Early each morning, when most folks are still sleeping (or perhaps just getting up to have their first cup of coffee and read the newspaper), this blogger is usually already in the office poring over FDA-related news, citizen petitions, and new legislation to update the FDA Law Blog trackers (here, here, and here) and to rev up the @FDALawBlog Twitter feed. One day last week, as we were looking at new legislation, one bill in particular caught our attention.  The bill carried the following title: “A bill to amend the Federal Food, Drug, and Cosmetic Act to ensure that valid generic drugs may enter the market.”

Hmmm . . . . What could that mean? Perhaps a bill to implement the Trump Administration’s recent budget proposal that we think would cheapen 180-day exclusivity (see our previous post here)?  Or maybe something entirely different?  We went on a mission to find out.  And when we finally did obtain a copy of the bill several hours later and took a look through the text, we were struck with a case of déjà vu.

The bill, S. 2476, is called the “Expanding Access to Low Cost Generic Drugs Act” and was introduced by Senator Tina Smith (D-MN) on February 28, 2018.  Although S. 2476 is styled as the “Expanding Access to Low Cost Generic Drugs Act,” it’s really just a new name for nearly identical bills introduced in 2011 (S. 1882) and 2015 (S. 131) as the “Fair And Immediate Release of Generic Drugs Act, or the “FAIR GENERxICS Act” (and even before that in another form in 2009 as S. 1315, the “Drug Price Competition Act of 2009” – see our previous post here).  As we noted back in 2011 when the “FAIR Generics Act” was introduced by Senators Jeff Bingaman (D-NM), David Vitter (R-LA), Sherrod Brown (D-OH), and Jeff Merkley (D-OR), the bill is pretty complex, but essentially concerns parked 180-day exclusivity.  According to a summary of the bill made at that time:

The legislation would prevent “parked exclusivities” from delaying full, fair, and early generic competition by:

• Granting the right to share exclusivity to any generic filer who wins a patent challenge in the district court or is not sued for patent infringement by the brand company.
• Maximizing the incentive for all generic challengers to fight to bring products to market at the earliest possible time by holding generic settlers to the deferred entry date agreed to in their settlements.
• Creating more clarity regarding litigation risk for pioneer drug companies and generic companies by requiring pioneer companies to make a litigation decision within the 45 day window provided for in the Hatch-Waxman Act.

The same summary applies to S. 2476, the current version of the “FAIR Generics Act.” But let’s take a closer look at the current bill.  Here’s how it would amend the FDC Act’s 180-day exclusivity provisions, and other portions of the FDC Act and the patent laws (additions in bold red typeface and deletions in bold strikethrough typeface).

FDC Act § 505(j)(5)(B)(iv) (AMENDED)

(iv) 180-DAY EXCLUSIVITY PERIOD.—

(I) EFFECTIVENESS OF APPLICATION.—Subject to subparagraph (D), if the application contains a certification described in paragraph (2)(A)(vii)(IV) and is for a drug for which a first applicant has submitted an application containing such a certification, the application shall be made effective on the date that is 180 days after the date of the first commercial marketing of the drug (including the commercial marketing of the listed drug) by any first applicant.

(II) DEFINITIONS.—In this paragraph:

(aa) 180-DAY EXCLUSIVITY PERIOD.—The term “180-day exclusivity period” means the 180-day period ending on the day before the date on which an application submitted by an applicant other than a first applicant could become effective under this clause.

(bb) FIRST APPLICANT.—As used in this subsection, the term “first applicant” means an applicant that, on the first day on which a substantially complete application containing a certification described in paragraph (2)(A)(vii)(IV) is submitted for approval of a drug, submits a substantially complete application that contains and lawfully maintains a certification described in paragraph (2)(A)(vii)(IV) for the drug.

(cc) (bb) SUBSTANTIALLY COMPLETE APPLICATION.—As used in this subsection, the term “substantially complete application” means an application under this subsection that on its face is sufficiently complete to permit a substantive review and contains all the information required by paragraph (2)(A).

(dd) (cc) TENTATIVE APPROVAL.—

(AA) IN GENERAL.—The term “tentative approval” means notification to an applicant by the Secretary that an application under this subsection meets the requirements of paragraph (2)(A), but cannot receive effective approval because the application does not meet the requirements of this subparagraph, there is a period of exclusivity for the listed drug under subparagraph (F) or section 505A, or there is a 7-year period of exclusivity for the listed drug under section 527.

(BB) LIMITATION.—A drug that is granted tentative approval by the Secretary is not an approved drug and shall not have an effective approval until the Secretary issues an approval after any necessary additional review of the application.

FDC Act § 505(j)(5)(B)(v) (NEW)

(v) FIRST APPLICANT DEFINED.—As used in this subsection, the term “first applicant” means an applicant—

(I)(aa) that, on the first day on which a substantially complete application containing a certification described in paragraph (2)(A)(vii)(IV) is submitted for approval of a drug, submits a substantially complete application that contains and lawfully maintains a certification described in paragraph (2)(A)(vii)(IV) for the drug; and

(bb) that has not entered into a disqualifying agreement described under clause (vii)(II); or

(II)(aa) for the drug that is not described in subclause (I) and that, with respect to the applicant and drug, each requirement described in clause (vi) is satisfied; and

(bb) that has not entered into a disqualifying agreement described under clause (vii)(II).

FDC Act § 505(j)(5)(B)(vi) (NEW)

(vi) REQUIREMENT.—The requirements described in this clause are the following:

(I) The applicant described in clause (v)(II) submitted and lawfully maintains a certification described in paragraph (2)(A)(vii)(IV) or a statement described in paragraph (2)(A)(viii) for each unexpired patent for which a first applicant described in clause (v)(I) had submitted a certification described in paragraph (2)(A)(vii)(IV) on the first day on which a substantially complete application containing such a certification was submitted.

(II) With regard to each such unexpired patent for which the applicant described in clause (v)(II) submitted a certification described in paragraph (2)(A)(vii)(IV), no action for patent infringement was brought against such applicant within the 45-day period specified in clause (iii); or if an action was brought within such time period, such an action was withdrawn or dismissed by a court (including a district court) without a decision that the patent was valid and infringed; or if an action was brought within such time period and was not withdrawn or so dismissed, such applicant has obtained the decision of a court (including a district court) that the patent is invalid or not infringed (including any substantive determination that there is no cause of action for patent infringement or invalidity, and including a settlement order or consent decree signed and entered by the court stating that the patent is invalid or not infringed).

(III) If an applicant described in clause (v)(I) has begun commercial marketing of such drug, the applicant described in clause (v)(II) does not begin commercial marketing of such drug until the date that is 30 days after the date on which the applicant described in clause (v)(I) began such commercial marketing.

FDC Act § 505(j)(5)(B)(vii) (NEW)

(vii) AGREEMENT BY FIRST APPLICANT TO DEFER COMMERCIAL MARKETING; LIMITATION ON ACCELERATION OF DEFERRED COMMERCIAL MARKETING DATE.—

(I) AGREEMENT TO DEFER APPROVAL OR COMMERCIAL MARKETING DATE.—An agreement described in this subclause is an agreement between a first applicant and the holder of the application for the listed drug or an owner of one or more of the patents as to which any applicant submitted a certification qualifying such applicant for the 180-day exclusivity period whereby that applicant agrees, directly or indirectly, (aa) not to seek an approval of its application that is made effective on the earliest possible date under this subparagraph, subparagraph (F) of this paragraph, section 505A, or section 527, (bb) not to begin the commercial marketing of its drug on the earliest possible date after receiving an approval of its application that is made effective under this subparagraph, subparagraph (F) of this paragraph, section 505A, or section 527, or (cc) to both items (aa) and (bb).

(II) AGREEMENT THAT DISQUALIFIES APPLICANT FROM FIRST APPLICANT STATUS.—An agreement described in this subclause is an agreement between an applicant and the holder of the application for the listed drug or an owner of one or more of the patents as to which any applicant submitted a certification qualifying such applicant for the 180-day exclusivity period whereby that applicant agrees, directly or indirectly, not to seek an approval of its application or not to begin the commercial marketing of its drug until a date that is after the expiration of the 180-day exclusivity period awarded to another applicant with respect to such drug (without regard to whether such 180-day exclusivity period is awarded before or after the date of the agreement).

FDC Act § 505(j)(5)(B)(viii) (NEW)

(viii) LIMITATION ON ACCELERATION.—If an agreement described in clause (vii)(I) includes more than 1 possible date when an applicant may seek an approval of its application or begin the commercial marketing of its drug—

(I) the applicant may seek an approval of its application or begin such commercial marketing on the date that is the earlier of—

(aa) the latest date set forth in the agreement on which that applicant can receive an approval that is made effective under this subparagraph, subparagraph (F) of this paragraph, section 505A, or section 527, or begin the commercial marketing of such drug, without regard to any other provision of such agreement pursuant to which the commercial marketing could begin on an earlier date; or

(bb) 180 days after another first applicant begins commercial marketing of such drug; and

(II) the latest date set forth in the agreement on which that applicant can receive an approval that is made effective under this subparagraph, subparagraph (F) of this paragraph, section 505A, or section 527, or begin the commercial marketing of such drug, without regard to any other provision of such agreement pursuant to which commercial marketing could begin on an earlier date, shall be the date used to determine whether an applicant is disqualified from first applicant status pursuant to clause (vii)(II).

FDC Act § 505(j)(5)(B)(ix) (REDESIGNATED)

(v) (ix) 180-DAY EXCLUSIVITY PERIOD FOR COMPETITIVE GENERIC THERAPIES.—

FDC Act § 505(j)(5)(D)(i)(IV) (AMENDED)

(IV) FAILURE TO OBTAIN TENTATIVE APPROVAL.— The first applicant The first applicant, as defined in subparagraph (B)(v)(I), fails to obtain tentative approval of the application within 30 months after the date on which the application is filed, unless the failure is caused by a change in or a review of the requirements for approval of the application imposed after the date on which the application is filed.

