New Efforts to Expand Access to Laboratory Tests in Maryland

New Efforts to Expand Access to Laboratory Tests in Maryland

By Serra J. Schlanger

Readers who work with laboratory tests are likely aware that such tests can be subject to regulation by FDA, CMS, and individual states. A few state laws, particularly those in Maryland, New York, New Jersey, and Rhode Island, currently constrain how some laboratory tests are offered in those states.

On February 2, 2019, two bills were introduced to the Maryland General Assembly to address Maryland’s constraints. HB0526 and SB0495 both propose to modify Maryland Health General Code § 17‑215, which prohibits advertising or soliciting for medical laboratories. The Maryland law currently states: “A person may not directly or indirectly advertise for or solicit business in this State for any medical laboratory, regardless of location, from anyone except a physician, hospital, medical laboratory, clinic, clinical installation, or other medical care facility.” Under Maryland law, a “medical laboratory” includes “any facility, entity, or site that offers or performs tests or examinations in connection with the diagnosis and control of human diseases or the assessment of human health, nutritional, or medical conditions or in connection with job-related drug and alcohol testing.” Md Health Gen. Code § 17‑201(c). The cross-filed bills seek to create an exception to the current prohibition for laboratory tests that are ordered by a physician and performed by a medical laboratory certified under 42 U.S.C. § 263a (e.g., a CLIA-certified laboratory). If passed, the change would take effect on October 1, 2019.

It appears that the advertising prohibition has been in effect in Maryland since 1957, but the reasoning behind this particular law may be lost in the history books. Regardless, there have been many, many changes and developments in the field of laboratory testing and the regulations that apply to laboratory testing over the past 60+ years. For example, federal regulation of laboratory testing was introduced in 1967 (see Pub. Law 90-174 § 5(a)) and then amended by the Clinical Laboratory Improvement Amendments of 1988. FDA’s views and regulation of laboratory tests have also changed over the past 60+ years, particularly for laboratory developed tests (LDTs) (see previous posts here, here, here, here, here, and here). Congress is currently considering changes to the regulatory framework for laboratory tests (see our coverage of the VALID Act here).

We work with a number of clients who have been restricted by the current Maryland law and believe that the law is likely limiting the laboratory testing available to Maryland residents. We will continue to monitor these efforts to expand access to laboratory testing in Maryland.

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Congress Floats Discussion Draft of IVD Legislation

Congress Floats Discussion Draft of IVD Legislation

By Allyson B. Mullen & Jeffrey N. Gibbs

Since FDA announced in late 2016 that it would not finalize its laboratory developed test (LDT) guidances, it has become clear that any change to the LDT regulatory framework (at least during this administration) would need to come through a statutory change.  The first such proposal came in early 2017 with the release of the Diagnostic Accuracy and Innovation Act (DAIA).  FDA provided Technical Assistance (TA) on the DAIA last summer (see our earlier posts here and here).  As noted in our posts, FDA’s TA was essentially a complete rewrite of the DAIA, and the changes were viewed negatively by many in the industry.

It appears Congress had the opposite reaction, however. Last month, Chairman Walden, Ranking Member Pallone, Representative Bucshon, and Representative DeGette released a discussion draft of The Verifying Accurate Leading-edge IVCT Development (VALID) Act of 2018.  The VALID Act incorporates many concepts of FDA’s TA.  Congress is currently soliciting feedback on the draft through February 15, 2019.

While we do not expect that the discussion draft will be finalized in anything like its current form, we thought our readers would be interested in reading a short summary of the draft bill to understand the revised framework as it is radically different from what IVD manufacturers and labs are operating under today.  Our summary can be found here.  We encourage those with a stake in this legislation to contact their legislators, trade organizations, or other groups to provide feedback to this draft.  If finalized, this legislation could profoundly affect the availability and innovation of diagnostic tests.

We would also note that the discussion draft contains explicit requests for feedback.  Some sections relating to critical topics, e.g., breakthrough IVDs, are blank placeholders, or are bracketed, e.g., transfer or sale of approval or the precertification program.

Finally, we would emphasize that in a bill this complicated, careful drafting is essential.  Even seemingly modest tweaks to the established but complex IVD regulatory universe can have large ramifications, and the draft bill is anything but a modest tweak.

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Orange You Glad We Didn’t Make an Orange Book Pun?

Orange You Glad We Didn’t Make an Orange Book Pun?

By Sara W. Koblitz

In yet another step to address drug pricing, Commissioner Gottlieb announced last week several new initiatives, including an update to the revered Orange Book.  Cue the crazy Muppet arms!  Proclaiming the Orange Book update a “transparency initiative,” FDA expects that this undertaking will “provide greater certainty around timing of market entry and enable more informed decisions.”  This is all part of the Agency’s extensive effort to enhance competition, which has resulted in several new guidance documents pertaining to generic development, efforts to reform the Citizen Petition process, new priority reviews, an ICH proposal, and other efforts to expedite generic approval.  As Commissioner Gottlieb points out, FDA has made great strides in streamlining the generic review process in the last few years, including record numbers of generic drug approvals and tentative approvals in 2017 and 2018.

