Case Dismissed: Strike Two for PMRS

Case Dismissed: Strike Two for PMRS

By Sara W. Koblitz

In one of the multiple lawsuits that Pharmaceutical Manufacturing Research Services (PMRS) has filed against the FDA related to the approval of abuse-deterrent opioids in the last few years, the Eastern District of Pennsylvania summarily rejected PMRS’s bid to keep abuse-deterrent opioid, RoxyBond, off the market.  The Court determined that PMRS did not have Article III standing to challenge FDA’s approval of RoxyBond.

For those unfamiliar with the backstory, PMRS is a contact manufacturer for drug products that has petitioned FDA repeatedly to stop the approval of pending and future opioids indicated for chronic use.  These requests have specifically named opioid products approved with abuse-deterrent properties, asking that FDA stay approval of specific products, like RoxyBond, the first immediate release opioid approved for chronic use with abuse-deterrent properties. PMRS has submitted six petitions for stay and citizen petitions to FDA since February 2016 – all asking FDA to either stay or revoke approval of opioids labeled for chronic use. FDA has denied all of these petitions (Strike One) other than the one filed in March 2017 and one filed in November of 2018, which remain pending. PMRS also submitted an NDA for its own abuse-deterrent, immediate release opioid for acute rather than chronic use. FDA issued a Complete Response Letter for the product in November 2017 and denied PMRS’s NDA and Request for A Hearing on October 30, 2018 (which ultimately led to another PMRS lawsuit against FDA) (potentially Strike 3).

In August 2017, PMRS sued FDA arguing that the Agency’s denial of its petitions was arbitrary, capricious, and an abuse of discretion in contravention of the Administrative Procedures Act and asked the Curt to stay the effective date of RoxyBond. On Tuesday, the Court dismissed the case for lack of jurisdiction because PMRS lacks Article III standing. The Court made clear that an agency’s mere denial of a petition does not constitute injury in fact for purposes of Article III standing. PMRS additionally argued that FDA could compare a PMRS application to RoxyBond during the approval process and therefore the approval of RoxyBond would alter the approval process for abuse-deterrent opioids, but the Court rejected that argument as too speculative to establish injury in fact. PMRS also could not rely on the “competitor standing” doctrine either because its NDA did not have tentative approval nor was PMRS a current competitor with RoxyBond.

Notably, this decision sets forth the premise that even if a plaintiff is the recipient of a final agency action, it may not be enough to confer Article III standing. Even having a pending NDA may not be enough to seek judicial review. While we’ll have to wait to see how this is applied beyond the narrow circumstances of this case, it could have ramifications for trade associations or public interest groups that routinely use the Citizen Petition process to try to convince FDA of their policy positions.

{ Comments are closed }

Updates to FDA’s Software Pre-Certification Program

Updates to FDA’s Software Pre-Certification Program

By Adrienne R. Lenz, Senior Medical Device Regulation Expert

On January 7, 2019, FDA released new documents related to its Software Pre-Certification (Pre-Cert) Program:

In this post, we will cover the Working Model, which is in its third revision, and the Test Plan, which is a new document.  We will discuss the Regulatory Framework on a follow-up post.

The Pre-Cert Program is intended to create a new streamlined regulatory process for software as a medical device (SaMD) (see our earlier blog posts on the program here, here, and here).  The program focuses primarily on the software developer and its processes.  For lower risk software, there may be no premarket product review while for moderate and higher risk software, the product-specific information would be submitted in a streamlined premarket application.  FDA has stated that the goal of the program is to “have tailored, pragmatic, and least burdensome regulatory oversight that assesses organizations (large and small) to establish trust that they have a culture of quality and organizational excellence such that they can develop high quality SaMD products, leverages transparency of organizational excellence and product performance across the entire lifecycle of SaMD, uses a tailored streamlined premarket review, and leverages unique postmarket opportunities available in software to verify the continued safety, effectiveness and performance of SaMD in the real world.”  Working Model at 7.

The details of the Pre-Cert Program are outlined in the Working Model.  The first notable change to the Working Model is the introduction of the Total Product Lifecycle.  While previous versions described each of the steps, this version clarifies that the program has four key components following a Total Product Lifecycle (TPLC) approach and describes the interactions during each component.  The four components of the program are:

  • Demonstrate a culture of quality and organizational excellence through an Excellence Appraisal (pre-certification).
  • Determine the SaMD’s required review through Review Determination.
  • Conduct a Streamlined Review, and
  • Verify a SaMD’s continued safety, effectiveness and performance and the organization’s commitment to culture of quality through post-market Real-World Performance.

The Excellence Appraisal would evaluate software manufacturers based on five culture of quality and organizational excellence principles (Excellence Principles), including: product quality; patient safety; clinical responsibility; cybersecurity responsibility; and proactive culture.  Organizations would be certified into one of two levels depending on their experience in developing products.  While FDA envisions the use of accredited third-parties for Excellence Appraisal in the future program, they have clarified in this version of the working model that the Excellence Appraisals will be performed by FDA during the 2019 testing of the program.

