On September 24, 2020, the Department of Health and Human Services (HHS) and the Food and Drug Administration (FDA) announced a Final Rule and an FDA Guidance for the importation of certain prescription drugs. (See our coverage of the proposed rule and draft guidance here.) The Final Rule and FDA Guidance set forth the details of the two separate pathways introduced in the July 2019 Safe Importation Action Plan (see our summary here) and satisfy the rulemaking directive in President Trump’s July 2020 Executive Order on Drug Importation (see our coverage of the Executive Orders here). The following day, the Centers for Medicare & Medicaid Services (CMS) issued Release No. 114 (CMS Release), containing guidance on manufacturer obligations under the Medicaid Drug Rebate Program (MDRP) with respect to multi-market approved (MMA) products created under the pathway provided in the FDA Guidance.
The Final Rule
The Final Rule implements Section 804 of the Federal Food, Drug, and Cosmetic Act (FDC Act), 21 U.S.C. § 384, to allow for the importation of certain prescription drugs from Canada. Under the Final Rule, states (including the District of Columbia and U.S. territories), Indian Tribes, and, in certain circumstances, pharmacists or wholesale distributors (SIP Sponsors), may develop a Section 804 Importation Program (SIP) that must be authorized by FDA. The SIP Sponsors must specify which prescription drugs will be included in the SIP. Certain categories of prescriptions drugs are excluded by statute from inclusion in the SIPs, including controlled substances, biological products, infused drugs, intravenously injected drugs, drugs inhaled during surgery, intrathecally or intraocularly injected drugs, and drugs subject to Risk Evaluation and Management Strategies (REMS). Drugs that are going to be imported must be approved by the Health Products and Food Branch of Health Canada, and, other than the labeling, meet the conditions in an FDA-approved new drug application (NDA) or abbreviated new drug application (ANDA). This does not mean that a SIP Sponsor or Importer (described below) must obtain FDA approval of an NDA or ANDA for the imported drug, but that the product is currently marketed in the U.S. under an NDA or ANDA, and the imported version of the drug meets the conditions of that NDA or ANDA. In order to ascertain that such conditions are met, the manufacturer must provide the Importer with an attestation that the imported drug meets the conditions of the NDA or ANDA (regardless whether the manufacturer approves of the importation). In addition, the Importer or manufacturer must arrange for the imported drug to be tested by a U.S. laboratory for compliance with established specifications and standards.
Before imported drugs may be sold in the United States, they must undergo testing as described above, and be relabeled for sale in the United States. Each SIP Sponsor must identify the FDA-registered repackager or relabeler in the United States that will relabel the imported products with the required U.S. labeling, including the following required labeling statement: “[This drug was/These drugs were] imported from Canada without the authorization of [Name of Applicant] under the [Name of SIP Sponsor] Section 804 Importation Program.”
To protect the drug supply chain, SIP Sponsors must identify a Canadian Foreign Seller that will purchase the prescription drug directly from its manufacturer and a U.S. Importer that will buy the drug directly from the Foreign Seller. The Foreign Seller must be licensed by Health Canada as drug wholesalers and registered with FDA as a Foreign Seller; the Importer must be a wholesale distributor or pharmacist licensed to operate in the United States. Both the Foreign Seller and the Importer will be subject to the supply chain security requirements set forth in the FDC Act and Final Rule. Initially, each SIP will include one SIP Sponsor, one Foreign Seller, and one Importer. However, if the SIP Sponsor can demonstrate that it has consistently imported eligible prescription drugs in accordance with Section 804 and the Final Rule, the SIP Sponsor may submit a supplemental proposal to FDA to add additional Foreign Sellers or Importers to the SIP. Each SIP is envisioned to be limited to an initial two-year period, but may be reauthorized by FDA if the SIP satisfies the statutory requirements that the program (1) pose no additional risk to public health and safety and (2) result in a significant reduction in the cost of drugs to the American consumer.
As we’ve noted in our previous posts, FDC Act § 804 was enacted in 2003, and until now, no administration has made the statutorily required certification that an importation program will pose no additional risk to the public’s health and safety and will result in a significant reduction in the cost of covered products to the American consumer. Concurrent with the issuance of the Final Rule, HHS for the first time made the required certification to Congress. However, the Final Rule places the burden of demonstrating consumer savings on the SIP Sponsors; each SIP Sponsor is required to provide FDA with data and information about its SIP, including the SIP’s cost savings to the American consumer. At this time, six states (Vermont, Florida, Colorado, Maine, New Mexico, and New Hampshire) have passed laws that allow for the development of drug importation programs.