FDC Act § 505(j)(14) (NEW)

(14)(A) The holder of an abbreviated application under this subsection shall submit to the Secretary a notification that includes—

(i)(I) the text of any agreement entered into by such holder described under paragraph (5)(B)(vii)(I); or

(II) if such an agreement has not been reduced to text, a written detailed description of such agreement that is sufficient to disclose all the terms and conditions of the agreement; and

(ii) the text, or a written detailed description in the event of an agreement that has not been reduced to text, of any other agreements that are contingent upon, provide a contingent condition for, or are otherwise related to an agreement described in clause (i).

(B) The notification described under subparagraph (A) shall be submitted not later than 10 business days after execution of the agreement described in subparagraph (A)(i). Such notification is in addition to any notification required under section 1112 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.

(C) Any information or documentary material filed with the Secretary pursuant to this paragraph shall be exempt from disclosure under section 552 of title 5, United States Code, and no such information or documentary material may be made public, except as may be relevant to any administrative or judicial action or proceeding. Nothing in this paragraph is intended to prevent disclosure to either body of the Congress or to any duly authorized committee or subcommittee of the Congress.

FDC Act § 301(e) (AMENDED) (Prohibited Acts)

(e) The refusal to permit access to or copying of any record as required by section 412, 414, 417(j), 416, 504, 564, 703, 704(a), 760, or 761; or the failure to establish or maintain any record, or make any report, required under section 412, 414(b), 417, 416, 504, 505 (i) or (k) 505 (i), (j)(14), or (k), 512(a)(4)(C), 512 (j), (l) or (m), 572(i), 515(f), 519, 564, 760, 761, 909, or 920 or the refusal to permit access to or verification or copying of any such required record; or the violation of any recordkeeping requirement under section 204 of the FDA Food Safety Modernization Act (except when such violation is committed by a farm).

35 U.S.S. § 271(e)(7) (NEW)

(7) The exclusive remedy under this section for an infringement of a patent for which the Secretary of Health and Human Services has published information pursuant to subsection (b)(1) or (c)(2) of section 505 of the Federal Food, Drug, and Cosmetic Act shall be an action brought under this subsection within the 45-day period described in subsection (j)(5)(B)(iii) or (c)(3)(C) of section 505 of the Federal Food, Drug, and Cosmetic Act.

 We’re still in the process of sorting out how all of these new and amended provisions would operate. And not all of them seem to make complete sense (e.g., How can an agreement described in the proposed text control when an applicant may seek an approval of its ANDA? Isn’t that really an FDA decision?)  In any case, whether renewed interest in changes to the statutory 180-day exclusivity provision, as a result of the Trump Administration’s recent budget proposal, will lead to passage of the “Expanding Access to Low Cost Generic Drugs Act” or another bill remains to be seen.

On March 1, 2018, FDA announced the release of several guidance documents: final guidance on Scientific Evaluation of the Evidence on the Beneficial Physiological Effects of Isolated or Synthetic Non-digestible Carbohydrates Submitted as Citizen Petition; final guidance on Reference Amounts Customarily Consumed: List of Products for Each Product Category Product Category; a small entity compliance guide on the new regulations regarding serving sizes; Questions and Answers for Industry on Dietary Fiber; and a Draft Guidance on Declaration of Added Sugars on Honey, Maple Syrup, and Certain Cranberry Products. The dietary fiber guidance and the added sugar in honey maple syrup and cranberry products guidance raise new issues.

Dietary Fiber Guidance

As we previously reported, in May 2016, FDA published a final rule amending the nutrition labeling regulations. Among other things, FDA redefined dietary fiber as non-digestible soluble and insoluble carbohydrates (with three or more monomeric units) and lignin that are intrinsic and intact in plants, and isolated or synthetic non-digestible carbohydrates (with three or more monomeric units)(hereinafter “added NDCs”) that FDA determines to have a physiological effect that is beneficial to human health.  In November 2016, FDA issued a draft guidance describing FDA’s criteria in evaluating the evidence that an added NDC has a beneficial physiological effect. Using the approach described in the draft guidance, FDA determined that the available evidence for 26 added NDCs was insufficient to meet the standard. Therefore, these added NDCs did not qualify as dietary fiber for purposes of nutrition labeling.

As described in the final guidance, FDA has reconsidered some of its criteria and approaches used in the evaluation of evidence for added NDCs.  Appendix A to the final guidance discusses the main changes in FDA’s position.  Specifically:

• FDA will consider clinical studies conducted in diseased populations.
• In the draft guidance, FDA had taken the position that since foods are intended for the general U.S. population, it would not consider results from studies on individuals with a specific disease. However, as explained in the final guidance, FDA has decided that it will consider evidence from studies on individuals with a disease under certain circumstance, namely when “extrapolating to individuals who do not have the disease is scientifically appropriate.” For example, FDA would consider studies on constipated individuals when evaluating the effect of an added NDC on laxation.
• FDA also has reconsidered its position on evaluating whether a combination of two NDCs has a beneficial physiological effect. If a combination of isolated NDCs will be used as an ingredient, there are two options. Either the citizen petition provides data on a specific (fixed) combination of the added NDCs, or it provides evidence regarding the beneficial physiological effect of each individual NDC included in the combination.
• The final guidance also includes additional examples of physiological endpoints that FDA may consider, e.g. satiety and fecal output/fecal weight as measured on the basis of grams/day as a measure of laxation. However, FDA maintains its position that fermentation and changes in microbiota in the large intestine are not valid physiological endpoints.
• FDA will consider studies in which there is a statistically significant difference in baseline values between groups, provided that the statistical analysis includes adjustments for these differences or otherwise corrects for these differences.
• The final guidance provides more information about how FDA will weigh the strength of the evidence.
• In its request for data on added NDCs, FDA provided for a process to submit unpublished data. Although FDA maintains that it will consider unpublished data in its determination of whether the added NDC is a dietary fiber, it does encourage submission of publicly available data. Amending the regulation to include an additional added NDC that meets the definition of dietary fiber requires notice and comment rulemaking. This is a public process. Thus, data critical for the evaluation of the evidence of a beneficial physiological effect will need to be available to the public.

It remains to be seen to what extent FDA’s changes in its position regarding inclusion and exclusion criteria for the evaluation of evidence will affect its assessment of the data for the 26 added NDCs in 2016.As readers of this blog know, several Petitions regarding added NDCs have been submitted. The timing of FDA’s responses to these Petitions remains uncertain. In the updated Questions and Answers regarding Dietary Fiber, FDA states that it remains committed to completing the review process in the “near future.” Although the publication of the final guidance and the reconsiderations regarding key issues are a step forward, much uncertainty remains. Among other things, clarification as to what constitutes an added NDC vs. what is an intrinsic and intact NDC is needed.

Declaration of Added Sugars on Honey, Maple Syrup, and Certain Cranberry Products; Added Sugars with A Twist 

FDA’s draft guidance on declaration of added sugars on honey and maple syrup and cranberry products is – for lack of a better word – interesting.

As readers of this blog may recall, a major issue in the amendment to the nutrition labeling regulations was the inclusion of the new requirement to declare added sugars. The final rule defines “added sugars,” in part, as “sugars that are either added during the processing of foods, or are packaged as such.” (Emphasis added).  As a result, the term includes single ingredient products such as honey and syrups; e.g. a jar of honey and a bottle of maple syrup would need to declare added sugars in the nutrition facts panel.  FDA got a large number of comments by the honey and maple syrup industries about this requirement.  Specifically, the comments raised concerns that declaring added sugars on single ingredient honey and maple syrup products would suggest to consumers that the pure products contain added table sugar because added sugars are listed in the Nutrition Facts panel. Both of these product categories have a history of economic adulteration with cheaper sweeteners, and according to the comments, the declaration of added sugars might lead consumers to believe sweeteners are added.

FDA’s draft guidance provides a possible solution to this issue. FDA proposes to exercise enforcement discretion for products that use a “†” symbol immediately following the added sugars percent Daily Value in the Nutrition Facts panel. The “†” symbol may direct consumers to a truthful and non-misleading statement on the package outside the Nutrition Facts panel.  In that statement, manufacturers may explain that no sugar was added to the pure honey or pure maple syrup.  In short, the Nutrition Facts panel will state that the product contains added sugars but a statement outside the Nutrition Facts panel will state that these are not added sugars, but are naturally occurring.

The added sugar labeling requirement also puts certain cranberry products in a bad light. The cranberry industry submitted comments to FDA explaining that the added sugars declaration would be detrimental to the cranberry industry by implying that cranberry products are less nutritious than competing products that have similar amounts of total sugars and nutrients.  Cranberries naturally contain little sugar and are extremely tart, so sugars usually are added for palatability.  Other fruits that naturally contain more sugar and are palatable without additional sugar would not need to declare added sugars.  For example, sweetened dried cranberries contain 29 grams of total sugars including 25 grams of added sugars per serving while raisins contain 29 grams of total sugars with zero added sugars per serving.

As with the honey and maple syrup products, FDA proposes to exercise enforcement discretion when such products use a “†” symbol immediately following the added sugars percent Daily Value in the Nutrition Facts panel. The “†” symbol may direct consumers to a truthful and non-misleading statement outside the Nutrition Facts panel explaining that addition of sugar to the cranberry product is meant to increase the palatability of the naturally tart fruit and that the amount of total sugars per serving is at a level that does not exceed the amount of total sugars in a comparable product with no added sugars.