To us, the Excellence Principles relate closely to the quality system regulation (21 C.F.R. Part 820), yet there is no connection made in the Working Model.  Once precertified, the Working Model describes several factors that may trigger the need for an additional Excellence Appraisal, including patient or product issues, significant restructuring, mergers or acquisitions, continuous improvements that lead to a change in performance capability, new activities or incorporation of a new clinical domain, or continued recurrence of safety signals.  However, it does not describe how inspectional findings in a quality system inspection might affect the precertification status.  And to avoid inspectional findings, precertified software manufacturers should also be careful to ensure that their processes continue to meet quality system requirements, especially in cases where new formats for providing information may be acceptable in an Excellence Appraisal or Streamlined Review.

For precertified software manufacturers, bringing a SaMD to market would begin with a Review Pathway Determination.  While the Review Pathway Determination was described previously, it has been clarified that it requires submission to FDA of information about the SaMD and its risk.  In 2019, the information proposed for this component of the program would be provided during an optional Pre-Submission meeting or as part of the premarket submission.  In the future, FDA anticipates that the SaMD product-level elements would be submitted when the precertified organization is ready to 1) market their SaMD if review is not required or 2) submit their SaMD for Streamlined Review if review is required based on the manufacturer-determined risk category.  Depending on the organization’s precertification level and the SaMD’s Risk Categorization according to the International Medical Device Regulators Form (IMDRF), FDA will confirm whether the product requires a streamlined premarket submission or no premarket submission.  To stay within existing regulatory authority, the Regulatory Framework limits the Pre-Cert Program pilot to Pre-Cert De Novo applications and Pre-Cert 510(k)s following classification of the device in a Pre-Cert De Novo.   FDA also intends, in the future, to post review pathway determinations (when no additional review is required) or following clearance or approval (when a marketing submission is required), which should further assist companies in properly categorizing their SaMD.

For those products that require a marketing submission (which includes all pilot products), the program’s streamlined review promises a shortened review timeline, but does not give estimates on how much time might be saved.  The Working Model further states that FDA anticipates that the amount and complexity of clinical data will ultimately be the driver for the duration of the review.  In our review of the product content that would be submitted, at least for 510(k) devices, there does not appear to be much that differs from a traditional submission.  There is some elimination of possible redundancy (e.g., the device description serves as the software description), and the software development environment description and lower level software testing reports need not be submitted.  In our experience, these parts are not a large portion of the submission under review and are less likely to result in deficiencies, while review of clinical and non-clinical performance data, which is still submitted in a streamlined review, and response to FDA deficiencies related to performance data and substantial equivalence are more likely to slow down the overall time to market.

The last phase of the Pre-Cert Program’s TPLC approach includes collection and analysis of real-world performance analytics (RWPA), encompassing at least three types of analysis: Real-world Health Analytics (RWHA), User Experience Analytics (UXA) and Product Performance Analytics (PPA).  The RWPA plan would be developed in advance of introducing the SaMD to the market.  FDA envisions engaging in an iterative process with SaMD manufacturers to refine the types of data elements most relevant to the SaMD.  FDA would collect RWPA data to FDA periodically (e.g., quarterly), though the mechanism for this data collection is not described.  FDA would be analyzing the data in addition to the SaMD manufacturer and the data would be used to drive decisions such as the need to make software modifications as well as FDA’s ability to identify potential emerging issues across product classes.  It is not clear how FDA will work with SaMD manufacturers, especially if there are differences in opinion in terms of actions that should be taken based on the data.  Questions on timeliness of FDA’s review are also raised as they will be reviewing data after a SaMD manufacturer has already conducted their review and made plans for any necessary actions.

For the pilot program, FDA intends to test the process, which we applaud.  The Test Plan will include retrospective tests of SaMD submissions that have been previously reviewed and prospective tests.  For prospective tests, Pre-Cert companies volunteering to participate in the testing would not only undergo the Pre-Cert process but would also submit a full submission so that FDA can compare results of the current review process to the streamlined review process.  The Working Model states that FDA will not establish precertified companies during the testing in 2019 which suggests that only those companies that are already part of the program will also be included in the submission testing.  Reviewing the proposed methods, we find ourselves asking questions similar to those FDA typically asks device sponsors regarding their test plans.  For example, FDA states they will “consider the Pre-Cert model to be confirmed when the program framework remains static over multiple premarket submissions” but does not provide justification of this endpoint, provide a specific number of submissions over which the framework remains static that would be needed to validate the program, or state how long FDA would run the test.  Further, the Test Plan does not provide a submission sample size with justification or discuss how many divisions and reviewers will participate to account for typical review variability.  If limited to only De Novos or follow-on 510(k) submissions from the current companies participating in the precertification pilot, there may not be enough submissions to truly validate the program.

Overall, we aren’t convinced that the time and cost for market entry will be reduced given the now multi-step process and questions that these new steps raise.  For example, how much time and effort will be required for an organization to become precertified?  In addition to the precertification step, there are two additional steps needed to bring SaMD to market, including a review to confirm the appropriate market application (or that no marketing application is needed) and postmarket commitments including periodic (e.g., quarterly) review of real-world performance data by FDA.  Will FDA have adequate resources to perform these steps without delaying the overall SaMD development timeline?  It is not clear whether the promised benefit of a shorter submission review will outweigh the additional efforts.  This will likely be dependent on the organization and the number of SaMD products it develops and supports in the market.