The FDA Guidance
Unlike SIPs, which arrange for eligible drugs to be imported whether or not the manufacturer approves of such importation, the FDA Guidance provides an importation pathway that may be used at the option of manufacturers. The FDA Guidance explains that “FDA has become aware that some drug manufacturers may be interested in offering certain of their drugs at lower costs and that obtaining additional National Drug Codes (NDCs) for these drugs may help them to address certain challenges in the private market.” The challenges FDA refers to are most likely contracts with payors and GPOs that lock in drug prices and/or price reductions for the currently available NDCs during the term of the contract. The FDA Guidance outlines the process for drug manufacturers to obtain NDCs for FDA-approved products originally intended to be marketed and sold in a foreign country (not limited to Canada) that are imported to the United States. A “multi-market approved product” (MMA product) can be (1) an FDA-approved prescription drug, (2) an FDA-licensed biological product, including an FDA-approved NDA that was deemed to be an FDA-approved Biologics License Application (BLA) but not a blood or blood component or an allogeneic cellular or tissue-based product, or (3) a combination product approved in an NDA or BLA. In the United States, the MMA product has to be authorized for marketing by the manufacturer, be the subject of a supplement to an approved NDA or BLA, and meet certain quality and labeling requirements.
The MMA product, including its labeling, must be the same as the FDA-approved drug or FDA-licensed biological product, except that the prescribing information, container label, and package label must state, “Imported following the procedures recommended in FDA Guidance: see [current link to the FDA Guidance],” The FDA Guidance recommends that a manufacturer obtain a new labeler code for its MMA products to avoid confusion with the FDA-approved drug or FDA-licensed biological product. The FDA Guidance includes other recommendations to help distinguish an MMA product and minimize potential product confusion, such as adding easily visible contrast stripes to the MMA product container and issuing Dear Healthcare Provider Letters with information about the MMA product. A manufacturer that wishes to import an MMA product must complete the registration and listing process for each MMA product. A manufacturer of an MMA product must also comply with the FDC Act drug supply security requirements for product identification, tracing, and verification.
Although the Notice of Availability for the draft guidance had asked for comments related to expanding this pathway to generic drug manufacturers, the final FDA Guidance is limited to brand products. The biggest change from the draft guidance to the final FDA Guidance is the inclusion of FDA-licensed biological products, including deemed biological products such as insulin, in the MMA product category. This may be significant because, as noted above, biological products may not be imported from Canada under the SIPs.
The CMS Release
The CMS Release addresses the eligibility of MMA products to receive payment under the MDRP and determines that such products meet the definition of a “covered outpatient drug.” According to CMS, an MMA product satisfies the statutory definition of a covered outpatient drug because it is a prescribed drug that is approved under FDC Act § 505 or licensed under the Public Health Service Act § 351. The manufacturer must enter into a Medicaid drug rebate agreement with HHS that includes the new labeler code and NDCs for the MMA products to ensure payment by Medicaid. The manufacturer would also need to comply with the statutory and regulatory requirements for participation in the MDRP with respect to the MMA products.
With regard to calculation of average manufacturer price (AMP) and best price, CMS views a manufacturer authorizing the sale of an MMA product in the United States under the FDA Guidance as similar to the manufacturer marketing an authorized generic product, with the non-MMA product being equivalent to the brand product and the MMA product being equivalent to an authorized generic marketed under the manufacturer’s approved NDA. Accordingly, CMS refers manufacturers to the its rules and recently proposed updates on authorized generic for guidance on the calculation of average manufacturer price (AMP) and best price. See Medicaid Program Proposed Rule, 85 Fed. Reg. 37286 (June 19, 2020); see also 42 C.F.R. § 447.506; CMS Releases 111 and 112. (See our coverage of the proposed rule here.) The CMS Release does not address calculation of AMP and best price for biological MMA products, to which the authorized generic provisions do not apply.
With regard to AMP, a manufacturer should treat the FDA-approved MMA product as a separate product that it has authorized to be sold under its NDA and submit a separate AMP for the MMA product based on the sales of that MMA product only. The manufacturer would submit a separate AMP for the non-MMA product based on the sales of that product only, not taking into account any sales of the MMA product. The MMA and non-MMA products would likely have different labeler codes and NDCs (as recommended in the FDA Guidance) , but the base date AMP for the MMA product would be the same as that for the non-MAA product because both are marketed under the same NDA. As the proposed Medicaid rule is finalized, CMS may issue additional guidance on AMP calculations for MMA products.
A manufacturer’s best price should reflect the lowest price available to any entity sold under a manufacturer’s NDA. CMS again analogized to the authorized generic product scenario in which the statutory definition of best price expressly provides that, in the case of an authorized generic, the best price shall be inclusive of the lowest price for such authorized drug available from the manufacturer during the rebate period to best price eligible entities. See 42 U.S.C. § 1396r-8(c)(1)(C) and 42 C.F.R. §§ 447.505, 447.506. Accordingly, the best price for either the MMA product or the non-MMA product sets the best price for both products.
The CMS Release does not address the treatment of drugs imported from Canada under SIPs. However, such drugs most likely would not be considered covered outpatient drugs because, unlike MMA drugs, drugs imported under a SIP do not meet the definitional requirement of being approved under an NDA or ANDA.