied on at that time (and expended significant resources), or its new process, which is the subject of the March 2018 draft re-nomination guidance (and likely prompted by the Endo/Par lawsuit)?  In addition,  we wonder where this leaves FDA’s Section 503A interim bulk substances policy, in which FDA had adopted a similar approach to nominations (but for the fact that Section 503A explicitly permits pharmacies to compound using components of approved drugs).  It also seems that, notwithstanding the Endo/Par lawsuit, hospital system pharmacies would be able to continue compounding using vasopressin and other components of approved drugs, and provide the compounded formulations to its hospital patients under other current FDA guidance.   Inquiring minds …. so much to resolve.

One more Note: FDA’s Division of Drug Information’s announcement on the release of the Notice also mentions that its action on the Bulks List is part of a series of steps that FDA intends to take:

between now and the end of 2018 to further implement the DQSA. It specifically mentions that it will be issuing this year a revised draft Memorandum of Understanding with states that will describe a more flexible approach to addressing certain distributions of compounded products by 503A compounders; a revised draft guidance on insanitary conditions at compounding facilities that will, among other things, address concerns that were raised by providers around the potential implications of the agency’s prior draft guidance; and a revised guidance on current good manufacturing practice (CGMP) requirements for outsourcing facilities that, we believe, will take a more tailored approached to make it more feasible for more 503A pharmacies to become 503B outsourcing facilities.

As always, stay tuned.

One of the most painful consequences of a bad inspection at a U.S. facility is FDA’s resulting refusal to issue certificates to foreign governments (CFGs) until the issues are resolved. CFGs are quite often a requirement to renew licenses and permits to sell in various foreign markets. Although typically linked to a warning letter, sometimes a Form 483 can trigger this refusal. Sometimes it can take many months, or more than a year, for FDA to begin issuing CFGs again. During that time period, a manufacturer may find itself unable to sell product into certain foreign countries.

Section 704 of the FDA Reauthorization Act (FDARA) amended Section 801 of the Federal Food, Drug, and Cosmetic Act to require FDA to provide additional clarity to the bases for denying CFGs. The statute requires that:

• FDA must provide a written statement of the basis for denying a request for a CFG “and [must] specifically identify the finding upon which such denial is based.”
• If the denial is based on a routine inspectional finding that a facility is out of compliance with the QSR, FDA must “provide a substantive summary of the specific grounds for noncompliance.”
• A CFG may not be denied if it is solely based upon the issuance of a Form 483 if the manufacturer “has agreed to a plan of correction in response.”

FDARA also directed FDA to set up a process that appears to be essentially equivalent to supervisory appeals of significant decisions. A manufacturer denied a CFG may at any time “request a review in order to present new information” relating to corrective actions.

In accordance with FDARA, on August 17, FDA issued draft guidance, “Process to Request a Review of FDA’s Decision Not to Issue Certain Export Certificates for Devices.” The short, seven-page guidance is intended, according to FDA, to clarify the new statutory requirements related to CFG denials. In our reading, however, it leaves open more questions than answers and mainly reiterates the statutory requirements.

For example, the statute states that a CFG may not be denied based solely upon a Form 483 if the manufacturer “has agreed to a plan of correction in response.” The guidance requires the following steps to satisfy this standard:

1. The owner, operator, or agent in charge of the establishment should submit a plan of correction in writing to the appropriate FDA office. The plan should include steps the owner, operator, or agent in charge of the establishment will take to correct observations documented and timeframes for completing such steps.
2. The FDA will review the plan and notify the owner, operator, or agent in charge of the establishment whether the plan is sufficient to address the violations documented in the inspectional observations. If the plan is agreed to, FDA will issue a CFG.

Step 1 sounds to us like a well-prepared 483 response. As any manufacturer will tell you, FDA virtually never notifies a company that it is in agreement with its corrective actions outlined in a 483 response. The Agency’s agreement is commonly assumed through Agency silence (e.g., lack of a Warning Letter or other enforcement action) and is often confirmed when an Establishment Inspection Report is issued documenting that the Agency has closed out the inspection.

Therefore, Step 2 appears to be entirely new requiring FDA to affirmatively notify the company that its plan is “sufficient to address the violations documented in the inspectional observations.” FDA provides no details about how this process will unfold. For example, how long will it take FDA to review a company’s response? What if a plan is generally sufficient but the Agency has minor changes, will FDA provide that feedback to the company so it can modify its plan and then reach agreement? We hope that FDA will provide additional clarity regarding this new process in the final guidance.