{ Comments are closed }

FDA Issues Final Rule on Medical Device Classification Procedures

FDA Issues Final Rule on Medical Device Classification Procedures

By Véronique Li* —

On December 17, 2018, FDA published a final rule, Medical Device Classification Procedures: Incorporating Food and Drug Administration Safety and Innovation Act Procedures, to amend its regulations governing classification and reclassification of medical devices to align with the relevant portions of the Federal Food, Drug, and Cosmetic Act (FD&C Act) as amended by the Food and Drug Administration Safety and Innovation Act (FDASIA).  We previously blogged on the proposed changes here.  While FDA said that the final rule allows it to classify any device from class III to class I or class II, a process known as down-classification, it also makes it easier for the agency to increase product classification based on new or changing information to more appropriately reflect device risk.  FDA’s easier ability to up-classify devices may be particularly relevant in light of the Agency’s November 2018 announcement on new steps to modernize FDA’s 510(k) program. In this announcement, which we previously blogged on here, CDRH highlighted that it has eliminated the use numerous of 510(k)-cleared predicate devices via up-classification.  This up-classification process, involving 1,477 devices since 2012, had, historically, been both time- and resource-intensive. FDA’s use of this process could increase through the easier re-classification process.

FDASIA, which became effective on July 9, 2012, established a new process for requiring premarket approval (PMA) applications for pre-amendment class III devices and for the reclassification of devices by administrative order, rather than by rulemaking.  FDA is amending the provisions of its regulations governing reclassifications initiated by FDA to incorporate the process for issuing administrative orders and to update generally the part 860 regulations that govern the classification and reclassification of devices to conform them to the FDASIA changes and current FDA practices.  The final rule is essentially the same as the proposed rule.  For instance, just as described in the proposed rule, the final rule adds § 860.90 and amends § 860.125 to explain how and when FDA will consult with panels regarding classification of pre-amendment devices. However, citing that its intent was to provide clarity and not to implicitly change the classification/reclassification process, FDA did not incorporate the original proposed definitions.

Just like the proposed rule, the final rule states that prior to publication of a final order reclassifying a device or requiring a PMA application for a pre-amendments class III device in response to a petition, FDA must publish a proposed order in the Federal Register, consider any comments submitted on the proposed order, and hold a device classification panel meeting.  After consideration of comments on the proposed order and findings, FDA must either:

(1) finalize the call for PMAs by issuing an administrative order requiring approval of a PMA and publishing in the Federal Register findings with respect to:

(i) degree of risk or injury designed to be eliminated or reduced by requiring the device to have an approved PMA or a declared completed product development protocol and

(ii) the benefit to the public from the use of the device; or

(2) publish a notice in the Federal Register terminating the proceeding and initiate a reclassification proceeding based on new information.

This final rule, which will become effective March 17, 2019, also clarifies the process where reclassification of a post-amendments device or a transitional device is initiated by FDA, rather than in response to a petition.  This rule details the procedures, which consist of a proposed reclassification order, optional panel consultation, and a final reclassification published in the Federal Register following consideration of comments and any panel recommendations or comments (amended §§ 860.134(c) and 860.136(c) of this final rule.

A post-amendments device remains in class III and is subject to the PMA requirements unless and until: (1) FDA reclassifies the device into class I or II; (2) FDA issues an order classifying the device into class I or II via the De Novo classification process; or (3) FDA issues an order finding the device to be substantially equivalent to a predicate device that does not require the filing of a PMA.

This final rule also removes the requirement for a hearing under part 16 (21 C.F.R. Part 16) for reclassifying transitional devices.  Transitional devices are devices that were regulated by FDA as new drugs before May 28, 1976; any class III device that was approved by a New Drug Application is now governed by PMA regulations.  FDA believes the process providing for a proposed order, panel consultation as appropriate, consideration of comments, and final order provide sufficient opportunity for participation and review of reclassification of transitional devices.

Additionally, the final rule removes two definitions (§ 860.3(f) and (g)) associated with classification questionnaire and supplemental data sheet.

We believe that the finalization of this rule simplifies procedures for classifying and reclassifying medical devices yet it makes it easier for the agency to make changes on an existing classification based on new or changing information.  For example, FDA proposed to down-classify medical image analyzers applied to mammography breast cancer and ultrasound breast lesions from class III to class II. This shows that as FDA became more comfortable with these devices, they intended to reduce regulatory burdens on industry by no longer requiring a PMA and accepting a 510(k).  On the other hand, this rule could be problematic if FDA begins to up-classify more devices through the simplified process.

* Senior Medical Device Regulation Expert

{ Comments are closed }

Pharmaceutical Manufacturers Must Submit 340B Ceiling Prices Starting in the First Quarter of 2019

Pharmaceutical Manufacturers Must Submit 340B Ceiling Prices Starting in the First Quarter of 2019

By David C. Gibbons & Alan M. Kirschenbaum

Beginning February 15, drug manufacturers will have a new price to report to the Federal government: 340B ceiling price.  Under Section 340B of the Public Health Service Act, a manufacturer of covered outpatient drugs, as a condition of having its drugs be eligible for federal payment under Medicaid and Medicare Part B, to enter into a Pharmaceutical Pricing Agreement with the Department of Health and Human Services (“HHS”). Under the agreement, the manufacturer is obligated to charge no more than a statutorily defined ceiling price (the “340B ceiling price”) to certain types of purchasers (called “Covered Entities”), which include certain types of clinics that receive federal funding and certain types of hospitals.  Since the creation of the 340B program in 1992, drug manufacturers have been required to calculate the 340B ceiling price so that they can charge Covered Entities the appropriate price, but they have not been obligated to report the 340B ceiling price to the government – until now.