Over the course of 2019, FDA intends to issue two Orange Book-focused draft guidances.  The first is a draft guidance document explaining the process for therapeutic equivalence evaluation and the assignment of the TE codes listed in the Orange Book.  This is intended to facilitate requests for TE codes, as well as encourage development of more therapeutically equivalent drugs – particularly under the 505(b)(2) pathway, as 505(b)(2) applicants typically must request a TE code by Citizen Petition (unlike ANDAs, where a TE code is routinely assigned upon listing).  As such, FDA also believes that such clarity on TE codes may facilitate development of complex generics through the 505(b)(2) pathway.  The second Orange Book guidance will be a draft guidance with FAQs about reading and using the Orange Book.

FDA also plans to solicit public comment on the use of the Orange Book with an emphasis on potential enhancements.  It also seems like FDA may finally address whether drug-device patents – or now, given the hi-tech era we are in – drug-digital app patents should be listed in the Orange Book.  Industry has been asking for instruction on this issue for about 15 years, and without word from FDA, many manufacturers have decided to list them anyway if the device is integral to the drug as approved, so it will be interesting to see if FDA will change the current practice.  Again, FDA is doing this for the purposes of transparency so that potential manufacturers can now determine if a digital app patent might block marketing of a generic drug before investing resources.

FDA also announced a new guidance document, Marketing Status Notifications Under Section 506I of the Federal Food, Drug, and Cosmetic Act; Content and Format, which provides notification instructions for discontinued drugs, as required under FDARA.  506I of the FDCA requires manufacturers to provide notification to the Agency of the drug withdrawn from sale or the unavailability of a drug and requires the submission of a one-time report on marketing status for actively marketed drugs.  These statutorily-required notifications are intended to help the Agency understand which products are actively marketed and where there is a need for more generic competition.

Of note, the guidance explains that “withdrawn from sale” does not mean that the NDA or ANDA itself has been withdrawn, but that the drug has been discontinued from marketing – even temporarily.  FDA will use these notifications to determine whether to move products not available for sale to the “Discontinued” list.  Applicants withdrawing their product from sale must submit the notification 180 days prior to withdrawal, and newly approved drugs must submit the notification within 180 days of the date of approval of a drug if that drug will not be available for sale within 180 days of the date of approval.  Notifications are expected to include NDC numbers (for previously marketed drugs); the established name of the drug; the proprietary name of the drug, if applicable; the NDA or ANDA number; the strength of the drug; the date in which the drug will no longer be for sale or on which the drug will be available for sale, if known; and the reason for withdrawing or not marketing the drug.  Application holders who fail to submit this notification may also find their drugs moved from the “Active” to the “Discontinued” list.

Needless to say, we here at the FDA Law Blog are excited.

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This Cannot Stand, Man! The BLOCKING Act of 2019 Would Unnecessarily Reform 180-Day Generic Drug Exclusivity

This Cannot Stand, Man! The BLOCKING Act of 2019 Would Unnecessarily Reform 180-Day Generic Drug Exclusivity

By Kurt R. Karst

Over the 12 years that we’ve been doing this blogging gig, we’ve never before drawn inspiration for a post from Lebowski Pony – a.k.a. “the Dude” – that iconic character from the 1998 film The Big Lebowski, written and directed by Joel and Ethan Coen. (By the by, “the Dude” is supposed to be making an appearance in a Super Bowl commercial on Sunday.)  But the Dude came to mind while cogitating on a bill – the Bringing Low-cost Options and Competition while Keeping Incentives for New Generics Act, or “BLOCKING Act” – introduced on January 31, 2018 by Representatives Kurt Schrader (D-OR) and Earl L. “Buddy” Carter (R-GA) to amend the FDC Act’s 180-day exclusivity provisions.  Well, as the Dude says, “[t]his will not stand, ya know, this aggression will not stand, man.”

We’de normally give you a lot of background on the issue at this point in our post, but channeling our inner Dude, we’ll just say: “This is a very complicated case, Maude.  You know, a lotta ins, lotta outs, lotta what-have-you’s.  And, uh, lotta strands to keep in my head, man. Lotta strands in old Duder’s head.  Luckily I’m adhering to a pretty strict, uh, drug regimen to keep my mind, you know, limber.”

Well, on second thought, we may need a little more here than the Dude’s script can offer. (Ha!  Get it?) . . . .

Last February, the Trump Administration released a proposed Fiscal Year 2019 Budget.  Tucked into the Proposed Budget are provisions concerning 180-day generic drug exclusivity billed as an incentive to increase generic drug competition.  But as we noted in a post at the time, the Budget Proposal could have exactly the opposite effect.   Here’s a small taste of how the 180-day exclusivity provisions are described in the Budget Proposal:

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.

In short, the concern the Trump Administration appears to want to address is a first applicant’s ability to “park” 180-day exclusivity eligibility because of alleged “deficiencies” (e.g., unresolved cGMP concerns) that prevent FDA from granting final ANDA approval and commercial marketing under that application (thus triggering 180-day exclusivity) while subsequent ANDA applicants otherwise ready for approval are blocked from obtaining final approval solely because of a first applicant’s continuing eligibility for exclusivity.  (Perhaps the most prominent examples of the occurrence of this scenario concerned Ranbaxy Laboratories.  Ranbaxy, which was a first applicant eligible for 180-day exclusivity on several blockbuster drugs – e.g., valsartan, esomeprazole magnesium, and valganciclovir HCl – entered into a Consent Decree with FDA and the Department of Justice in January 2012, and was placed on FDA’s Application Integrity Policy List because of alleged fraudulent activity in connection with ANDA submissions.  Those concerns and allegations prevented FDA from granting final ANDA approval, and resulted in “parked” 180-day exclusivity until an alternative basis for forfeiture of 180-day exclusivity was found by FDA.)