Although these solutions might be palatable to some stakeholders, FDA’s proposed approach seems to undercut the basis for the requirement to declare added sugars. Undoubtedly consumer education will be crucial to explain that in some products added sugars are not a concern, whereas in other products these same added sugars are a concern.

To ensure consideration, comments to the draft guidance must be submitted by May 1, 2018.

While likely not FDA’s intent, the net effect of FDA’s requirements surrounding importation of active pharmaceutical ingredients is driving manufacturing of investigational finished drug products outside the United States. In its most egregious implementation, FDA’s current interpretation sets up a Catch-22 in which a batch of investigational API cannot be imported for manufacture of finished drug product without an IND, but an IND cannot be obtained without analyses and stability data on that drug product.  As a result, investigational API and drug product, from a practical perspective, must be made entirely within or entirely outside the US. Because API manufacturing is largely done outside the U.S., FDA’s requirements have the effect of encouraging sponsors to manufacture outside the U.S. to the detriment of pharmaceutical developers, U.S. contract manufacturers and patients.

An active pharmaceutical ingredient (API), or bulk drug substance, is “any substance that is intended for incorporation into a finished drug product and is intended to furnish pharmacological activity or other direct effect in the diagnosis, cure, mitigation, treatment, or prevention of disease, or to affect the structure or any function of the body,” but does not include intermediates used in the synthesis of the API. 21 C.F.R. § 207.1. Because API is intended to diagnose, cure, mitigate, treat, or prevent disease, or to affect the structure or function of the body according to this regulation, it meets the definition of a drug under the Federal Food, Drug, and Cosmetic Act (FD&C Act). See 21 U.S.C. § 321(p). Generally, API undergoes further manufacturing into a drug product, or finished dosage form, that contains the API and excipients (see, e.g., 21 C.F.R. § 210.3(b)(4) for a definition of drug product). Recent estimates from FDA indicate that approximately 80 percent of APIs used in the U.S. drug supply are manufactured in more than 150 countries. United States Government Accountability Office, Drug Safety: FDA Has Improved Its Foreign Drug Inspection Program, but Needs to Assess the Effectiveness and Staffing of Its Foreign Offices, at 1 (Dec. 2016).

Like all FDA-regulated products, API is subject to examination when it is imported or offered for import into the United States and must meet applicable statutory and regulatory requirements. FDA has the authority, under the FD&C Act, to refuse admission to any drug that “appears” to be misbranded or in violation of the requirements for new drugs, such as the need for an approved marketing application. 21 U.S.C § 381(a)(3). In general, the FD&C Act requires that any drug must have labeling that provides adequate directions for use or be subject to a regulatory exemption from this requirement. Id. § 352(f). API, because it is not yet a finished drug product, is unavoidably misbranded within the meaning of the FD&C Act as its labeling cannot bear such adequate directions for use. Therefore, any API imported into the United States must be subject to a regulatory exemption from the labeling requirements, such as existence of an active IND, and comply with all regulatory exemption requirements.

To see this in operation, one can examine the impact of regulatory exemption requirements at certain points in the drug development cycle. Early in the drug development cycle, manufacturers may utilize a single lot of API to conduct preclinical testing, manufacture drug product for analytical and stability testing and for use in initial clinical trials. Certain preclinical testing, as well as the manufacture and testing of drug product must be completed prior to filing an investigational new drug application (IND) to initiate human testing of a drug. See 21 C.F.R. § 312.23(a)(7). Initial U.S. clinical trials, on the other hand, can only occur after an IND is opened and in effect. Before the IND is opened and in effect, the importing pharmaceutical company can bring the API into the country for laboratory research so long as it complies with an exemption for API not intended for clinical use. The importer must provide information on this intended use to FDA at the time of import.

A separate import shipment that complies with a different exemption must be made in order to lawfully manufacture clinical trial material from the API. Under this exemption, the API must be labeled with the statement “Caution: For manufacturing, processing, or repacking in the preparation of a new drug limited by Federal law to investigational use.” In addition, the API must be used only in the manufacture of such new drug limited to investigational use as provided under the IND regulations. 21 C.F.R. § 201.122(b). The importer must provide information on this intended use to FDA at the time of import and, if the clinical trial is to be conducted under an IND, the IND number must be provided.

The practical effect is that pharmaceutical firms who wish to import API from outside the U.S. but manufacture drug product in the U.S. must undertake at least two separate imports prior to initiation of clinical trials. Even then, however, there are more hurdles. Because imported API for clinical drug product can enter the U.S. no earlier than the day the IND becomes effective (no sooner than 30 days after submission of the IND), drug product for use in clinical trials can not be available for use on day 30, when the clinical trial would otherwise be able to begin enrolling subjects. Instead, the clinical trial cannot begin until that API is manufactured into drug product and subjected to sufficient testing for release. Thus, the use of imported API to manufacture clinical trial material in the United States will result in a delay to beginning the clinical trial—a delay imposed by FDA’s overly rigid interpretation of its regulations. On the other hand, the manufacturer could produce clinical trial material outside the U.S. in time to import it into the U.S. and ship it to investigators on day 30, without delaying the start of clinical trials.

Once all necessary clinical and nonclinical studies have been completed to support an NDA, the manufacturer will want to begin producing finished drug product—the final dosage form in finished packaging “suitable for distribution to pharmacies, hospitals, or other sellers or dispensers of the drug product to patients or consumers” (21 C.F.R. § 207.1)—in anticipation of marketing the product upon FDA approval of the NDA. Because the finished drug product is not for investigational use, the API used in its manufacture cannot be imported under the previously described exemption. A separate exemption covers API intended for use in the manufacture of a finished drug product that is subject to a pending NDA. See 21 C.F.R. § 201.122(c). FDA regulations state that API can be subject to this exemption if an NDA has been “submitted but not yet approved, disapproved, granted, or denied, the bulk drug is not exported, and the finished drug product is not further distributed after it is manufactured until after the new drug application . . . is approved.” Id. Alternatively, manufacturers could produce commercial scale batches of finished drug product outside the U.S. and import them into the U.S. once the NDA is approved or utilize FDA’s Pre-Launch Activities Importation Request to stage finished product in advance of approval.

FDA has significant concerns about API imports, as is reflected in its Import Alert 66-66, requiring detention without physical examination for APIs that appear to be misbranded because they do not meet one of the exemptions provided in the regulations. FDA, Import Alert 66-66 (Dec. 1, 2017). Import Alerts are issued when FDA identifies a potentially recurring problem with imported articles. A drug placed on import alert shifts the burden to the importer to prove that its drug does not violate the FD&C Act. FDA issued the Import Alert for APIs because of concerns that importers obtained entry of their APIs by supplying legitimate NDA or IND numbers when the number did not cover the source of the API or when the importer had no right of reference to the NDA or IND number.

In essence, FDA’s current interpretation of its regulations may delay the importation of API at critical times during the development cycle and thus result in an overall delay to drug development. It may also present substantially increased costs involved with manufacturing the same finished drug product twice, but for different uses. Manufacturing drug product outside the U.S. may be a viable strategy for eliminating certain delays imposed by regulatory requirements. Therefore, the unintended consequence of FDA regulations covering the importation of APIs may be to drive the manufacturing of drug product outside the United States.

FDA should interpret and enforce the law and regulations to allow for the intended use of imported API to “evolve” through the drug development cycle.

February 28, 2018 is Rare Disease Day. In honor of that day, we thought it would be the perfect time to provide our annual rundown of the past calendar year in orphan drug designations and approvals.  And what a year 2017 was for orphan drugs!  As we’ve previously said, hardly a day goes by that we don’t see a press release or announcement that a company has requested or received from FDA’s Office of Orphan Products Development (“OOPD”) designation of its drug or biological product as an “orphan drug.”  And there’s a good reason for that: FDA received orphan drug designation requests at a near record rate of 1.4 per day (more than 2 per work day) in 2017, and  granted designation requests at a record rate of 1.3 per day (more than 2 per work day) in 2017!

In 2017, FDA’s orphan drug program continued to break new ground. Orphan drug designations and approvals (which include not only approvals of NDAs for new molecular entities and BLAs for original biological products, but also applications approved for new orphan uses of previously approved drugs and biologics) skyrocked compared to previous years.  FDA granted 77 orphan drug approvals, and granted 476 orphan drug designation requests.  Those numbers obliterate the previous records of 49 orphan drug approvals (2014) and 355 orphan drug designation requests (2015).  The increase in orphan drug designations may be attributed to FDA’s Orphan Drug Designation Modernization Plan, which targeted the elimination of  the backlog of pending designation requests.  FDA’s OOPD also received a near record 526 requests for orphan drug designation in 2017.  That’s a slight dip over the 2016 record of 582, but still not too shabby! Since 1983, FDA has granted more than 650 orphan drug approvals, has granted nearly 4,500 orphan drug designations, and has received more than 6,300 orphan drug designation requests.

Below are three tables – one for each metric we track – showing the year-by-year numbers since 1983. The numbers are largely based on information from FDA’s Orphan Drug Designations and Approvals Database.

New efforts FDA announced this week could mean that new records will be set in 2018. Those new efforts include a pilot program for more efficient orphan designation requests.  The components of the pilot program include a fillable form intended to make the designation process easier for sponsors and more efficient for FDA to review, an on-line tutorial to guide sponsors through the submission process, and a new inter-center consult process to streamline and standardize the Agency’s communications process.