In 2010, section 7102 of the Affordable Care Act (“ACA”) amended Section 340B to require HHS to develop a system to verify the accuracy of 340B ceiling prices calculated by manufacturers and charged to eligible Covered Entities.  To implement this requirement, the Health Resources and Services Administration (“HRSA”) Office of Pharmacy Affairs (“OPA”) has developed an electronic system for manufacturers to report their 340B ceiling prices, using HRSA’s Office of Pharmacy Affairs Information System (“OPAIS”).  OPAIS was launched in 2017 as a database of information about Covered Entities, manufacturers, and contract pharmacies participating in the 340B Program, but it has now been expanded for use as a vehicle for manufacturers to report their 340B prices.  This new reporting requirement has been a long time coming.  Subsequent to the enactment of the ACA in 2010, HRSA issued an Information Collection Request (“ICR”) in April 2015 to solicit comments on its plan to develop the electronic data collection system (see our previous blog post here).  Now, over three years after that ICR was issued, OPAIS is open for manufacturer reporting.

In a recent update to manufacturers, HRSA provides some details related to implementation of 340B ceiling price verification.  HRSA will obtain certain relevant data from CMS, including the Medicaid Rebate average manufacturer price (“AMP”) and unit rebate amount (“URA”) for each covered outpatient drug.  HRSA will obtain package size information from First Databank, a widely used publisher of drug pricing information.  From these data, OPAIS will calculate the 340B ceiling price.  Manufactures will submit corresponding data in OPAIS.  For each covered outpatient drug, these data include the National Drug Code number, AMP, URA, Wholesale Acquisition Cost, and the 340B ceiling price, as well as packaging information, product name, and labeler name.  OPA will compare the 340B ceiling prices submitted by manufacturers with those calculated by OPAIS, and any discrepancies will be identified for the manufacturer to resolve.  Adjudicated 340B ceiling prices will then be made available in OPAIS to Covered Entities.  HRSA notes that OPAIS includes security safeguards to protect confidential pricing data from unauthorized re-disclosure.

Manufacturers should note that OPAIS will be available for only approximately two weeks each quarter for manufacturers to upload or enter their data.  The first two-week manufacturer submission period is February 15, 2019 through March 4, 2019.  HRSA states that manufacturers will receive an email when the pricing data upload period is open.

{ Comments are closed }

CBI’s 4th Edition Drug Pricing Transparency Congress

CBI’s 4th Edition Drug Pricing Transparency Congress

CBI is holding its Fourth Edition Drug Pricing Transparency Congress on March 25-26, 2019 in Philadelphia, Pennsylvania.  This program convenes stakeholders to discuss how the future of drug pricing transparency regulations will impact commercialization, reimbursement, pricing, and compliance practices.  Given the novelty and complexity of state laws aimed at transparency and reporting of drug pricing information, this will be of particular interest to FDA Law Blog readers. . . . and, importantly, for which our readers can get a discount.

Hyman, Phelps & McNamara, P.C.’s David Gibbons will be joining the distinguished faculty of legal and regulatory experts to participate in the State-by-State Analysis Showcase and speak on the current status of Nevada’s SB-539.

As a sponsor of the event, we can offer our readers a special $300 discount off the registration.  The discount code is: DPC300, which expires February 1st.  We look forward to seeing you at this conference.

{ Comments are closed }

What Will FDA Do With All Those “Violative” Stem Cell Clinics Once Enforcement Discretion Tolls in November 2020?

What Will FDA Do With All Those “Violative” Stem Cell Clinics Once Enforcement Discretion Tolls in November 2020?

By Mark I. Schwartz

Enforcement discretion for stem cell facilities (and certain other HCT/P manufacturers) ends in November of 2020, and as FDA indicated in a recent press release, the agency is “discouraged” by the dearth of manufacturers wanting to interact with them during the enforcement discretion period.

Back in 2008, when I was still in the Office of Chief Counsel at FDA, there were virtually no U.S. clinics marketing stem cell therapies, and in late 2015 when I left my position as CBER’s Deputy Director  of the Office of Compliance and Biologics Quality, at FDA, there were at least 570 stem cell clinics/manufacturers in the U.S., concentrated mainly in California, Florida, Texas, Colorado, Arizona and New York, according to an independently published report.  There are likely many more than that today.

In fact, I recently discovered that even the internal medicine practice that I frequent in the Washington DC suburbs offers autologous stem cells derived from adipose tissue to treat osteoarthritis – this just a stone’s throw from the FDA campus in White Oak, Maryland.

Given the number of such facilities, the “discouraging” trend that FDA referenced in its recent press release, and that fact that over a third of the enforcement discretion period has already passed, it is highly unlikely that most of these clinics will voluntarily cease operations by the end of the period.  In that eventuality, what are FDA’s options?