The Fiscal Year 2019 Budget did not include draft language to implement the proposal discussed above.  That task became FDA’s (HHS’s) responsibility, and draft language was eventually forwarded to Capitol Hill.  Now that draft language has made its way into a bill: the BLOCKING Act.

The BLOCKING Act would amend FDC Act § 505(j)(5)(B)(iv), titled “180-day exclusivity period,” to place some new conditions on when a subsequent Paragraph IV ANDA can be approved, and thus, when 180-day exclusivity is triggered.  Below is the relevant text from the bill with proposed additions identified in red, italicized, bold typeface:

(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 earlier of—

(aa) the date of the first commercial marketing of the drug (including the commercial marketing of the listed drug) by any first applicantor

(bb) the applicable date specified in subclause (III).

***

(III) APPLICABLE DATE.—The applicable date specified in this subclause, with respect to an application for a drug described in subclause (I), is the date on which each of the following conditions is first met:

(aa) The approval of such an application could be made effective, but for the eligibility of a first applicant for 180-day exclusivity under this clause.

(bb) At least 30 months have passed since the date of submission of an application for the drug by at least one first applicant.

(cc) Approval of an application for the drug submitted by at least one first applicant would not be precluded under clause (iii).

(dd) No application for the drug submitted by any first applicant is approved at the time the conditions under items (aa), (bb), and (cc) are all met, regardless of whether such an application is subsequently approved.

Let’s take a closer look at the proposed (III) conditions – all of which must be in place for 180-day exclusivity to be triggered – one at a time . . .

Condition “(aa)” assumes a “but for” world in which a subsequent Paragraph IV ANDA could be approved if no first applicant were eligible for 180-day exclusivity.   In the “real world” this means that a subsequent Paragraph IV ANDA can only be tentatively approved because of a first applicant’s eligiblity for 180-day exclusivity.

Condition “(bb)” seems to assume – at least when read in connection with condition “(dd)” – that if a first applicant is unable to secure final ANDA approval within 30 months of ANDA submission, then there must be problems (i.e., deficiencies) with the application.  In fact, in a case where there are multiple first applicants, all it takes under the language of the bill is any one of those first applicants to reach the 30-month mark without approval.  We note in passing that FDA’s Fiscal Year 2019 Justification of Estimates for Appropriations Committees says that the “Median Review Time from ANDA Receipt to Approval” was 37.26 months (FY 2017 Actual), is 37.00 months (FY 2018 Annualized CR), and is estimated to be 36.75 months (FY 2019 President’s Budget).  Those figures are alarming when matched up with the 30-month provision in the bill (i.e., condition “(bb)”).

Condition “(cc)” – again referring to “at least one first applicant” – says that ANDA approval would not be precluded under  FDC Act §  505(j)(5)(B)(iii).  That provision governs 30-month patent infringement litigation stays.  In other words, if at least one first applicant no longer has a 30-month litigation stay in effect (perhaps because of a license agreement and dismissal of litigation) or there is no court-ordered preliminary injunction, then this condition goes into effect.  We note that in cases in which a company with a pending ANDA amends (or supplements) that application to include a Paragraph IV certification to newly-listed patent information, the statute precludes the imposition of a 30-month litigation stay on ANDA approval.  Thus, in cases in which all ANDA applicants qualify as a first applicant by virtue of a Paragraph IV amendment to newly-listed patent information, this condition would not apply.

Finally, condition “(dd)” says that regardless of what may happen in the future with respect to first applicant approval, 180-day exclusivity is triggered, perhaps as early as the date that is 30 months after the first ANDA submission (regardless of whether or not that initial ANDA was later amended to contain a Paragraph IV certification), because no first applicant ANDA is approved at the time a subsequent Paragraph IV ANDA is tentatively approved (because of a first applicant’s eligiblity for 180-day exclusivity), and there is no 30-month stay or preliminary injunction in effect for at least one first applicant.

There’s a lot to object to in this proposal to amend and augment the FDC Act’s 180-day exclusivity provisions.  But first off . . . is a legislative change even necessary??  After all, FDA already has sufficient statutory and regulatory authority to determine that a first applicant has forfeited eligibility for 180-day exclusivity because of ANDA “deficiencies” preventing final approval.

First, there’s the “withdrawal of application” forfeiture provision at FDC Act § 505(j)(5)(D)(i)(II).  That provision states that eligibility for 180-day exclusivity is forfeited under either of the following circumstances:

(II) WITHDRAWAL OF APPLICATION.—The first applicant withdraws the application or the Secretary considers the application to have been withdrawn as a result of a determination by the Secretary that the application does not meet the requirements for approval under paragraph (4).