Today the PEW Charitable Trusts released a detailed report on the general state of pharmacy compounding of human drug products in the United States. The Report focuses on compounding pharmacies, but addresses both sterile and non-sterile compounding regulation by states.  The Report also touches on states’ regulation of Outsourcing Facilities, which Congress created when it enacted Title I of the Drug Quality and Security Act (The Compounding Quality Act).  The detailed Report provides a helpful roadmap of where states stand concerning their widening role in the regulation of human drug compounders in a post-NECC world.  Given the morass of inconsistent state laws covering both traditional pharmacy compounding and Outsourcing Facilities (for both sterile and non-sterile human drugs) the roadmap is a welcome tool for industry, and those curious about what states are doing to address these important issues. The press release accompanying the Report notes the following points:

• Thirty-two state pharmacy boards require pharmacies that engage in sterile human drug compounding to be in “full compliance” with the quality standards for sterile compounding set forth in USP<797>.
• An additional ten states have requirements that are “’equivalent to or stricter than’” USP<797>, while an additional four states have pending policy changes that, if they are passed, would require USP<797> compliance or additional, more stringent requirements. The Report notes that, in 2015, 26 states required compliance with USP <797> or an equivalent quality standard.
• Thirty-nine states and the District of Columbia prohibit pharmacies from human drug compounding of sterile office stock formulations. This contrasts with responses to a PEW survey back in 2015 from two-thirds of the responding state boards that permitted office use compounding “to at least some extent.”

The Report does note, however, that only 22 states and D.C. report that they routinely inspect their in-state sterile compounders at least annually, which is down from 26 states in 2015.  The Report states that “interviews with state officials underscore the need for more financial resources and inspection capacity.”

The Report contains recommendations for states on best practices for compounders to ensure a safe supply of compounded formulations. Those recommendations include a focus on quality assurance and emphasis on adherence to at least USP guidelines, alignment with federal law regarding office stock compounding (which law remains controversial among the pharmacy compounding community and some members of Congress about the appropriate parameters of office use compounding pursuant to FDCA Section 503A).

Although the content of the Report itself addresses in detail each of these and other points, even more interesting components of the Report appear in its Appendices. As anyone who works in the compounding world knows, understanding positions of various states on issues such as sterile and non-sterile compounding, inspections, state licensing fees, permissibility of office stock compounding, and Outsourcing Facility licensing requirements  — to name a few — can induce both hand-wringing and hair pulling experiences for those that grapple with compliance with the myriad state requirements.

The Appendices set forth the questionnaire that PEW provided to states, and include several tables and charts specifically describing where states stand on these and other important issues (below). With respect to the Appendices, PEW sought states’ verification of data collected.  Forty-three states and D.C. responded, but seven did not respond.

• Quality Standards for Section 503A Pharmacies that Compound Sterile Drugs for Humans (App. C, Table C1): Addressing which states require compliance with USP <797> or an equivalent or stricter quality standard; whether a regulatory change will be needed to require compliance with revised <797> (not yet released); whether the state requires compliance with other quality standards; whether there is pending state legislation, and its effect if passed.

• State Policies on Section 503A Pharmacies Drugs for Humans in the Absence of Patient-Specific Prescriptions (App. C, Table C2): Addressing which states permit office use compounding and any restrictions on the same for sterile and non-sterile products; whether state legislation is pending.
• State Licensure and Registration of Outsourcing Facilities (App. C, Table C3): Addressing whether states license or register Outsourcing Facilities; the type of license required; the fees required for Outsourcing Facility state licenses; whether there is pending legislation affecting Outsourcing Facilities. Note that Table clarifies the confusing morass of state registration/licensing requirements for Outsourcing Facilities, which are both complex and at times inconsistent among states (and with the federal Compounding Quality Act).
• Inspections of In-State 503A Pharmacies that Perform Sterile Compounding for Humans (App. C, Table 4): Addressing the frequency of routine inspections; specific circumstances that trigger inspections.
• State Oversight of Out-of-State 503A Pharmacies that Perform Sterile Compounding for Humans (App. C, Table 5): Addressing applicable quality standards; whether inspections are required; frequency of inspections; who performs the inspections; whether there is pending legislation or regulations and what would happen if they passed.

Obtaining FDA decisions detailing when one orphan drug has been determined by the Agency to be “clinically superior” to another orphan drug – either to obtain approval of a product notwithstanding another company’s orphan drug exclusivity for the same drug for the same indication, and/or to obtain a separate period of orphan drug exclusivity – has historically been a bit of a task. First, we members of the public had to comb through FDA’s Orphan Drug Designations and Approvals Database to identify instances in which clinical superiority based on greater efficacy, greater safety, or a major contribution to patient care might have been an issue.  Then we had to submit – and wait for FDA to respond to – a Freedom of Information Act request to obtain FDA’s letter decision and orphan drug designation package.  The fruits of our labor are apparent in various FDA Law Blog posts that compile and categorize FDA’s various orphan drug clinical superiority decisions – see here, here, and here.  But those days of research and waiting might now be behind us!

As we previously noted in a summary memorandum, the 2017 FDA Reauthorization Act (“FDARA”) amended the FDC Act – and the Orphan Drug Act in particular – to add Section 527(e), which states:

(e) DEMONSTRATION OF CLINICAL SUPERIORITY STANDARD.— To assist sponsors in demonstrating clinical superiority as described in subsection (c), the Secretary—

(1) upon the designation of any drug under section 526, shall notify the sponsor of such drug in writing of the basis for the designation, including, as applicable, any plausible hypothesis offered by the sponsor and relied upon by the Secretary that the drug is clinically superior to a previously approved drug; and

(2) upon granting exclusive approval or licensure under subsection (a) on the basis of a demonstration of clinical superiority as described in subsection (c), shall publish a summary of the clinical superiority findings.

It’s FDC Act § 527(e)(2) that really got us excited! (Yes, this blogger gets excited about that kind of stuff.)  We had to sift through FDA’s website to find out how the Agency implemented the new statutory requirement, but we finally found a website titled “Clinical Superiority Findings.”  As of now, FDA’s website identifies only a single clinical superiority determination.  That determination concerns MYLOTARG (gemtuzumab ozogamicin), and it’s a greater safety clinical superiority determination:

The new approval for Mylotarg is for a lower dose and different schedule than the previous approval. In a cross-study analysis of clinical outcomes for patients with relapsed or refractory acute myeloid leukemia treated with single-agent Mylotarg, in comparison to the regimens using the previously approved regimen, patients treated with the new dosing regimen had less early mortality, less hepatotoxicity, less veno-occlusive disease, more rapid platelet recovery and less hemorrhage.  Therefore, the sponsor has demonstrated that the newly approved dosing regimen is safer than the previously approved dosing regimen, and thus clinically superior for the purposes of orphan-drug exclusivity.  21 CFR 316.3(b)(3), 316.34(c).

New clinical superiority determinations will be added as they are made by FDA. As for previous determinations, we assume that FDA will not add those to the website.  So, you’ll have to refer back to our previous postings for descriptions of those precedents.

On February 21, FDA published a final rule amending its regulations on the acceptance of data from clinical investigations for medical devices (83 Fed. Reg. 7366). These amendments are designed to ensure the quality and integrity of clinical data and the protection of human subjects.  FDA simultaneously released a guidance listing frequently asked questions about the new final rule. The final rule is effective for all studies in which enrollment begins on or after February 21, 2019.

Overall, the new rule seeks to provide a consistent approach to acceptance of clinical data, regardless of whether the data were collected inside or outside the United States (OUS). To this end, however, the amendments mostly affect the requirements for clinical investigations conducted OUS.  As noted in FDA’s guidance, these amendments appear to be, in part, the result of sponsors’ increased reliance on data from clinical investigations conducted OUS.

For Investigational Device Exemption (IDE) applications or premarket submissions supported by clinical data from investigations conducted OUS, the final rule adds a new provision to the IDE regulations (21 C.F.R. § 812.28) to ensure that the investigations comply with good clinical practices (GCP). This new provision states that FDA will accept data from a clinical investigation conducted OUS if the investigation is “well-designed and well-conducted” and the following information is provided:

1. A statement that the investigation was conducted in accordance with GCP;
2. The names of the investigators and the names and addresses of the research facilities and sites where records relating to the investigation are maintained;
3. The investigator’s qualifications;
4. A description of the research facility;
5. A detailed summary of the protocol and results;
6. Either a statement that the device used in the investigation is identical to the device that is the subject of the submission, or a detailed description of the device used in the investigation and a comparison to the device that is the subject of the submission;
7. If the investigation is designed to support the safety and effectiveness of a device, a discussion demonstrating that the data constitute valid scientific evidence within the meaning of 21 C.F.R. § 860.7;
8. The name and address of the Independent Ethics Committee (IEC) that reviewed the investigation;
9. A summary of the IEC’s decision to approve or modify and approve the investigation;
10. A description of how informed consent was obtained;
11. A description of any incentives provided to the subjects to participate;
12. A description of how the sponsor monitored the investigation; and
13. A description of how investigators were trained to comply with GCP and to conduct the investigation in accordance with the protocol.

For the purposes of this provision, GCP is defined as a “standard for the design, conduct, performance, monitoring, auditing, recording, analysis, and reporting of clinical investigations in a way that provides assurance that the data and results are credible and accurate and that the rights, safety, and well-being of subjects are protected.” 83 Fed. Reg. 7366, 7386 (new § 812.28(a)(1)).

As noted in items 8 and 9 above, GCP includes review and approval by an IEC. An IEC is defined as an “independent review panel that is responsible for ensuring the protection of the rights, safety, and well-being of subjects involved in a clinical investigation and is adequately constituted to ensure that protection.”  83 Fed. Reg. 7366, 7385 (new § 812.3(t)).  The regulation notes that an Institutional Review Board (IRB) is one type of IEC.