Over the past 6-8 years, the agency’s policy with regard to stem cell facilities has largely been wait-and-see.  They have sent a number of untitled letters and warning letters to such facilities over the years, but have very rarely taken any action beyond that, despite many of these facilities continuing their activities unabated after receiving such regulatory correspondence from FDA.

Over the years, FDA has initiated legal action (i.e., seizure or injunction) only against stem cell manufacturers in two types of situations.  First, in instances where there were allegedly serious or life-threatening adverse events to patients of the facility, such as in the actions against US Stem Cell Clinic LLC of Sunrise, Florida and California Stem Cell Treatment Center Inc., previously discussed here.

In the first case, ocular stem cell injections were alleged to have led to the partial or total blindness of at least three patients, and in the second case, the therapies were alleged to have led to infections necessitating the hospitalization of several recipients of the therapies.

A similar case is currently unfolding, with FDA having sent a Warning Letter late last year to Genetech, Inc., a stem cell company from San Diego, California (not to be confused with Genentech, from San Francisco, California).  In a press release issued in conjunction with the publication of the Genetech Warning Letter, FDA stated that CDC had received reports of infections from 12 patients, and that all these patients all required hospitalization.  If this company does not desist in the manufacture and implantation of these cell therapies, one would expect that this case is also likely to lead to FDA initiated litigation.

The other type of situation that has led to FDA legal action against a stem cell company, is the case of the U.S. v. Regenerative Sciences LLC, where Regenerative, somewhat atypically in the industry, cultured the autologous stem cells for several days before re-administering them to patients.  Apparently, FDA found the culturing of these cells to be particularly problematic and successfully obtained an injunction against Regenerative.

At the end of the enforcement discretion period which, perhaps not coincidentally, will be around the time of the next presidential election, it seems that the agency would have the following enforcement options: (1) to continue to only litigate the types of cases they are already litigating, meaning primarily facilities where there are allegations of serious or life-threatening adverse events – usually requiring hospitalization; (2) to also litigate instances of facilities administering stem cells via routes of administration associated with higher risk (as described in the enforcement discretion portion of the guidance), even where there are no allegations of serious or life-threatening adverse events, and/or instances of facilities administering stem cells that are intended for non-homologous uses that are intended for the prevention or treatment of serious and/or life-threatening diseases and conditions (i.e., basically the agency’s carveout under the current enforcement discretion); and (3) to litigate even more broadly any alleged violations of the four criteria under 21 CFR Part 1271.10(a).

Option #3 is so broad as to be unmanageable given the number of facilities currently in existence, and it also doesn’t really allow for any reasonable means of prioritizing which cases to bring.  Option #1, on the other hand, is unlikely to be satisfactory for the agency given that they have been exercising this option for the past several years, and despite this the stem cell industry has continued to flourish.  That leaves option #2.  The question is how many lawsuits will FDA need to bring under this option for the hundreds of facilities in existence (including the ones on FDA’s doorstep in suburban Maryland, Virginia and DC) to reconsider marketing their stem cell products, and does the agency have the resources and the intestinal fortitude to bring all those cases?  Time will tell.

{ Comments are closed }

M.C. Escher By Way of Generic Drug Pricing

M.C. Escher By Way of Generic Drug Pricing

By Sara W. Koblitz

Though FDA does not have the legal authority to control or even directly address drug prices, Commissioner Gottlieb has certainly not shied away from the issue.  In fact, drug (and biologic) competition and accessibility is one of Dr. Gottlieb’s main efforts at the Agency (see e.g. discussions here and here).  Typically, the conversation about accessibility frames drug prices as too high, but the discussion has recently taken an interesting turn into questions about whether some drug prices are too low.  And it’s clear from the Commissioner’s latest FDA Voices Blog post on the issue, he understands the complicated economic principles behind this discrepancy, but questions abound about whether FDA can adequately address it.  Indeed, it seems like FDA is stuck in a bit of an M.C. Escher piece, in which its attempts to address drug pricing render the Agency stuck in an infinite loop of high drug prices.

Much concern has been raised about the costs of healthcare and drugs in the U.S.  Typically, the concern is with brand or innovator drugs, usually those with thick patent portfolios and exclusivities, who charge high prices presumably to recoup their investments in research and development.  A myriad of strategies have been implemented to address high drug prices, and though pricing falls predominantly under the umbrella of HHS rather than FDA, FDA has been working within its statutory mandate to tackle high drug prices in any way that it can.  To this end, we have seen the Drug Competition Action Plan, which endeavors to introduce more generic competition as efficiently as possible to drive down drug prices, directly or indirectly, for consumers.

Indeed, competition has done an overall good job keeping generic prices low.  For many products, there is enough competition in the market to keep prices low – very low.  And while, yes, generic competition is anemic for some products, typically more complex products, there is a glut of competition for others.  The Drug Competition Action Plan attempts to introduce more competition for those drugs with “inadequate” competition – often fewer than three generic versions of a product – but an articulated goal of this plan is to “spur new entrants.”  Theoretically this should lead to more competition for drugs with inadequate competition.  But while over 1,000 generic drugs were approved in 2017, “which is the most in FDA’s history in a calendar year by over 200 drugs,” it’s a pretty good bet that not all of these products were generic versions of drugs with inadequate competition.  And it’s a pretty good bet that not all “new entrants” are developing supply chains and manufacturing processes to submit ANDAs only for drugs with inadequate competition.