FDA briefly discussed this forfeiture provision in January 2017 draft guidance document, stating:

The withdrawal of application provision provides for forfeiture under two conditions: (1) if the first applicant withdraws the application or (2) if FDA considers the application withdrawn for failure to meet the various general requirements for approval laid out in section [FDC Act § 505(j)(4)].   A first applicant’s affirmative withdrawal of its ANDA would meet the first condition, resulting in a forfeiture under this provision.  FDA has not yet considered a forfeiture under the second condition.

Second, FDA’s ANDA regulations (at 21 C.F.R. § 314.107(c)(3)) have for decades allowed the Agency to conclude that 180-day exclusivity will not be awarded to a first applicant that does not diligently pursue ANDA approval: “If FDA concludes that a first applicant is not actively pursuing approval of its ANDA, FDA may immediately approve an ANDA(s) of a subsequent applicant(s) if the ANDA(s) is otherwise eligible for approval.”  In promulgating this regulation (59 Fed. Reg. 50,338, 50,354 (Oct. 3, 1994)), FDA commented that:

For purposes of this rule, the phrase “actively pursuing approval” is intended to encompass a drug sponsor’s good faith effort to pursue marketing approval in a timely manner.  In determining whether a sponsor is actively pursuing marketing approval, FDA will consider all relevant factors, such as the sponsor’s compliance with regulations and the timeliness of its responses to FDA’s questions or application deficiencies during the review period. [(Emphasis added)]

Despite FDA’s apparent hesitance to make a determination under either FDC Act § 505(j)(5)(D)(i)(II) or 21 C.F.R. § 314.107(c)(3) that a first applicant has forfeited or otherwise lost 180-day exclusivity, the Agency has clear authority to make such a determination.  In particular, FDC Act § 505(j)(5)(D)(i)(II), by virtue of its internal reference to FDC Act § 505(j)(4), gives FDA broad discretion to determine if an ANDA is considered withdrawn.  Among other things, FDC Act § 505(j)(4) provides that FDA will not approve an ANDA because of certain cGMP and bioequivalence deficiencies.

If the intent of the BLOCKING Act is to address a first applicant’s ability to “park” 180-day exclusivity eligibility because of alleged “deficiencies” that prevent FDA from granting final ANDA approval and commercial marketing under that application while subsequent ANDA applicants otherwise ready for approval are blocked from obtaining final approval solely because of a first applicant’s continuing eligibility for exclusivity, then the BLOCKING Act doesn’t quite hit the mark.  It would punish ANDA applicants eligible for 180-day who are diligently pursuing final application approval, and would further dilute and cheapen the 180-day exclusivity incentive Congress created in the Hatch-Waxman Amendments.

After reading and re-reading the BLOCKING Act – and now at 2:32 AM in the morning – we have some initial specific concerns with the bill.  First, the BLOCKING Act is immensely and unnecessarily complex and becomes more complex with the addition of each variable (e.g., multiple first applicants).  Enactment of the proposed language would almost certainly lead to costly and time-consuming litigation.  Second, the BLOCKING Act makes 180-day exclusivity eligibility unpredictable for ANDA applicants.  Factors that can lead to the triggering of exclusivity under the proposed legislative language are not readily available (or are not immediately available) to the public, such as the time of a subsequent applicant’s tentative approval and the date of submission of an ANDA.  (Indeed, FDA may not update the Agency’s Drugs@FDA website for several days after tentatively approving an ANDA.  Moreover, the basis of such tentative approval is not known because FDA does not regularly post tentative approval letters.)

Moreover, the BLOCKING Act could allow for myriad other circumstances outside of alleged ANDA “deficiencies” to trigger 180-day exclusivity.  Some potential examples include:

  1. New bioequivalence or other required testing (e.g., elemental impurity testing or new or updated USP standards) that a first applicant is working diligently to complete;
  2. A pending Citizen Petition specific to a first applicant’s ANDA (e.g., formulation-specific) that has not been resolved at the time FDA grants tentative approval to a subsequent applicant’s ANDA; and
  3. Circumstances outside of an applicant’s control, such as: (a) the need to repeat bioequivalence studies, re-assay biostudy samples, or commission a scientific audit by a qualified independent expert because of concerns raised by FDA about the validity of reported studies conducted by a contract research organization (e.g., MDS Pharma Services); (b) catastrophic events such as explosion, fire, storm damage to manufacturing facilities; and (c) events that could not have been reasonably foreseen, and for which the applicant could not plan (e.g., abrupt discontinuation of supply of active ingredient, packaging material, or container closure system, or relocation of a facility or change in an existing facility because of a catastrophic event).

Although “the Dude abides” in The Big Lebowski, this FDA Law Blog dude does not and cannot abide with the BLOCKING Act.