For significant risk devices, all of the items in the list above are required. For devices other than significant risk devices, the sponsor only needs to provide items 1, 2, 5, 6, 8‑10, and 12 from the above list in the submission.

If a sponsor is not able to comply with all of the GCP requirements listed above (e.g., because a requirement conflicts with a requirement in the country where the study is conducted), the sponsor may request a waiver from FDA.

The final rule also made conforming revisions to the premarket approval (PMA) application regulations in Part 814. The PMA regulations will now provide that if any clinical investigation in support of a PMA application was not conducted in compliance with Part 50, Part 56, or GCP, FDA may deny or withdraw approval of the PMA.

Now all IDE applications and medical device premarket submissions with OUS data must confirm compliance with GCP, as defined in the new provision described above. Submissions with data collected inside the United States must include a statement that each investigation was conducted in compliance with the applicable requirements in the protection of human subjects regulations (21 C.F.R. Part 50), IRB regulations (21 C.F.R. Part 56), and the IDE regulations (21 C.F.R. Part 812).  If any of these regulations do not apply (e.g., for IDE-exempt, non-significant risk studies), or the investigation was not conducted in compliance with these regulations, an explanation must be included in the submission.

In practice, it might be a good idea to for anyone submitting a 510(k) to add a new section that would include the statement of compliance, along with whatever additional information is required under the new rule. One can imagine that FDA will eventually add this statement as another item on the 510(k) “Refuse to Accept” checklist, so a separate section will provide greater clarity that the information is there.

These new provisions and FDA’s guidance will hopefully provide greater clarity to sponsors about how to demonstrate that clinical data collected from clinical investigations conducted OUS are adequate under FDA’s standards. However, now that the requirements are explicitly listed in FDA’s regulations, FDA will have less flexibility or discretion to accept OUS clinical data if compliance is not shown.  The new regulations will also increase the burden on sponsors, who must now affirmatively produce and/or describe in their IDE applications or premarket medical device submissions the items listed above.

* Law Clerk

On February 15, FDA’s Office of Combination Products (OCP) announced the draft guidance, “How to Prepare a Pre-Request for Designation (Pre-RFD).” Don’t let the name fool you though.  Unlike the similarly named Pre-Submission, a Pre-RFD does not need to precede a formal RFD.  A Pre-RFD is, in essence, an informal RFD through which a sponsor may receive a preliminary, non-binding jurisdictional assessment.  The practice of requesting informal, non-binding feedback from OCP prior to or in lieu of a formal RFD is not new and has been occurring for many years.  The guidance provides additional details regarding the process for doing so.

The draft guidance indicates that a Pre-RFD should include a product description, proposed indications for use, and a description of how the product achieves its intended use. A Pre-RFD can also, optionally, include other information, such as a description of the product’s manufacturing processes, data/studies supporting the primary mode of action, information regarding jurisdictional assignment (e.g., classification, primary mode of action, sponsor’s recommendation), and description of similar or related products.  There is no page limit for a Pre-RFD, a significant advantage over an RFD, which is capped at 15 pages.  This feature of the Pre-RFD process will be particularly useful for sponsors with substantial data supporting their primary mode of action.

Once prepared, the draft guidance indicates that a Pre-RFD can be submitted to OCP by email or in hard copy through mail. As with most submissions these days, the draft guidance includes a short screening checklist that OCP will use to perform an administrative review of a Pre-RFD within five business days of receipt.  Once accepted for substantive review, OCP aims to review and provide written feedback regarding a Pre-RFD in 60 days.

The draft guidance appears to envision an interactive review process, stating that sponsors may contact OCP with questions at any time during the review process. OCP anticipates that it can provide jurisdictional feedback based on the information provided in a Pre-RFD.  The draft guidance, however, indicates that a sponsor may request a meeting with OCP to provide a better understanding of how the product works.  A sponsor can request a meeting at any time and should include in its meeting request an explanation of the issues to be addressed and any supportive information.  OCP estimates that it will need approximately four weeks to prepare for such a meeting.  The guidance appears to contemplate that such a meeting would take place prior to OCP’s feedback on a Pre-RFD. It seems to us, though, that such a meeting could also be helpful after receiving  OCP’s feedback.

The draft guidance indicates that (similar to an RFD) if a product is changed after OCP’s review, the Pre-RFD feedback may no longer be applicable. Changes can include both physical changes to the product as labeling changes such as the indications for use.  If changes are made, the guidance recommends contacting OCP suggesting that a Pre-RFD could be an iterative process.  For example, if there are particular elements of a product that put it in one category or another, those could be changed and a new Pre-RFD submitted for the modified product in an effort to receive a different (potentially more favorable) jurisdictional assignment.

In sum, we think this draft guidance is informative and useful for sponsors that are interested in a more flexible, non-binding process for getting jurisdictional feedback from OCP, as compared to the traditional RFD process.

Overprescribing and inappropriate prescribing of controlled substances are significant causes of the nationwide opioid abuse epidemic. We have long believed that to effectively address the opioid epidemic, the Drug Enforcement Administration (“DEA”) must focus on physicians and other practitioners who fail to comply with legitimate prescribing and dispensing practices.  Two recent actions by the DOJ and DEA acknowledge that data collected by DEA since 1971 can be an effective enforcement tool and in certain cases can assist manufacturers and distributors to identify potential outliers.

We reported here that in November, Attorney General Jeff Sessions announced several initiatives addressing opioid abuse to include a new Louisville, Kentucky, Field Division and designated Opioid Coordinators in every district. More recently, on January 30, 2018, the Attorney General announced that DEA is attacking the opioid epidemic by launching a “surge” over the next six weeks by special agents, diversion investigators, and intelligence specialists targeting pharmacies and prescribers that dispense “unusual or disproportionate amounts of drugs.”  Attorney General Sessions Delivers Remarks on Efforts to Reduce Violent Crime and Fight the Opioid Crisis (Jan. 30, 2018) (here). Sessions noted that DEA annually collects 80 million controlled substance transaction reports from manufacturers and distributors that contain distribution quantities and inventory information.  The Attorney General said that “DEA will aggregate these numbers to find patterns, trends, statistical outliers-and put them into targeting packages.”  Sessions concluded that the surge will lead to “more arrests, secure more convictions-and ultimately help us reduce the number of prescription drugs available for Americans to get addicted to or overdose from these dangerous drugs.”

The Attorney General did not identify the transaction reports by name, but it is clear that he was referring to the Automation of Reports and Consolidated Orders System (“ARCOS”) reports that manufacturers and distributors submit to DEA.  Since regulations were first promulgated in 1971, DEA has required manufacturers and distributors of bulk and dosage form controlled substances to report inventories, acquisitions and dispositions of schedule I and II substances, and narcotic substances in schedule III as well as other selected substances such as Gamma-Hydroxybutyric Acid (“GHB”).  21 C.F.R. § 1304.33(c).  Manufacturers must also report synthesizing activities involving those substances in addition to certain schedule III and IV psychotropic controlled substances.  Manufacturers and distributors submit transaction reports to DEA at least quarterly.  21 C.F.R. § 1304.33(b).

Manufacturers and distributors must file ARCOS reports monthly, or in some cases quarterly, for every covered transaction to include the date, customer and amount of controlled substance distributed. Thus, DEA is able to track the specific quantity of drugs sold to wholesale distributors and the amount then distributed to each pharmacy.  The DEA ARCOS Unit has routinely aggregated the data from all reports and provides information to DEA agents and investigators, and other federal and state law enforcement and regulatory agencies, to identify diversion from licit to illegal channels.

Attorney General Sessions’ announcement that DEA would use this data to increase enforcement action against prescribers and other practitioners is not surprising except we wonder why DEA has not previously taken such action. DEA has certainly taken aggressive action against manufacturers and distributors for failing to report suspicious orders of controlled substances at the same time that DEA already possessed a database on the purchasing patterns of practitioners.  Unlike manufacturers and distributors, DEA has visibility to all ARCOS-reportable transactions, including purchases by pharmacies and practitioners; visibility that other stakeholders lack.  Manufacturers and distributors can only see with certainty what they themselves sell to pharmacies.

The industry has made repeated requests over the years for DEA to share information that could be helpful in identifying potential suspicious orders. Finally, last Wednesday, DEA announced that is adding to its ARCOS Online Reporting System the ability for manufacturers and distributors “to view the number of competitors who have sold a particular controlled substance to a prospective customer in the last six months.”  DEA Creates New Resource to Help Distributors Avoid Oversupplying Opioids (Feb. 14, 2018) (here).  DEA trumpeted that “this new tool will provide valuable information for distributors to consider as part of their assessment” of suspicious orders and may present a “red flag” that the customer may be diverting drugs.

While the new ARCOS tool is a useful first step, its usefulness is limited and could be improved. For example, it would also be useful if DEA would routinely publish information about trends in purchases of controlled substances by city or region, especially identifying areas where DEA believes there is a concern about sales relative to geography and population.  We understand there are limits to what DEA can and should provide given the highly confidential nature of individual sales and purchase data.  However, more coordination with industry on diversion trends would be very useful to manufactures and distributors, in particular.  The regulated industry should consider that DEA may now expect that industry will use this information in evaluating customers and customer orders, e.g., suspicious orders.

It will be interesting to see the results of the DOJ/DEA enforcement effort. We suspect that DEA will also utilize state Prescription Drug Monitoring Program (“PDMP”) data, to further evaluate whether certain prescribing and dispensing practices are for legitimate medical purposes.  State PDMPs track prescribing by practitioners and dispensing by pharmacies, hospitals and physicians.  The ARCOS and PDMP data used together allow DEA investigators to identify prescribers and pharmacies that are dispensing, as the Attorney General characterizes, “unusual or disproportionate amounts of drugs.”