Another area that warrants further clarification is the process for reviewing a CFG denial. The statute required FDA to set up a process for a company to “request a review in order to present new information” relating to corrective actions. The guidance essentially states that if a manufacturer wishes to obtain such a review, it should email the applicable export branch (CDRH or CBER) and provides the respective email addresses. The guidance states “if the issue cannot be resolved by the [applicable export branch], each Center’s review process will be followed.”

For CDRH appeals, the guidance references another guidance document specific to the CDRH appeals process, but notes that the request is not considered to be a 517A “significant decision,” and therefore is not subject to the 30 day filing and review timeframes. (For CBER-regulated products, FDA references the Formal Dispute Resolution Request process, but explicitly disclaims its ability to resolve issues within 30 days per the FDRR guidance.) It provides no further information as to how long it might take for the export branches to address a request for review. Nor does it state whether or how an export branch might communicate its process, timeline, or status to a company with a pending request for review. In our view, these additional details are essential to a well-established process. We hope that FDA will provide additional clarity in its final draft so that the positive intentions of Section 704 of FDARA may be realized for industry.

In United States of America ex rel Streck v. Allergan Inc., a federal False Claims Act (FCA) case alleging that several pharmaceutical manufacturers knowingly calculated false Average Manufacturer Prices (AMPs) that affected their Medicaid rebate payments, the U.S. Court of Appeals for the Third Circuit agreed with the district court that the relator failed to adequately plead such a claim. Hyman, Phelps & McNamara, P.C. represented two of the manufacturers in the case.

We previously posted here about the district court’s decision. The relator alleged that the manufacturers had failed to include so-called “price appreciation credits” as a price adjustment in calculating AMP. The issue considered on appeal by the Third Circuit was whether the relator had pled that the manufacturers had acted “knowingly,” a required intent for an FCA claim. In concluding that the relator had not done so, the court quoted from a D.C. Circuit decision reasoning: “Consistent with the need for a knowing violation, the FCA does not reach an innocent, good-faith mistake about the meaning of an applicable rule or regulations. Nor does it reach those claims made based on reasonable but erroneous interpretations of a defendant’s legal obligations.” (quoting U.S. ex rel Purcell v. MWI Corp., 807 F.3d 281, 287-288 (D.C. Cir. 2015).

Relying on Purcell, the Third Circuit applied a three part test: (1) whether the relevant statute was ambiguous; whether the defendant’s interpretation was objectively reasonable; and (3) whether the defendant was “warned away” from that interpretation “by available administrative and judicial guidance.” With respect to the last item, it is noteworthy that Purcell, citing to the Supreme Court’s 2007 decision in Safeco Insurance Co. of America v. Burr, made it clear that such guidance must be “authoritative guidance” because “[i]n Safeco the Supreme Court explained that informal guidance . . . is not enough to warn a regulated defendant away from an otherwise reasonable interpretation.” The FCA violations alleged by the relator took place between 2004 and 2012. The Third Circuit found that, during that period, the available CMS guidance on calculating AMP in general “failed to articulate a coherent position on AMP and, specifically, price-appreciation credits.” Under those circumstances, the court found that the relator had failed to plead that the defendants were “warned away” from their interpretation that price appreciation credits were excluded from AMP.

Based on the Purcell framework, the Third Circuit agreed with the district court that the manufacturers’ alleged failure to include price appreciation credits as a price adjustmemt in calculating AMP could not sustain an FCA claim, because even if their interpretation was incorrect — which the Third Circuit did not decide but assumed for purposes of its analysis — it was not unreasonable.

It is important to note that, following the period of the violations alleged in the Streck case, CMS did specifically address price appreciation credits. In the preamble to a 2016 regulation, CMS expressed its view that price appreciation credits amount to a price adjustment that should be recognized in AMP. 81 Fed. Reg. 5170, 5228 (Feb. 1, 2016). Therefore, although the Third Circuit’s decision provides helpful support for the proposition that an FCA claim may not be proven based on an innocent mistake about the meaning of ambiguous regulations or guidance, it is questionable whether the exclusion of price appreciation credits from AMP could be defended based on Purcell and the Third Circuit’s decision in Streck after CMS’s 2016 preamble statement.

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.