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OIG Proposed Safe Harbor Revisions Take Aim at Formulary Rebates, Volume-Based PBM Service Fees

OIG Proposed Safe Harbor Revisions Take Aim at Formulary Rebates, Volume-Based PBM Service Fees

By Alan M. Kirschenbaum

Today the U.S. Department of Health and Human Services (HHS) Office of the Inspector General (“OIG”) released a proposed rule to put into practice an idea floated in HHS’ May 2018 Blueprint for lowering drug prices:  eliminating discount safe harbor protection for manufacturer rebates offered to Medicare Part D plans (including Medicare Advantage Prescription Drug Plans), Medicaid Managed Care Organizations (MMCOs), and their PBMs, as an incentive for drug manufacturers to reduce list prices.  The proposed exclusion was accompanied the addition of new proposed safe harbors for manufacturer point-of-sale discounts provided to such plans and PBMs, and non-volume based administrative fees paid to PBMs.  The intent of these amendments taken together is simply stated by the OIG:  it is “to eliminate rebates from manufacturers to PBMs, and replace them with discounts provided to beneficiaries at the point of sale.”  (p. 66)

OIG’s case against formulary rebates:  In brief, the preamble presents a three-pronged criticism of the current rebate framework:

  • PBM rebates increase drug costs to beneficiaries in the deductible phase and those with percentage-based cost-sharing obligations, since both of these out-of-pocket costs are based on the list price (WAC), which does not take into account rebates paid by the manufacturer to the plan or its PBM. According to the OIG, PBMs and manufacturers benefit from higher WACs, but beneficiaries pay more.
  • Current rebates skew PBM and plan formulary decisions in favor of drugs with the highest rebates, which may be more expensive and/or less effective than drugs with lesser rebates.
  • Current rebates are not transparent. Since manufacturer-PBM rebate agreements are confidential, plan sponsors do not know what portion of manufacturer rebates to PBMs, if any, are passed on to the plans.

Narrowing of Discount Safe Harbor:  To address these problems, the proposed rule would add an exclusion from the current discount safe harbor for “a reduction in price or other remuneration from a manufacturer in connection with the sale or purchase of a prescription pharmaceutical product to a plan sponsor under Medicare part D, a Medicaid Managed Care Organization, or to a pharmacy benefit manager acting under contract with a plan sponsor …, unless it is a price reduction or rebate that is required by law.”  Interestingly, the OIG expresses its view that the discount safe harbor even in its current form does not protect rebates paid for formulary position to Part D plans, MMCOs, or their PBMs, because these entities are not “buyers” as contemplated under the safe harbor.  (Many in the industry have heretofore taken a more expansive interpretation, since health plans arguably are ultimately “buyers” of prescription drugs.)  This raises the question why an amendment to the safe harbor is necessary.  The OIG’s answer is that the agency is acting “out of an abundance of caution and desire to offer bright line guidance regarding the treatment of retroactive payments to PBMs that they retain.”  (p. 19 and note 36).

The preamble makes clear OIG’s intent that the discount safe harbor continue to protect discounts offered to other entities, including wholesalers, hospitals, physicians, pharmacies, and third-party payors in other Federal health care programs.  (p. 41).  (One wonders how the latter payors (e.g., the Indian Health Service) can be considered “buyers” when Part D plans and MMCOs are not.)  OIG also does not intend the safe harbor exclusion to affect existing value-based arrangements between manufacturers and Part D and MMCO plan sponsors, though the text of the proposed amendment, as drafted, contains no exclusion that would protect such arrangements.  The OIG also does not intend the amendment to affect Medicaid supplemental rebate agreements.

New safe harbor for point-of-sale price reductions:  Along with the stick the OIG offers a carrot:  a new safe harbor for a reduction in price charged by a manufacturer for a drug that is payable by a Part D plan, an MMCO, or their PBMs, if the reduction is applied to the price charged to the beneficiary at the point of sale.  The rule requires that the price reduction be set in advance under a contract with the plan or PBM, and it may not “involve a rebate unless the full  value of the reduction in price is provided to the dispensing pharmacy through a chargeback or series of chargebacks . . . .”  Although this proposal is not crystal clear, the preamble describes a system under which the manufacturer would enter into a contract with the plan or PBM to offer a reduced price to network pharmacies.  This can be done through a chargeback or rebate to the pharmacy if the full price reduction to the pharmacy, combined with the patient’s cost sharing and the plan’s reimbursement to the pharmacy, is at least equal to the price agreed upon between the manufacturer and the plan or PBM.  The pharmacy, in turn, would be required to pass the entire manufacturer price reduction through to the beneficiary at the point of sale.  (p. 47)

New Safe Harbor for Administrative Fees to PBMsCurrently, many PBMs charge administrative fees that are based on a percentage of WAC or sales.  The OIG objects that these variable fees can “function as a disguised kickback.”  (p. 23)  Accordingly, a new safe harbor is proposed for PBM administrative fees that are for services that are specified in a written agreement that covers all of the services the PBM will provide in connection with the PBM’s arrangements with health plans during the term.  Importantly, the fees must be fixed (i.e., not percentage-based), fair market value, and not take into account business generated between the parties or between the manufacturer and the PBM’s health plans.  In addition, the PBM must disclose at least annually, and to HHS on request, the services rendered by the PBM to the manufacturer.  The OIG is considering, and solicits comments on, whether PBMs should also be required to disclose their fee arrangements to their client health plans, though this requirement is not reflected in the propose rule.

