Attorney East Hampton

By Kurt R. Karst —

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

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

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

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

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

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

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

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

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

By Riëtte van Laack —

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

Introduction of HACCP Requirements

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

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

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

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

Egg Products are Ready-to-Eat

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

Egg Products Definition

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

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

Other Amendments

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

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

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

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

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

By Kurt R. Karst —

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

Page 51 of the Proposed Budget states:

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

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

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

Finally, the HHS budget document states on page 15:

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

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

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

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

. . . and on pages 68 and 85:

Change Conditions on First Generic Exclusivity to Spur Access and Competition

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

Change Conditions on First Generic Exclusivity to Spur Access and Competition

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

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

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

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

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

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

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

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

By Riëtte van Laack —

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

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

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

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

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

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

By Ricardo Carvajal —

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

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

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

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

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

By Alan M. Kirschenbaum —

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

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

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

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

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

By Véronique Li * & Jeffrey K. Shapiro —

The Center for Devices and Radiological Health (CDRH) says it has a plan for fostering digital health innovation while reimagining the regulatory oversight to provide patients with access to safe and effective digital health products. One step in the plan is developing a Digital Health Software Precertification (Pre-Cert) Program. We blogged on the overall digital health plan here.

As part of developing the Pre‑Cert Program, Dr. Jeff Shuren, Center Director of CDRH, welcomed the audience to a two day workshop at the end of January. Bakul Patel, Associate Director for Digital Health, introduced the program in detail, summarizing its progress to date and sharing lessons learned. The workshop was divided into five panels with opportunities for the audience to ask questions on the first day and three breakout sessions with time to share breakout discussions with the larger group on the second day.

The panels included representatives from among Pre-Cert pilot participants, CDRH Pre-Cert team members (many of whom doubled as workshop moderators), patients, payers, providers, investors, assessors, trade associations, and academic institutions.

The Pre-Cert Program has been touted as an organization-based streamlined regulatory approach for Software as a Medical Device (SaMD) that relies on a demonstrated Culture of Quality and Organizational Excellence (CQOE), where SaMD is defined as software intended to be used for one or more medical purposes that perform these purposes without being part of a hardware medical device. The excellence principles are:

1. Patient Safety
2. Product Quality
3. Clinical Responsibility
4. Cybersecurity Responsibility
5. Proactive Culture.

One of the overarching workshop themes was that FDA intends to work closely with stakeholders to develop the Pre-Cert Program. The idea is CDRH could “precertify” companies that exhibit CQOE, based on objective criteria. These organizations would qualify to market their lower-risk devices without additional FDA review or with a more efficient premarket review (depending on the product).  This focus on the manufacturer, and not the product, would be a significant departure from the Agency’s historical approach to premarket product review.

The following were interesting or notable aspects of the discussion:

The notion of using CQOE principles for evaluation of software firms was received well, but a lot of questions were raised about what metrics, as a practical matter, would be suitable. There was also a question about how frequently companies would need to re-certify. The moderators also asked participants to consider what the certification review would look like and emphasized that it needed to be feasible for both small and large organizations and align with how software firms conduct themselves.

No consensus answers emerged. True to form for a technological crowd, some panelists suggested crowdsourcing to identify key performance indicators (KPIs metrics).  The crowdsourcing approach was also suggested for collecting real world data from users on product performance, which would then be shared with developers, who would use this feedback to improve safety and effectiveness in the next software version. This iterative life‑cycle approach has the potential to tie in nicely with the Center’s efforts to promote the National Evaluation System for health Technology (NEST), which is being developed to generate better evidence for medical device evaluation across the total product lifecycle and regulatory decision-making.

We learned that the nine pilot participants each had hosted CDRH for a two-day site visit. The visits were the first steps from CDRH to engage stakeholders. Representing small and large organizations, profit and non-profit, the participants agreed on ensuring high‑quality products reached market sooner and promoting a concept of transparency to ensure confidence and credibility of both the program and its participants.