While DEA has used ARCOS data to support enforcement efforts against manufacturers and distributors, we appreciate the Attorney General’s announcement that such data will be used in a comprehensive enforcement effort to target the primary source of the opioid crisis, overprescribing, and to that we say, it is about time.

The years-long battle over 5-year New Chemical Entity (“NCE”) exclusivity for Ferring Pharmaceuticals Inc.’s (“Ferring’s”) colonoscopy preparation, PREPOPIK (sodium picosulfate, magnesium oxide, and citric acid) for Oral Solution (NDA 202535; approved on July 16, 2012), may finally be at an end (pardon the pun). Last week, the U. S. District Court of the District of Columbia issued a Memorandum Opinion denying Ferring’s July 2018 Motion to Enforce Judgment (opposition and reply briefs available here and here) filed after FDA reversed course and issued a 9-page Letter Decision on June 9, 2017 concluding that under the Agency’s structure-centric interpretation of “active moiety” (rather than an activity-based interpretation), PREPOPIK is not eligible for 5-year NCE exclusivity.

As we previously reported, there’s quite a bit of back story to the PREPOPIK NCE exclusivity dispute. In short, after denying NCE exclusivity for PREPOPIK, FDA seemed to indicate that the Agecny would grant the exclusivity in light of the D.C. District Court’s September 2016 ruling in Ferring Pharmaceuticals, Inc. v. Burwell.  Judge Rudolph Contreras’s September 2016 Memorandum Opinion granted a Motion for Reconsideration filed by Ferring requesting reconsideration of the court’s March 2016 ruling that FDA’s pre-October 10, 2014 interpretation of the FDC Act’s NCE exclusivity provisions as applied to a newly approved Fixed-Dose Combination (“FDC”) drug product containing an NCE and a previously approved drug was not arbitrary and capricious. Although Judge Contreras initially backed FDA’s decision to deny NCE exclusivity for PREPOPIK, he reversed course after considering several precedents identified by Ferring in the company’s Motion for Reconsideration and remanded the matter to FDA.

Then came FDA’s June 9, 2017 Letter Decision concluding that PREPOPIK is not eligible for 5-year NCE exclusivity:

Upon further evaluation of the structure of sodium picosulfate during FDA’s consideration on remand, the Agency determined that sodium picosulfate is the di-sodium salt of a di-sulfate derivative of bis-(p-hydroxphenyl)-pyridyl-2-methane (BHPM) (Figure I). After excluding the salt and ester portions of sodium picosulfate, as FDA’s regulations require, what remains is BHPM. Therefore, BHPM is the active moiety in sodium picosulfate. BHPM is also the same active moiety as that of the drug substance bisacodyl, which was approved years before Prepopik.

Ferring promptly filed a Motion to Enforce Judgment with the DC District Court requesting that the court order FDA to recognize NCE exclusivity for PREPOPIK, and characterizing FDA’s exclusivity decision as an end-run of the court’s order. But in his 22-page February 13th Memorandum Opinion, Judge Contreras said that he is not persuaded by Ferring’s arguments:

Ferring [] argues that the FDA’s change in position regarding sodium picosulfate’s prior approval status violates the law of the case; that the agency is judicially estopped from changing its position in this manner; that the agency’s eleventh hour chemical analysis of sodium picosulfate impermissibly retroactively applies a new interpretation of the term “ester” and violates due process; and that the agency’s actions are arbitrary and capricious. . . . [T]he Court finds that the FDA’s actions on remand do not violate the law of the case and that the FDA is not judicially estopped from asserting its change in position concerning sodium picosulfate’s prior approval status. The Court also finds that Ferring’s arguments regarding retroactivity, due process, and arbitrary and capriciousness are not suitable for consideration within the context of a motion to enforce judgment.

Importantly, while the baseline for Ferring’s arguments was an apparent (and initial) shared understanding with FDA that focused on whether picosulfate was a NCE, Judge Contreras said that the court never relied on that understanding in his remand decision:

[T]he Court did not “rely” on the parties’ shared understanding that picosulfate was the active moiety in sodium picosulfate in reaching its decision, but rather focused on the issue presented to it: whether the application of the FDA’s original interpretation of the NCE five-year exclusivity provision to Prepopik was arbitrary and capricious, violating the APA. The identity of the active moiety in sodium picosulfate was not essential to the Court’s reasoning in reaching its decision, nor was it actually decided by the Court. Accordingly, although this remand gave Ferring the right to have its application adjudicated without the application of a particular arbitrary and capricious rule, it did not dictate a result in Ferring’s favor. Nor did it constrain the FDA’s decisionmaking process beyond the non-application of the rule that the Court had deemed arbitrary and capricious. On remand, agencies are permitted to come to the same conclusions as they had come to in the first instance, as long as they come to those conclusions for permissible reasons. . . . If there is a post-remand arbitrary and capricious, or otherwise invalid, final agency action that Ferring wishes to challenge, it may do so, but not through a motion to enforce the Court’s prior judgment.

As of this date, there’s been no indication that Ferring will appeal to the DC Circuit.

On February 13, 2018, the USDA Food Safety and Inspection Service (FSIS) published a proposed rule that would amend the egg products inspection regulations. The proposal had been announced on January 9, 2018. The 48-page proposal (including the preamble) covers more than a change in good manufacturing practices and has the potential to be far-reaching.

Introduction of HACCP Requirements

The purpose of the proposed rule is to modernize food safety inspection systems at egg products plants. To that end, FSIS proposes to require that an official establishment that processes egg products (a term that FSIS proposes to redefine to include additional products) use Hazard Analysis and Critical Control Point (HACCP) systems and Sanitation Standard Operation Procedures (SSOPs). FSIS also proposes to eliminate those “command and control” regulations that are incompatible with the regulations for HACCP and SSOPs.  Regulations that will be amended or deleted include those relating to egg products plant grounds and pest management; plant sanitation and requirements for plant construction, including rooms, doors, and windows; lighting; ventilation and odors.

According to FSIS, HACCP systems provide flexibility to tailor food safety systems to a particular product, facility, and equipment. The amendments to the regulations would align FSIS regulations for egg products with the regulations for meat and poultry.

FSIS notes that about 93 percent of egg products plants already operate under written HACCP plans. Consequently, the cost of the implementation of the new regulations will be “mitigated.”  However, the rule may come as a surprise to facilities that thus far have not been subject to FSIS jurisdiction.

FSIS intends to phase in the HACCP requirements over a 2-year period and the SSOP measures and requirements one year after the publication of a final rule.

Egg Products are Ready-to-Eat

FSIS considers pasteurized egg products ready to eat. To clarify this, the Agency proposes to specify in the regulations that official establishments must process egg products to be edible without additional preparation to achieve food safety; egg products must be free of detectable pathogens.  Plants are to maintain control of egg products that have been sampled and tested for public health hazards, until the test results become available.

Egg Products Definition

Under the Egg Products Inspection Act (EPIA), FSIS regulates egg products. The EPIA defines the term “egg product” in relevant part as “dried, frozen, or liquid eggs, with or without added ingredients, excepting products which contain eggs only in a relatively small proportion or historically have not been . . . considered by consumers as products of the egg food industry.” FSIS has the authority to exempt certain products from this definition.  The implementing regulation defines egg products to include a list of specific exemptions.  FSIS is now proposing to revise that definition.  Specifically, FSIS is considering removing the exemption of egg substitutes and freeze-dried egg products from the definition of egg products.

As discussed in the proposal, FSIS considers a product to be subject to the EPIA if it consists of dried, frozen, or liquid eggs, with or without added ingredients. Traditionally egg substitutes have been excluded from this definition; the addition of a color additive caused them to fall outside the definition of egg product.  However, FSIS now has determined this is incorrect; since the “fundamental ingredient” in egg substitutes is egg white, they are egg products and should not be excluded from the definition.  Similarly, FSIS has concluded that there is no justification for the exclusion of freeze dried egg products.  FSIS does not know the number of facilities that might become subject to FSIS jurisdiction as a result of this action.  In light of the FSIS requirements for import of products under its jurisdiction (including the requirement for the exporting country to be determined equivalent), this change in definition may have far reaching consequences for foreign establishments that manufacture freeze dried egg products and egg substitutes.

Other Amendments

FSIS proposes several additional amendments to make the requirements for egg products more similar to those applicable to meat and poultry products. For example, FSIS proposes to require special handling instructions such as “Keep Refrigerated,” “Keep Frozen,” and “Perishable Keep Under Refrigeration,” on egg products.  Also, egg products plants would be incorporated into the coverage of the “Rules of Practice” that the Agency follows when initiating administrative enforcement actions.

Some amendments that likely will be welcomed by egg products establishments include the proposal to change the interpretation of the requirement for “continuous inspection” to be consistent with current inspection requirements applicable to meat and poultry processing facilities; if finalized as proposed, egg products plants would be required to be inspected at least once per shift, instead of during all processing operations.

In a move certain to be welcomed by industry, FSIS proposes to amend the labeling regulation to allow for generic label approval for egg products, an option currently not available. FSIS estimates that about 50% of labels will be eligible for generic label approval.

Concurrently, FSIS issued draft guidance to help small and very small plants producing egg products to meet the proposed new regulatory requirements.

Because of the “magnitude of the proposed action and the need to provide for possible public meetings on the proposed action,” FSIS provides for a comment period of 120 days; comments to the proposed rule and the draft guidance must be received on or before June 13, 2018.

On Monday, the Trump Administration released a proposed Fiscal Year 2019 Budget.   Tucked into the Proposed Budget are provisions concerning 180-day generic drug exclusivity that garnered quite a bit of discussion earlier this week at the Annual Meeting of the Association for Accessible Medicines in Orlando, Florida.  While the provisions – which certainly were not proposed for inclusion in the Budget by the generic drug industry – are billed as an incentive to increase generic drug competition, if written into legislation and enacted, the Budget proposal may, in fact, have exactly the opposite effect.  But before we get to that item, let’s take a look as what the Proposed Budget provisions say. . . .