*    *     *

It is by no means certain that the anticipated shift from formulary rebates to point-of-sale discounts will have the desired effect of reducing pharmaceutical list prices and beneficiary out-of-pocket costs.  The proposed safe harbor amendment does not affect plans other than Part D or MMCO plans, so drug manufacturers may contract to provide discounts to these plans but leave their WACs, and current rebating practices, in place for the commercial market.  Among beneficiaries, there will be winners and losers.  Beneficiaries in the deductible phase and with co-insurance based on a percentage of list price will benefit from reductions in out-of-pocket expenses.  Those with flat copays will benefit less, and all Part D and MMCO beneficiaries will see their premiums increase as plans stop applying manufacturer rebates to reduce premiums.  The OIG believes that total reductions in cost-sharing will exceed total premium increases (p. 99), but critics disagree.  What can be said with confidence about the proposal is that it will increase transparency.  Government beneficiaries will know that their deductible costs and percentage-based cost-sharing are based on an actual net price.

The proposed rule will appear in the Federal Register on February 6.  The proposed effective date for the discount safe harbor amendment is January 1, 2020, and that of the of the new safe harbor for point-of-sale discounts is 60 days following publication of the final rule.  (The proposed effective date for the new safe harbor for PBM administrative fees is not specified.)  Comments on the proposed rule will be due on April 7.

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Key Insights from FDA’s Webinar on the Breakthrough Designation Program

Key Insights from FDA’s Webinar on the Breakthrough Designation Program

By Rachael E. Hunt

FDA recently hosted a webinar on the final guidance regarding the Breakthrough Devices Program.  The Breakthrough Device Program is meant to speed access to new devices that treat or diagnose “life-threatening or irreversibly debilitating diseases or conditions.”  See our previous post for a more in-depth review of the content of the final guidance.

Maureen Dreher, Policy Analyst in the Clinical Trials Program at the Office of Device Evaluation, presented an overview of the Program as set forth in the guidance as well as a summary of the differences between the draft and final versions.  This portion of the presentation was relatively brief; most of the time was allocated for questions and answers.  We found much of the information provided during the Q&A discussion to be useful and summarize what we considered the most insightful details below.  A copy of the webinar slides is available here.

Preventative Indications

One participant asked whether a device with a preventative indication that otherwise meets the breakthrough designation criteria would be eligible for the Program.  To satisfy the first criterion a device must “provide for more effective treatment or diagnosis…”  FDA did not preclude the possibility that a device with a preventative indication could qualify for breakthrough status, but suggested the determination may require careful wording of the indications and discussions with the Breakthrough Device Program staff.

Substitute for 513(g)?

A breakthrough designation request may include a statement of the planned marketing application—510(k), De Novo or PMA.  In its review of the designation request, FDA will make sure the product is, in fact, subject to premarket review, but the Agency will not comment on whether the sponsor has chosen the appropriate pathway.  The Breakthrough process is not a substitute for a 513(g).

Publication of Decisions and Metrics

One person asked whether FDA will be publishing a database of requests for designation determinations.  FDA explained that the breakthrough designation requests and decisions are confidential.  While a sponsor may wish to publicize that it received breakthrough designation, FDA will not maintain a public database of this information.

Multiple participants also expressed interest in the publication of the metrics of the Program—how many requests are received, granted, etc.  While these metrics are currently being tracked internally to inform programming decisions, FDA stated that there is no formal plan to publish them, but the speaker said that she would take the request for publication of the metrics back to management.  We note that FDA has communicated metrics from time to time.  For example, at the Association of Medical Diagnostics Manufacturers Focus meeting in Los Gatos, CA last October, FDA reported that it had granted 95 breakthrough requests (it’s unclear if this is just since the statutory change or also includes designations under the EAP guidance).  Of those 95, 29 were for IVDs.  Similarly, in a statement yesterday from Commissioner Gottlieb and CDRH Director Shuren regarding new steps to promote innovations in medical devices that help advance patient safety, the Agency reported that 112 devices have received breakthrough status.

Expected Level of Product Development

There is no expected level of product development prior to seeking breakthrough designation, but FDA is looking for evidence on technical success and clinical impact.  Specifically, FDA expects bench data that the device functions as intended, preliminary animal data on clinical impact, and/or literature that the product is likely to be more effective than currently available alternatives.  In our experience with the program, the data need not be extensive, but it must show that there is a reasonable likelihood that the device may be able to achieve the breakthrough indication.

Broad Indications

One participant asked whether a device can obtain breakthrough designation for a broad indication where a subset of that indication could qualify as a breakthrough.  The speaker explained that is not how the Program was intended to work.  A company may decide to seek designation for the narrower indication initially and pursue the broader indication in the future.  The general, non-breakthrough indication would be subject to the regular premarket procedures and timelines.

###

In concluding the call, FDA stated that any chance for FDA staff to engage with stakeholders improves understanding on both sides.  We appreciate FDA taking the time to present this information, and more importantly, to allow such a substantial portion of time to answer questions.

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HP&M’s Anne Walsh to Present on Pharmacovigilance & Drug Safety Issues

HP&M’s Anne Walsh to Present on Pharmacovigilance & Drug Safety Issues

Hyman, Phelps & McNamara, P.C. is pleased to announce that Anne Walsh will present at this year’s Pharmacovigilance & Drug Safety: Risk Management & Regulatory Compliance Conference, to be held in Arlington, VA on March 12-13, 2019.   The focus of her presentation is on post-market approaches to drug safety, such as adverse event reporting and mandated studies.  She will speak to Agency initiatives and research surrounding post-market safety issues, methods used to determine causal relationships, and tools FDA uses to address safety concerns.