During these visits, CDRH and the pilot participants had discussed common organizational traits such as having agile processes and a culture that recognizes and supports efforts to ensure quality, but also recognized the difficulty in aligning the five excellence principles with the four validating perspectives (i.e., organizational resource, customer, learning and growth, and process). Another outcome of these interactions was that FDA postulated that a library of KPIs could be used to determine a CQOE, acknowledging that no one set would fit every company.

The panels at the workshop provided interesting perspectives on how a precertification program would be understood and received by their communities. For instance, one panelist from the healthcare stakeholder perspectives panel noted the need for clarification between software reviewed under a product based pathway such as the 510(k) versus software considered under a firm based approach as imagined in the Pre-Cert. She also noted that payers will have to consider reimbursement of apps judiciously. The reimbursement process will take time and could frustrate software developers.

Another panelist from the same group pointed out that healthcare is moving towards a value based system that considers clinical outcomes. He expressed concern about constantly evolving algorithms in software and the potential disruption to clinical workflow. The same panelist wondered how a clinician would obtain information to help choose one company’s software over another.

Another panelist brought up recent experience with electronic health records (EHR). The EHR implementation included cybersecurity, lost data, power failure, and interoperability issues. These same issues could begin to plague digital health software.

A panelist challenged the notion that digital health should be subject to traditional processes. He cited the tradeoffs patients are willing to make in exchange for faster access to technology and highlighted the challenges of costly, time‑consuming clinical studies which could lag well behind innovation.

In general, there was much spirited discussion that showed there is still a long way to go in standing up the Pre-Cert program, something the CDRH moderators acknowledged as well. The good news is that CDRH clearly is interested in developing the Pre‑Cert program with input from the community.

It seems to us that the key issue is the KPI metrics that will be used to assess companies. It is easy to sketch out the broad CQOE principles.  Figuring out how to operationalize these principles with concrete KPI metrics is much harder.  Some of the metrics that were introduced and discussed during breakout sessions included employee performance, customer engagement, and brand reputation. However, even these metrics are fairly abstract and hard to measure.  One wonders how “brand reputation” would even apply to smaller start ups.  All in all, it is probably fair to say that the workshop shed light on how difficult it will be to adopt a binding list of KPI metrics and how far off those decisions are.

CDRH has invited those who are willing to share their thoughts on the Pre-Cert Program, whether it be in the form of questions or requests for clarification, to do so in an email to FDAPre-CertPilot@fda.hhs.gov or through a comment on the open docket entitled “Fostering Medical Innovation: A Plan for Digital Health Devices; Software Precertification Pilot Program”.

By Hyman, Phelps & McNamara, P.C. —

On Friday, February 9, 2018, from 2:00-3:30 PM ET, the Food and Drug Law Institute (“FDLI”) will be hosting a webinar, titled “New Medical Device Requirements and Where Manufacturers Should Focus:  MDUFA, FDARA, and 21st Century Cures.” Hyman, Phelps & McNamara, P.C.’s Jeffrey N. Gibbs will be moderating the webinar.

As the title of the webinar suggests, several important pieces of FDA legislation have recently been enacted that significantly affect the medical device industry.  FDA has been busy implementing the new laws, issuing numerous final and draft guidance documents and policies.  These developments directly affect device companies:

• Implementing changes in device inspections to make them more risk-based
• Establishing pilots for the use of Real World Evidence
• Issuing new checklists for de novo submissions
• Evolving approaches for patient preference information
• Developing guidance in the digital health space
• Streamlining MDR reporting, and more

Keeping up with the array of changes and proposed changes is challenging.  Join a panel of industry and agency experts for a status update on what’s happened already, what’s coming, and where medical device companies should be focusing their efforts.

You can register here for the webinar.

By Allyson B. Mullen —

The third-party 510(k) review process was an emphasis in the most recent user fee negotiations and statutory changes under the FDA Reauthorization Act of 2017 (FDARA). This process has been criticized in the past for being restrictive, ineffective, and not beneficial for applicants.  On January 26, 2018, FDA took its first step towards complying with the new requirements when it issued performance metrics for third-party reviewers (available here).

As discussed in our FDARA summary (available here), the types of devices has been modified. Addressing the restrictive aspect, the most significant change was that devices requiring clinical data are no longer excluded from eligibility for the program.  This change has opened up the possibility of more devices, most notably IVDs, being able to undergo third-party review in the future.