Page 51 of the Proposed Budget states:

[T]he Budget proposes to give the Food and Drug Administration (FDA) greater ability to bring generics to market faster by incentivizing more competition among generic manufacturers. This would lead to greater access for consumers to safe, high-quality, and affordable generic drugs and would improve health and quality of life through FDA’s advances in shaping medical practices.  The proposal ensures that first-to-file generic applicants who have been awarded a 180-day exclusivity period do not unreasonably and indefinitely block subsequent generics from entering the market beyond the exclusivity period.  Under this proposal, when a first-to-file generic application is not yet approved due to deficiencies, FDA would be able to tentatively approve a subsequent generic application, which would start the 180-day exclusivity clock, rather than waiting an indefinite period for the first-to-file applicant to fix the deficiencies in its application.  Triggering the start of the 180 day-exclusivity period for first-to-file applicants who “park” their exclusivity would speed delivery of generic drugs and provide substantial cost savings to American consumers.

Page 150 of the Proposed Budget, in a section titled “Major Savings and Reforms,” states:

The Budget proposes to give the Food and Drug Administration greater ability to bring generics to market faster by incentivizing more competition among generic manufacturers. This proposal would result in substantial savings to Medicare. The Budget proposes to ensure that first-to-file generic applicants who have been awarded a 180-day exclusivity period do not unreasonably and indefinitely block subsequent generics from entering the market beyond the exclusivity period. The proposal makes the tentative approval of a subsequent generic drug applicant that is blocked solely by a first applicant’s 180 day exclusivity, where the first applicant has not yet received final approval, a trigger of the first applicant’s 180 day exclusivity. This means the period of exclusivity would immediately begin for the first filer.  This proposal will enhance competition and facilitate more timely access to generic drugs.

Finally, the HHS budget document states on page 15:

The Federal Food, Drug, and Cosmetic Act provides an incentive to generic drug applicants by granting a 180 day period of exclusivity to the applicant that is first to file a substantially complete application to FDA. Increasing the availability of generic drugs helps to create competition in the marketplace, which then helps to make treatment more affordable and increases access to health care for more patients.

Some “first filers” can block subsequent generic competitors from receiving approval under this exclusivity provision. Similarly, first filers that receive tentative approval but then intentionally delay seeking final approval can block subsequent competitors. As a result, first filers can “park” their exclusivity, and consumers are denied access to generic products and must keep paying brand price.

The Budget includes a legislative proposal to address this problem. The proposal makes the tentative approval of a subsequent generic drug applicant that is blocked solely by a first applicant’s 180-day exclusivity, where the first applicant has not yet received final approval, a trigger of the first applicant’s 180-day exclusivity. This means the period of exclusivity would immediately begin for the first filer. This proposal will enhance competition and facilitate more timely access to generic drugs.

This proposal is estimated to create $1.8 billion in Medicare savings over 10 years.

. . . and on pages 68 and 85:

Change Conditions on First Generic Exclusivity to Spur Access and Competition

Effective FY 2019, this proposal makes the tentative approval of a subsequent generic drug applicant that is blocked solely by a first applicant’s 180-day exclusivity, where the first applicant has not yet received final approval, a trigger of the first applicant’s 180-day exclusivity. See the Food and Drug Administration chapter for a proposal description. [$1.8 billion in Medicare savings over 10 years]

Change Conditions on First Generic Exclusivity to Spur Access and Competition

This proposal makes the tentative approval of a subsequent generic drug applicant that is blocked solely by a first applicant’s 180-day exclusivity, where the first applicant has not yet received final approval, a trigger of the first applicant’s 180-day exclusivity. [Budget impact not available]

So, the concern is about so-called “parking” of 180-day exclusivity by a first applicant. And the remedy proposed in the Budget would require a change to the statute that would trigger the running of 180-day exclusivity when FDA tentatively approves a subsequent Paragraph IV ANDA, the fist applicant’s ANDA is not approved, and the only basis for FDA granting tentative approval to a subsequent applicant is a 180-day exclusivity block.

We’ve seen a shade of this proposal before . . . . Back in August 2003, while Congress was debating what would eventually become the Medicare Modernization Act (“MMA”), there was discussion of a similar issue.  Ultimately, however, Congress settled on the current six forfeiture provisions.  Those provisions significantly cheapened the value of 180-day exclusivity by making it possible for multiple (sometimes dozens of) generic drug manufacturers to qualify as first applicants eligible for 180-day exclusivity.  Now, the Trump Administration is seeking to further cheapen 180-day exclusivity by urging passage of a provision under the guise of promoting generic drug competition and savings.  But is the proposal a remedy in search of a problem . . . and a problem itself?

First, it should be noted that the MMA’s forfeiture provisions have worked relatively well over the past 15 year to address alleged “parking” of 180-day exclusivity. One need only look to a recent decision from the United States District Court for the District of Columbia for evidence that 180-day exclusivity can be triggered by a subsequent applicant. Moreover, the scenario contemplated in the Proposed Budget seems to be relatively rare, and is sometimes worked out among generic drug manufacturers so that both parties benefit (see our previous post here).

Second, further cheapening the value of 180-day exclusivity does not promote generic drug competition and savings.  In fact, it may have just the opposite effect.  If generic drug manufacturers have less security that they may benefit from 180-day exclusivity, then they may be less likely to submit ANDAs and challenge Orange Book-listed patents in the first place.

Third, by triggering 180-day exclusivity upon the tentative approval of a subsequent applicant’s ANDA, a first applicant can be caught totally off-guard as it is not possible to know when FDA might tentatively approve a subsequent applicant’s ANDA.  This disrupts launch planning and could significantly affect patent settlement agreements, which can promote earlier generic drug entry.

And fourth, the Trump Administration’s proposal could lead to monkeyshines among ANDA applicants (as first applicants seek to work deals with subsequent applicants or submit citizen petitions to prevent tentative approval) and among NDA holders and ANDA applicants.

If the provision proposed in the Budget has any legs, then it needs to be reworked to be less draconian. For example, instead of automatically triggering 180-day exclusivity, a subsequent applicant’s tentative approval could trigger a 75-day countdown to forfeiture similar to the 75-day period under the current failure-to-market forfeiture provision.  Anything less is untenable and would further erode the incentive Congress contemplated when it passed the Hatch-Waxman Amendments in September 1984.

Clean or cultured meat are terms used for animal muscle produced by growing cells directly rather than via the rearing and slaughtering of an animal. The idea of growing meat (or muscle) from cells outside the body (in vitro) to produce a product that replicates the characteristics of a product obtained from muscle harvested from slaughtered animals has been contemplated for a long time. In recent years, tools have been developed that have made the commercial production of a muscle food product in vitro a real possibility. As startup companies in the United States and elsewhere have gotten closer to getting an actual product to the market, the regulation of this type of product has become a topic of discussion.

Many questions arise. Who will regulate this product, USDA, FDA, or both agencies? How should this type of product be named? If it is grown from muscle cells and looks and tastes like meat, should it be called meat? And if yes, how should it be distinguished from traditionally produced meat which is obtained from a carcass after an animal has been slaughtered?

Apparently concerned about the effect the marketing of this type of meat product may have on the “traditional” industry, the United States Cattlemen’s Association (USCA) filed a petition with the USDA Food Safety and Inspection Service (FSIS) asking that FSIS establish formal definitions of “meat” and “beef” that exclude what petitioners call lab grown meat and products prepared from plant or insect protein. USCA asks that FSIS require that any “product labeled as ‘beef’ come from cattle that have been born, raised, and harvested in the traditional manner,” rather than from “alternative” sources such as a synthetic product from plant, insects, or any product grown in laboratories from animal cells. USCA further asks that FSIS narrow the definition of “meat” to “the flesh of animals that have been harvested in the traditional way,” and that FSIS add these new definitions to the FSIS Food Standards and Labeling Policy Book.

In support of its petition, USCA discusses the definition of “meat” and “beef” in common dictionaries and by USDA, the Federal Trade Commission’s (FTC’s) truth in advertising standard, and the labeling of “alternative products” as beef and meat in the market place. Somewhat surprisingly, USCA also cites FDA’s actions regarding Just Mayo in support of its petition; although FDA initially objected to that name for a product that failed to meet the standard of identity for mayonnaise by virtue of not containing egg, the Agency ultimately allowed the marketing of the product with that name provided that the product was clearly identified as egg-free.

This Petition formalizes regulatory consideration of an issue that until now was being considered informally, and bears watching on that basis alone. The Petition is limited to beef. Since development of clean pork and poultry is proceeding apace, it will be interesting to see if traditional producers of those animal products will follow USCA’s lead. We will be keeping an eye on this issue as it unfolds.

A hat tip to K&H’s The Daily INTAKE for putting this petition on our radar.

Barely a week apart, FDA announced the publication of a slew of guidance documents intended to further implement the food supply chain-related provisions of the Food Safety Modernization Act (FSMA).  In this posting, we look at the first set of documents, published on January 24.  In an upcoming posting, we’ll look at the second set of documents, published on January 31.

The first set of guidance documents – some draft, some not – brings home the extent to which the Agency is leveraging importers and producers to help ensure the safety of food, regardless of its origin.  The documents also show the difficulty of trying to weave together the FSMA regulations in a way that is comprehensible and doesn’t result in undue burdens or complexity.  Any party involved in the importation and production of food should closely read these documents, which are briefly summarized below.