Other topics to be addressed at the conference include:

  • Risk-Based Approaches to Signal Detection & Surveillance
  • Supporting Clearance through Proactive Safety in Clinical Research
  • Drug Safety Monitoring in the Post-Approval Environment
  • Use of Real-World Data to Support Long-Term Product Safety
  • Transforming Safety from National to Global Safety Surveillance
  • Technology & Automation in the Future of Pharmacovigilance

Attendee registration is limited to professionals from pharmaceutical and biotech companies.

FDA Law Blog readers can receive $200 off the event price using the promo code FDALAWBLOG.  Please register on this page.

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Commissioner Gottlieb and CBER Director Marks Deliver “State of Cell and Gene Therapy” Joint Statement

Commissioner Gottlieb and CBER Director Marks Deliver “State of Cell and Gene Therapy” Joint Statement

By James E. Valentine

As we await our nation’s State of the Union address, FDA’s own Commissioner Scott Gottlieb and Center for Biologics Evaluation and Research (CBER) Director Peter Marks issued a joint statement providing a state of union of sorts on the development and regulation of cell and gene therapy.  This comes at a time when we are seeing exponential growth in the number of cell and gene therapies entering clinical development (see previous coverage of the first gene therapy that was approved here).  The statement both provides an update on the advancement of these technologies and FDA’s actions and activities intended to further support their development.

An Inflection Point

Assessing the current pipeline and trends in incoming INDs, FDA views this as an inflection point in cell and gene therapy technology and innovation.  As such, FDA attempts to project the volume of cell-based or directly administered gene therapy products in development and gaining approval in coming years:

  • Currently 800+ active INDs
  • Anticipate receipt of 200+ new INDs per year by 2020
  • Predict approval of 10-12 cell and gene therapy products per year by 2025

Drawing an analogy to the platforms for humanizing antibodies that accelerated the mainstreaming of human monoclonal antibody drugs in the late 1990’s, FDA credits the advent of safe and effective vectors (e.g., AAV vectors) for the delivery of gene therapy products as enabling this progress.

To accommodate these increases, CBER is expanding its review group dedicated to reviewing these applications, with the hope of adding about 50 additional clinical reviewers to the CBER Office of Tissues and Advanced Therapies (OTAT).

Developing New Policy

To support the advancement of cell and gene therapies, Commissioner Gottlieb and CBER Director Marks underscored the importance of FDA developing a comprehensive framework for these technologies.  This is consistent with the work FDA has done over the last 1+ years, already weighing in on aspects of development through a series of guidance documents issued in December 2017 (see previous coverage here), followed-up with another release of guidances in July 2018 (find the full list of cell and gene therapy guidances here).

The two FDA officials used this opportunity to preview what additional draft and final guidance documents the Agency is currently developing, which include the following topics:

  • Different areas of active product development (e.g., products for inherited blood disorders like hemophilia). FDA previously issued a draft hemophilia drug development guidance, as well as retinal- and rare disease-specific guidances in July 2018.
  • Development of gene therapies for certain neurodegenerative diseases. In February 2018, the Agency released a series of neurology-focused drug development guidances for ALS, Duchenne muscular dystrophy, Alzheimer’s disease, partial onset seizures, and migraines (see previous coverage here), so this could be a key opportunity to see how FDA’s views on gene therapy development differ from traditional drug development.
  • Manufacturing of cell-based gene therapies, such as CAR-T cells. Guidances on this topic will recommend parameters for introducing advances in manufacturing without requiring costly new clinical investigations, as well as propose alternative ways to ensure safety and effectiveness of resulting products.  This area of guidance will also cover critical quality attributes and other factors related to product manufacturing, with the goal of specifying when minor changes are allowable without clinical bridging studies.  FDA is planning a public meeting in the coming months to discuss expediting clinical bridging studies when more than minor changes are introduced to the manufacturing process, but do not represent a transformation to a fundamentally different product.
  • Promote efficient development of safe and effective cell-based regenerative medicine products. For small sponsors, including academic investigators, who may not be able to conduct a clinical trial on their own, FDA intends to encourage these sponsors to pool clinical data to demonstrate safety and effectiveness of a product that is (a) manufactured with a similar manufacturing protocol and product quality specifications and (b) is used for a common clinical purpose.

Noticeably absent from the statement is any indication that the guidance documents will discuss the implications of the product quality policies on biosimilar development of cell and gene therapies.

Insights into FDA’s Evolving Regulatory Approach

While the Commissioner and CBER’s statement was mostly forward-looking, setting expectations for future policy development, a few key takeaways emerged.

The Role of Accelerated Approval

First, the statement notes that expedited programs, such as RMAT designation and accelerated approval are key to cell and gene therapy development.  Specifically, the statement sets out that accelerated, or Subpart E, approval can represent a faster route to approval when a gene therapy targets an underlying monogenetic change such that it could alter or cure the underlying genetic defect that leads to, and causes advance of, a disease.  This expedited development timeframe is able to be counterbalanced by post-marketing evaluation of the risks associated with gene therapies (i.e., durability and rare off-target effects), which require longer-term follow-up than traditional clinical trials allow.  This represents a great opportunity for FDA to more systematically utilize the accelerated approval pathway in an area outside of oncology, which has been the only area where FDA has had a well-established policy for use of this approval pathway.