In fact, there are so many generic versions of some drug products that the competition is driving prices down so low that the generics are not profitable for their manufacturers.  In such a scenario, a generic manufacturer facing significant competition from other generics needs to distinguish its version somehow.  Because its generic product is, by definition, exactly the same as its competitors’, the only possible distinction between manufacturers is price.  The cheaper their products, the more likely they are to get a contract to provide the generic version for these providers.  This is why, in theory, more generic approvals for a product should reduce the price of a drug substantially.  Combined with the fact that there are only a handful of major third-party payors, generic drug manufacturers may find themselves in a race to the bottom in an effort to secure a contract.

As Dr. Gottlieb explained in a late November drug shortage meeting co-hosted by Duke-Margolis Center for Health Policy (Go Blue Devils!), the market dynamics in a glut of generics may keep the price of generics so low that the manufacturers cannot sustainably continue to manufacture the drug.  Without making much of a profit, impetus to stay in the market decreases and players drop out.  In addition, with higher GDUFA program fees for based on the number of approved ANDAs held, it can be expensive to hold ANDAs that aren’t generating significant profits.

Even generic giant Teva experienced some downturn in 2017 as a result of “accelerated price erosion and decreased volume mainly due to customer consolidation, greater competition as a result of an increase in generic drug approvals by the U.S. FDA, and some new product launches that were either delayed or subjected to more competition.”   While Teva may not be leaving the generic market, it’s clearly feeling pressure from decreasing generic prices.  If even large companies like Teva are feeling the pressure, there is real risk that more established generic companies – those that already have adequate cGMP programs, supply and distribution chains, and all the other manufacturing necessities that make drug manufacturers go – are feeling it too.  And this type of pressure can lead to decisions to pull out of a market, especially if a given generic product is expensive to produce (i.e., more complex products).  A market exodus could disrupt the generic supply and ultimately lead to drug shortages.   Alternatively, with slashed profit margins, companies that otherwise may have invested in capital infrastructure upgrades and maintenance may no longer have the funds to do so (especially after paying GDUFA fees).  Without these upgrades, they may not have the capability to maintain supply, ultimately leading, once again, to drug shortages.  We have seen this type of issue arise recently when even long-standing generic companies have had manufacturing issues, leading to the unavailability of some products.

Fewer players, particularly established players, means fewer reliable generic options, which could lead to a shortage of generic versions of products – even if the brand version is plentiful.  Such a shortage would cause even generic manufacturers to raise prices based on basic principles of supply and demand (which, are admittedly a little wonky here given the drug pricing market, but once contracts are up for renegotiation, fewer competitors for a given contract should result in higher contractual prices even for generics).  And even if no shortage occurs, fewer competitors (theoretically) leads to a smaller supply, which should also impact pricing.  Therefore, Dr. Gottlieb cautions, the underpricing of generic drugs may lead to price increases.

With this dichotomy, FDA seems to be engaging in a battle on two fronts.  While diligently trying to reduce prices of brand products, FDA is also trying to figure out ways to prop up the price of generics to reduce market departures.  And FDA is taking all of this on without the legal authority to address prices directly.  Without this authority, FDA is attempting to use its review tools to direct and influence market competition.   But this is where the conundrum arises: as FDA and Congress are encouraging more competition in the generic market through the Competitive Generic Therapy program and the List of Off-Patent, Off-Exclusivity Drugs without an Approved Generic, FDA (or another governmental authority taking on such a task) must figure out a way to either reduce generic competition driving out established generic manufacturers or otherwise somehow inflate contractual prices for generic manufacturers to discourage attrition and/or drug shortages.  Somehow FDA needs to balance the country’s needs for more generic versions of complex products while discouraging extraneous competition in the generic market.  It’s a delicate and completely unintuitive balance.

FDA tackled a somewhat similar mass exodus problem in the vaccine market in the 1980s in the 1980s.  There, policymakers had to address high prices of vaccines arising from potential shortages as the number of vaccine manufacturers shrank from 26 to 4 in just 10 years.  The impetus of this exodus differed from the situation with generic drugs, as it resulted from soaring legal and insurance costs due to potential product liability.  Nevertheless, the principle is the same: when faced with a potential shortage, costs soar while availability plummets – neither is good for the public health.  In that situation, manipulation of the market would not have had an effect on retention of vaccine manufacturers since supply and demand would not impact the external costs.  Instead, Congress intervened with a new program compensating those injured by childhood vaccines under the National Childhood Vaccine Injury Act of 1986, indicating industry acceptance that a competition-based market solution may not be effective in drug shortage situations.

While a markedly different situation here, the economics behind drug shortage issues demonstrate that market incentives may not be enough to keep prices manageable.  The complex and intertwining relationship between drug competition and drug pricing indeed calls for a multifaceted solution, but query whether the manipulation of market dynamics can really be effective here.  It seems that while FDA is trying to find a way to bring equilibrium to drug pricing, the band-aids put on the market (in the form of competition-based incentives) keeps leading to overcorrection.