• Foreign Supplier Verification Programs for Importers of Food for Humans and Animals: Guidance for Industry (Draft Guidance) – This 108(!) page draft guidance includes Q&As on a range of topics, including:
  • Applicability of the regulation under given circumstances (e.g., importation of food contact substances; return of  U.S. goods by a foreign purchaser; importation of live animals)
  • Requirements of an FSVP (e.g., single vs. multiple FSVPs depending on types of food imported and the number of suppliers; whether a supplier’s process or procedure provides at least the “same level of public health protection” – a potentially complex analysis that is the subject of its own guidance (see further below); FSVP obligations that apply to receiving facilities under the preventive controls regulation)
  • Qualifications of individuals who develop an FSVP and perform FSVP activities, as well as auditors
  • Conduct of a hazard analysis (e.g., identification of known or reasonably foreseeable hazards; obligation to address hazards that are intentionally introduced; records that must be maintained)
  • Conduct of an evaluation for foreign supplier approval and verification (e.g., scenarios where a foreign supplier relies on its supplier to control a hazard; evaluation of a supplier’s compliance with FDA food safety regulations; circumstances under which the risk posed by a food and a foreign supplier’s performance must be reevaluated)
  • Conduct of foreign supplier verification activities (e.g., how to satisfy this obligation when purchasing food from a broker or distributor; factors to consider in selecting appropriate verification activities; conduct of onsite audits; verification activities for hazards related to transportation; mitigation of conflicts of interest)
  • Importation of foods that can’t be consumed without a hazard control, or where a hazard is controlled subsequent to importation, including provision of disclosure statements
  • Corrective actions, including examples of such actions and assessment of actions taken by a supplier
  • Identification of the FSVP importer at entry
  • Maintenance of FSVP records (e.g., retention, storage, and availability to FDA; translation of records in a foreign language)
  • FSVP requirements applicable to importation of dietary supplements (e.g., rationale for modified requirements and criteria for eligibility; obligations with respect to importation of finished dietary supplements)
  • Requirements applicable to very small importers and to importation of certain foods from countries with an officially recognized or equivalent food safety system
  • Consequences of failure to comply (e.g., issuance of 483s and warning letters; refusal of admission; import alert; civil and criminal actions; and debarment)
• Guidance for Industry: Foreign Supplier Verification Programs for Importers of Food for Humans and Animals: What You Need to Know About the FDA Regulation; Small Entity Compliance Guide – This much shorter guidance focuses on modified procedures for importers that qualify as a “very small importer” as that term is defined in the FSVP regulation, as well as importers of food from certain small foreign suppliers (e.g., qualified facilities and farms that grow produce but are not “covered farms” as that term is defined in the produce safety regulation).  The guidance also addresses modified requirements applicable to importers of dietary supplements and components, and of food from countries with officially recognized or equivalent food safety systems.
• Considerations for Determining Whether a Measure Provides the Same Level of Public Health Protection as the Corresponding Requirement in 21 CFR part 112 or the Preventive Controls Requirements in part 117 or 507: Guidance for Industry (Draft Guidance) – In FDA’s words, “[t]his guidance describes FDA’s current thinking on considerations for determining whether a measure or procedure used in lieu of an FDA requirement in 21 CFR part 112, 117, or 507 provides the same level of public health protection (SLPHP) as the corresponding FDA requirement.”  Ugly as the acronym SLPHP may be, it’s best to get used to it because it represents a core concept integrated into several FSMA regulations.  FDA can be expected to closely scrutinize the basis for an SLPHP determination.  The guidance sets forth “Points to Consider” that are “intended to provide a general framework for evaluating the adequacy of a measure to provide the necessary level of public health protection that FDA determined is appropriate by establishing the corresponding requirement” – a potentially heavy lift, given the effort ordinarily expended by FDA in establishing food safety requirements.  The guidance forthrightly flags FDA’s expectation that “an SLPHP determination should be supported by sound scientific evidence that is analyzed by competent individuals, taking into account any unique measure-specific considerations.”  That said, the guidance recognizes that the scope of an SLPHP evaluation can vary widely, and one can reasonably expect that the corresponding burdens will vary accordingly.  The Points to Consider included in the draft guidance are listed below:
  • Are the relevant data and information in support of the use of a measure sufficient to make a determination that the measure provides the “same level of public health protection” as the corresponding requirement?
  • Are there any unique considerations relevant to the level of public health protection provided by that measure?
  • Was the evaluation of scientific and technical evidence conducted by competent individuals using an appropriate process?
  • Is the determination of “same level of public health protection” properly documented?

• Hazard Analysis and Risk-Based Preventive Controls for Human Food: Draft Guidance for Industry, Chapter 15: Supply-Chain Program for Human Food – FDA previously issued the first six chapters of this draft guidance.  Issuance of another chapter that focuses on the supply-chain program requirements in part 17, subpart G dovetails with the issuance of the FSVP guidance documents discussed above.  Chapter 15 weighs in at a solid 49 pages and addresses numerous topics, including:
  • The definition of “receiving facility” (with examples), and the circumstances under which certain activities required of a receiving facility can be conducted by other entities
  • The role of a corporate parent in establishing a supply-chain program
  • How to deal with situations where a supply-chain-applied control is applied by an entity other than a supplier
  • The use of sampling and testing as a supplier verification activity
  • What types of records constitute “relevant food safety records”
  • Factors to consider in approving a supplier and determining appropriate supplier verification activities (e.g., a supplier’s food safety history)
  • Development of written procedures for receiving raw materials, including those received from brokers or distributors
  • Alternative supplier verification activities when a supplier is a “qualified facility”
  • Qualifications of a “qualified auditor” (including the need for “at least some actual experience in auditing”)
  • Summary of several types of records required to document a supply-chain program
• Policy Regarding Certain Entities Subject to the Current Good Manufacturing Practice and Preventive Controls, Produce Safety, and/or Foreign Supplier Verification Programs: Guidance for Industry – This guidance states FDA’s intent to exercise enforcement discretion with respect to certain requirements in the regulations on preventive controls for human and animal food, produce safety, and FSVP.  The scope of this exercise of enforcement discretion is summarized in a handy fact sheet. As one especially notable example, each of the four regulations includes a requirement that a manufacturer/processor/importer disclose to its customer when a food is not processed to control an identified hazard, and obtain in return a written assurance that the hazard will be controlled.  Based on “feedback from industry expressing concern that certain product distribution chains would require vastly more written assurances… than anticipated by FDA during the rulemaking process,” FDA will not enforce the written assurance requirements pending the initiation of amendatory rulemaking.

Comments on the three draft guidance documents discussed above are due by May 25, 2018.

Buried in the 250 pages of the Bipartisan Budget Act of 2018 (BBA 2018), which was signed by President Trump on Friday, February 9, are several provisions directly affecting the discounts brand drug manufacturers must pay under federal drug benefit programs:

Increase in Part D Coverage Gap Discount (BBA 2018 section 53116): The first provision will substantially increase coverage gap discounts payable by brand manufacturers under the Medicare Part D prescription drug benefit beginning in 2019. Under Part D, enrollees have heightened co-insurance responsibilities in the so-called coverage gap – i.e., the annual period after the enrollee and the plan have spent a specified amount on covered drugs ($3,750 in 2018), but before the enrollee’s out-of-pocket costs reach the catastrophic coverage threshold ($5,000 in 2018). Under the Coverage Gap Discount Program, the manufacturer of an innovator drug (i.e., a drug approved under an NDA or BLA) dispensed to an enrollee in the coverage gap is currently required to subsidize 50% of the “negotiated price” of the drug – that is, the amount the Part D plan has agreed to pay the pharmacy for the drug. The enrollee and the plan share the remainder of the cost. Before BBA 2018, the enrollee’s cost-sharing amount in the coverage gap, 35% in 2018, was to decrease to 30% in 2019 and 25% in 2020 and thereafter. BBA 2018 has accelerated that reduction so that enrollees will pay 25% in 2019 and thereafter. At the same time, BBA 2018 increased the manufacturer’s subsidy under the Coverage Gap Discount Program from 50% to 70% of the negotiated price, beginning in 2019. (Drugs approved under ANDAs are unaffected by this amendment, since they are not subject to coverage gap discounts.)

Biosimilars no longer exempt from coverage gap discounts (BBA 2018 section 53113): Before BBA 2018, biosimilars were exempt from coverage gap discounts. That exemption will now terminate beginning in 2019.

Correction of alternative rebate for line extensions under Medicaid Drug Rebate Program (BBA section 53104): Under the Medicaid Drug Rebate Program, a line extension (for example, an extended release formulation) of an oral solid dosage form innovator drug is subject to an alternative unit rebate amount (URA) calculation, if that calculation produces a URA higher than that produced under the ordinary statutory methodology. The alternative calculation was intended to tie the URA of the line extension drug to the degree of the original drug’s price increases, in order to prevent manufacturers from avoiding price increase penalties by making small changes in a line extension. However, the alternative calculation formula, enacted in 2010 as part of the Affordable Care Act, did not work as intended, and has now been corrected by BBA 2018.

Before BBA 2018, the alternative URA calculation took the highest additional rebate (i.e., the penalty rebate for price increases greater than inflation) of any strength of the original drug as a percentage of the original drug’s average manufacturer price (AMP), and multiplied that amount by the AMP of the line extension drug. Under the BBA 2018 amendment, an amount is calculated as described above, but that amount is added to the base rebate (usually 23.1% of the AMP) of the line extension drug. Therefore, the alternative URA calculation will be greater under the BBA 2018 revision than under the original provision. The new amendment is effective as of October 1, 2018. Note that CMS has yet to issue regulations defining a “line extension” – something the agency said two years ago that it intends to do.