In the same vein, the statement also distinguishes when CBER may view traditional approaches to drug development to be more appropriate.  FDA lays out that, where a gene therapy instead creates a genetic alteration aimed at treating the symptoms of a disease, or potentially altering the expression of a protein or enzyme believed to play a role in the advance of a disease (i.e., alter course and symptoms but not “cure” the disease), a more traditional clinical study is more appropriate.

Enforcing Pre-Market Approval of HCT/P’s

The statement expresses a continued concern by FDA that certain cell-based products that the Agency views as being subject to pre-market approval are being marketed outside of regulatory compliance and are even posing potential significant safety concerns to patients.  This refers to FDA’s ongoing attempt to reign in HCT/P manufacturing where it believes the products, primarily stem cell products, do not meet all four criteria for regulation solely under 21 CFR Part 1271.  In December 2018, the Agency issued a press release expressing its disappointment in the dearth of HCT/P manufacturers that have reached out to the Agency during the first 14 months of the enforcement discretion period (see previous coverage here).

In an apparent follow-up to last month’s press release, this statement announced FDA’s intent to undertake enforcement actions in 2019 for those products that pose a significant risk of potential harm to patients.  However, the statement did not specify what those enforcement actions would be, nor how this policy differs from what CBER’s enforcement posture has been to date regarding purportedly violative HCT/Ps.

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Petition to Bar Hydroponic Operations from Organic Certification

Petition to Bar Hydroponic Operations from Organic Certification

By Riëtte van Laack

The question of whether hydroponic operations are eligible for organic certification in the United States has been debated since 1995.  In most countries, such as Mexico and Canada, and regions, such as the EU, organic certification cannot be extended to crops not grown in soil.  However, in the United States, the USDA Agricultural Marketing Service (AMS) has historically taken the position that such operations are eligible for certification as long as they comply with the National Organic Program (NOP) regulations.  Now, organic hydroponic agriculture is facing a new challenge.

Between 2001 and 2010, the National Organic Standards Board (NOSB) Crops Committee repeatedly reevaluated the issue of “soil-less” growing systems, such as hydroponic systems.  In 2010, the NOSB once again assessed “soil-less” systems and concluded that they were inconsistent with organic status.  The NOSB recommended (by a vote of 12-1) that AMS issue a regulation specifying that hydroponic operations and hydroponically produced/grown products are not eligible for organic certification even if they use only substances permitted in organic production.  After further comments and questions by various parties, in May of 2014, AMS stated unequivocally that Organic hydroponic production is allowed.”  Hydroponic operations continued to be eligible for organic certification.

In 2015, AMS established a Hydroponic/Aquaponic Task Force to further explore the issue and write a report giving guidance to the NOSB on whether hydroponic/aquaponic production should be allowed under the current organic regulations; and if not, how the regulations could or should be changed.  By the fall meeting of 2017, by a vote of 8-7, the NOSB rejected a proposal (by the committee) to prohibit organic certification for hydroponic operations.  Subsequently, in a Jan. 25, 2018 notice, AMS (again) acknowledged the extensive debate over hydroponic, aquaponic, and aeroponic operations since the fall 2017 meeting of the NOSB, but noted that since the origins of the NOP , hydroponic operations had been eligible for certification.  AMS declared that such operations would continue to be eligible for certification unless and until AMS issues final regulations to the contrary.

Now, a coalition of opponents against organic hydroponics is trying to get AMS to issue such regulations, banning hydroponic operations from organic certification.  On January 16, 2019, the Center for Food Safety (CFS, endorsed by The Cornucopia Institute, Food & Water Watch, Cultivate Oregon, Maine Organic Farmers and Gardeners Association, Maine Organic Farmers and Gardeners, Association Certification Service, Northwest Organic Dairy Producers Alliance, Organic Farmers Association and several others) submitted a Petition to AMS requesting that AMS issue regulations excluding hydroponic agricultural production from organic certification, consistent with the 2010 NOSB recommendation and report.  Specifically, CFS asks AMS to amend 7 CFR § 205.105 to prohibit hydroponic systems and to revoke organic certification for currently certified hydroponic operations.

CFS points to legislative history, the statute and the regulations to support its Petition.  It also references inconsistency among organic certifiers.  Some certifying agents do not certify hydroponic operations whereas others do (According to CFS, there are currently 41 USDA certified organic hydroponic operations).  CFS also points to the prohibition of organic certification of hydroponic operations in other countries.

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FDLI to Sponsor Webinar on Patient Assistance Programs

FDLI to Sponsor Webinar on Patient Assistance Programs

Next Thursday, February 7, the Food and Drug Law Institute will conduct a webinar entitled, “Patient Assistance Programs, Recent Enforcement and Best Practices.”  The webinar will cover the various forms of patient assistance programs, the legal authorities that apply to them, recent enforcement actions, best practices from both the manufacturer and charity perspectives, advertising and promotion implications, adverse event reporting, and anticipated future developments.  Hyman, Phelps & McNamara, P.C.’s Alan Kirschenbaum will moderate the program.  Registration information can be found here.

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