That’s not to say that FDA is not trying to stem drug shortages and market exodus through other means because it absolutely is as part of its public health mandate.  But there doesn’t appear to be a simple solution for this giant game of whack-a-mole.  It’s admirable that Dr. Gottlieb and FDA are trying innovative methods to address the problem.  But with its hands tied with respect to activities directed specifically at drug pricing under its statutory mandate, the reliance on competition here seems to leave FDA and industry stuck between a rock and a hard place.

Recently, Congress has decided to figure out a better model to control drug pricing.  There have been no shortage of proposals to address drug pricing.  From the Patient Right to Know Drug Prices Act passed in October 2018, designed to increase transparency in drug pricing, to the recent proposal to start manufacturing generic drugs at HHS, you have to give Congress credit for thinking outside the box.  But now that we’re talking nationalizing generic drugs, somewhere between a rock and a hard place isn’t looking so bad.

{ Comments are closed }

AdvaMed Updates Code of Ethics

AdvaMed Updates Code of Ethics

By Serra J. Schlanger & Jeffrey N. Wasserstein

On January 9, 2019, the Advanced Medical Technology Association (AdvaMed) announced updates to its “Code of Ethics on Interactions with Health Care Professionals” (Code).  The Code was last updated in 2008; the newest updates will become effective on January 1, 2020.

The Code includes new sections on jointly conducted education and marketing, communications about the safe and effective use of medical technology, and communications related to providing technical support.  Other topics that were previously covered in multiple sections have been consolidated into more comprehensive sections on company programs, third-party programs, travel, and meals.  Enhancements and clarifying language have been added to the definitions, the section on consulting, and the section on products provided for demonstration and evaluation.  Additional detail about some of these updates is highlighted below.

In the Consulting section, the Code clarifies that a legitimate need for consulting services arises when a company requires the services of a health care professional (HCP) to achieve a specific objective; designing or creating an arrangement to generate business or reward referrals are not legitimate needs.  The Code also includes criteria a company should consider when seeking to establish fair market value for goods and services (e.g., the HCP’s specialty, years and type of experience, geographic location, practice setting, and type of services performed).

The Third-Party Programs section now includes a checklist companies can use to evaluate requests for educational program support.  This section also clarifies that a company cannot pass the benefits of program sponsorship on to an HCP but can host satellite symposia and can pay for the travel costs of HCPs serving as faculty members at the satellite symposia.

The new section on Jointly Conducted Education and Marketing Programs explains that these programs are designed to highlight both a medical technology and a HCP’s ability to diagnose or treat medical conditions.  The Code acknowledges that these types of programs have benefit, but cautions that the company and the HCP must serve as  bona fide partners.  To establish a bona fide partnership, the arrangement should be documented in a written agreement and contributions and costs should be shared equitably between the company and HCP.

The Travel section provides clearer guidance on when a company may pay for travel and lodging (e.g., consulting services, attending at a company-conducted training or education program, speaking on the company’s behalf) and when such payments are prohibited (e.g., attending general company meetings or third-party programs).  The Code also includes guidance for evaluating appropriate meeting venues.

The new section on Communicating for the Safe and Effective Use of Medical Technology recognizes that communications about on- and off-label uses of a device are critical to a HCP’s ability to his or her medical judgment.  This section encourages companies to develop policies and controls for the dissemination of truthful and non-misleading information.

The final new section sets forth principles for Company Representatives Providing Technical Support in the Clinical Setting.  For example, the company representatives should be transparent that they are acting on behalf of the company and should not interfere with a HCP’s independent clinical decision making.  Additionally, the company’s technical support should not eliminate an expense that the HCP would otherwise incur while providing patient care.

Although the Code is a voluntary standard, certain states (e.g., Connecticut and Nevada) require device manufacturers to adopt compliance programs consistent with the Code.  Manufacturers will want to review the latest updates and make adjustments to their compliance programs as necessary.

The updated Code is available here.  AdvaMed’s overview of the changes is available here.

{ Comments are closed }

FDA is “Discouraged” by Dearth of HCT/P Manufacturers that have Reached Out to Agency During Enforcement Discretion Period

FDA is “Discouraged” by Dearth of HCT/P Manufacturers that have Reached Out to Agency During Enforcement Discretion Period

By Mark I. Schwartz

In November of 2017, FDA published its enforcement discretion policy regarding HCT/Ps that don’t meet all four criteria under 21 CFR 1271.10(a):

To give manufacturers time to determine if they need to submit an IND or marketing application in light of this guidance and, if such an application is needed, to prepare the IND or marketing application, for the first 36 months following issuance of this guidance FDA generally intends to exercise enforcement discretion with respect to the IND and the premarket approval requirements for HCT/Ps that do not meet one or more of the 21 CFR 1271.10(a) criteria, provided that use of the HCT/P does not raise reported safety concerns or potential significant safety concerns.

FDA has believed for some time that numerous HCT/P manufacturers don’t meet all four criteria for regulation solely under 21 CFR Part 1271, and they have been hoping that the publication of the 2017 Guidance on Regulatory Considerations for Human Cells, Tissues, and Cellular and Tissue Based Products: Minimal Manipulation and Homologous Use, together with the 36 months of enforcement discretion (with 22 months remaining), will entice many of these firms to meet with FDA, either to discuss whether some type of clearance or approval for their product is required or, alternatively, to discuss the data requirements for said clearance or approval.  However, thus far it does not appear as though many firms have taken FDA up on their offer.