FDA will issue a draft guidance regarding the factors it will use to determine whether a Class I or II device is eligible for third-party review, and the Agency will finalize the guidance within 24 months from issuance of the draft. On the same day the guidance is finalized, FDA will also publish a list of Class I and II devices eligible for third-party review. Until this new list is published, the current list of devices eligible for third-party review is still in effect. In addition, as part of the user fee negotiations, FDA agreed, by the end of 2018, to issue draft guidance regarding criteria for reaccreditation of third party reviewers and the suspension or withdrawal of accreditation of a third party.

Finally, FDA agreed to publish performance metrics regarding third-party reviewers with at least five completed submissions on the web. FDA’s published statistics for FY2018 only, meaning, at most, less than four months worth of data.  There were seven third party reviewers totaling 18 510(k) submissions since October 1, 2017.  Only one of the reviewers had more than five submissions during this timeframe.  This report was issued on January 26, but it is not clear when data collection for the report ceased.  This sparse data set is of little to no use.  Presumably, the next data set will be more meaningful.

The user fee commitment did not specify a timeframe for analysis. It seems odd that FDA selected FY2018.  It provides very limited information because it is such a short time frame.  The utility of the report is, accordingly, limited.  We look forward to FDA completing its other required tasks related to the third party review process.  The process certainly holds potential but has been consistent in one respect – during its two decades, it has not lived up to its expectations or potential.  Perhaps these steps will help change that.

REMINDER: Join Us in April to Learn More about Improving Regulatory Compliance While Minimizing Products Liability! (Sign up here.)

By Riëtte van Laack —

On Monday, January 21 (amid the government shutdown) the Center for Veterinary Medicine of the Food and Drug Administration (CVM) released a draft guidance document addressing Subpart C of the Agency’s regulation titled “Current Good Manufacturing Practice, Hazard Analysis, and Risk-Based Preventive Controls for Food for Animals” (PC rule). Subpart C contains the requirements for facilities to use when developing a written animal food safety plan, conducting a hazard analysis and implementing risk-based preventive controls, if needed.

The draft guidance includes five chapters:

• food safety plan requirements;
• recommendations for conducting a hazard analysis;
• hazards associated with the manufacturing, processing, packing and holding of animal food;
• examples of preventive controls that may be used to significantly minimize or prevent animal food hazards; and
• preventive control management components.

In the federal register notice, CVM identifies them as the first five chapters suggesting that more will be added at a later time.

Similar to what FDA did in the draft guidance for human food preventive controls, CVM prepared a list of different animal food ingredients with specific references to hazards. Although this listing of hazards may seem helpful, it does have disadvantages and seems somewhat inconsistent with the PC rule.  Inspectors can be expected to use the list to determine whether a company has included the listed hazards listed in it’s hazard evaluation.  This appears inconsistent with the requirement that a company must conduct its own analysis based on the scientific literature, personal experience, illness data, etc.  We also note that the list of hazards for various ingredients appears to be based on data going back to 1989 – almost thirty years ago.  Query to what extent thirty year old data are relevant.

The timing of the draft guidance is somewhat unfortunate, because the compliance date for all businesses except those that are small or very small has already passed. FDA published final rules to implement the hazard analysis and risk-based preventive control (PC) provisions for human and animal food on September 17, 2015.  Businesses that are not small or very small businesses under the rule were required to comply with the animal food preventive control provisions as of September 18, 2017.  (Small businesses need to comply by no later than September 17, 2018, and very small businesses need to comply with limited provisions by September 17, 2019.)  FDA announced last year in August that it planned to delay routine preventive controls inspections for large businesses until fall 2018.  However, at that time the Agency made clear that this delay in inspections did not mean that companies should wait with the development of their food safety plan.  In the absence of CVM guidance, those food safety plans may not include or have considered hazards that CVM now has identified.  It remains to be seen how CVM will use its own guidance and whether it will rely on the hazards identified in this draft guidance.

Comments to the draft guidance are due by July 23, 2018.