In a press release issued on December 20th, 2018, FDA stated:

Even though a few sponsors have come to us, we are discouraged by the overall lack of manufacturers wanting to interact with the agency in this enforcement discretion period… [T]here’s a clear line between appropriate development of these products and practices that sidestep important regulatory controls needed to protect patients.  [Emphasis added]

FDA also indicated in this press release that once the 36 months of enforcement discretion lapses the agency will be “increasing oversight” related to cell-based regenerative medicine products.  It is somewhat unclear what FDA means by “increasing oversight” though it is likely to include a combination of Warning Letters to stem cell companies and injunctions and seizures involving those firms that are deemed to pose a more significant public health risk.

To that end, the agency fired a warning shot across the bow of these regenerative medicine companies in late December by also issuing “To Whom It May Concern” letters, stating that the recipient of the letter appears to offer stem cell products “to treat a variety of diseases or conditions.”  The letter goes on to remind the recipient of the agency’s November 2017 “comprehensive regenerative medicine policy framework…” and that the enforcement discretion period “…provides manufacturers time to comply with the IND and premarket approval requirements and engage with FDA to determine whether they need to submit an IND or marketing authorization application, and if so, to submit their application to FDA.”

One can expect FDA to continue to ramp up the pressure on stem cell companies as the enforcement discretion period winds down.  We’ll keep you posted on all developments.

{ Comments are closed }

Vermont Report Finds that the Costs of Prescription Drug Importation May Outweigh Savings

Vermont Report Finds that the Costs of Prescription Drug Importation May Outweigh Savings

By Serra J. Schlanger

As we previously reported, Vermont Governor Phil Scott signed a new law in May 2018 allowing for the wholesale importation of prescription drugs from Canada into Vermont.  Vermont’s Agency of Human Services (VAHS) recently issued a report containing the Agency’s preliminary design for a “Canadian Rx Drug Import Supply Program” and considerations for the State’s next steps.

VAHS was tasked with designing a wholesale prescription drug importation program that complies with the federal requirements for safety and cost savings.  Under Section 804 of the Federal Food, Drug, and Cosmetic Act (FDC Act), drugs may be imported from Canada if they meet certain minimum standards and if the Secretary of the U.S. Department of Health and Human Services (HHS) certifies that (i) the drugs will pose no additional risk to the public’s health and safety and (ii) that importation will result in a significant reduction in costs to American consumers.  HHS has never certified a prescription drug importation program under Section 804 – a fact that VAHS noted at the beginning of its report.

Nevertheless, VAHS set forth a preliminary design for an importation program.  VAHS proposed to establish two new types of licenses – “Rx Drug Importer-Wholesaler” and “Canadian Rx Drug Supplier” – administered by the Vermont Office of Professional Regulation.  All Rx Drug Importer-Wholesalers and Canadian Rx Drug Suppliers would be required to pass an inspection/audit conducted by the State of Vermont, a third-party contractor, or a U.S. state or Federal regulatory agency.  Rx Drug Importer-Wholesalers would be required to distribute products in compliance with the current Federal Drug Supply Chain and Security Act requirements.

To meet the second element of the federal requirements, VAHS set forth to determine whether importing drugs from Canada could result in savings to Vermont consumers.  Vermont Medicaid determined that importing drugs from Canada would not result in savings to the state because the State’s existing prescription drug rebate program already yields substantial savings.  VAHS then sought to determine whether importing drugs from Canada would provide savings to commercial health insurance customers.  For 17 prescription drugs, VAHS determined that importation from Canada could result in annual savings between $1 and $5 million.

However, VAHS also determined that a compliant drug importation program will require substantial upfront investment and appropriations.  In addition to inspection and auditing activities to ensure public health and safety, a compliant drug importation program must continue to show that the imported drugs result in a significant reduction in consumer costs.  As such, VAHS explained that the program must include ongoing monitoring and analysis of the savings opportunities, taking into account “changes in prescribing patterns, the introduction of new drugs to market, participation of additional purchasers of imported drugs, and changes in the value of U.S. and Canadian currency.”  VAHS admitted that it will need to acquire, develop, or repurpose expertise to monitor these trends and make the opportunities for savings transparent.  As such, VAHS concluded that “[b]efore a program of prescription drug importation can be recommended, the state needs to determine the cost of operating such a program and whether that cost eclipses the savings for participating commercial payors.  A program that costs more to operate than produces in savings is highly unlikely to meet the Secretary’s criteria for certification.”

Based on the VAHS report, it appears that our initial skepticism that the Vermont drug importation program will actually be implemented may be correct.  However, both federal and state legislatures continue to express interest in allowing for the importation of prescription drugs from Canada.  For example, Senator Grassley [R-IA] has introduced S.61 and Representative Pingree [D-ME-1] has introduced H.R. 478 to the 116th Congress.  Both bills seek to amend the FDC Act to allow for the personal importation of safe and affordable drugs from approved pharmacies in Canada.  We will continue to monitor and report on federal and state actions to regulate drug pricing.

{ Comments are closed }