Attorney East Hampton

By Deborah L. Livornese —

With the new Over-the-Counter (OTC) Monograph Reform came new facility fees (see our blog posts here and here, and FDA’s announcement here), and with new fees comes the new Arrears List. Facility fees under the OTC Monograph User Fee Act (OMUFA) were due for the first time on May 10, 2021, for fiscal year (FY) 2021.  On June 14, 2021, FDA published the OMUFA Facility Arrears List which is a list of registered facilities that are required to pay the FY2021 annual facility fee, but have failed to do so.  The list includes several hundred facilities running over 70 pages.  Given that this is the first year the fees have been assessed, it is not surprising that the list is long.  It likely contains some facilities that ceased operations prior to the applicability of the facility fee, and may also include some facilities that were registered as new manufacturers because they were used solely for the production of hand sanitizer under FDA’s temporary policy for manufacturing hand sanitizers in response to the COVID-19 pandemic.  As FDA explained when it reissued the OMUFA facility fees following the withdrawal of the original publication of fees, these facilities would not be required to pay OMUFA fees.

As with the arrears lists for other user fee programs, (possible) embarrassment is not the only consequence that accompanies appearing on the Arrears List.  Under section 502(ff) of the Food, Drug, and Cosmetic Act, a drug that is manufactured at a facility for which required OMUFA fees have not been paid is deemed misbranded.

On the same day it released the Arrears List, FDA also published on its website a series of Qs & As, “Other OMUFA Fee-Related Questions”.  These cover how to pay an overdue fee, whom to contact to correct an error in the listing, and how to request a refund for a fee paid in error.  They also clarify that, unlike some other user fee programs, there are no waivers or exemptions for OMUFA fees (although FDA is not assessing OMUFA facility fees for the aforementioned hand sanitizer facilities).

By Faraz Siddiqui & Serra J. Schlanger —

In October 2020, the Department of Health and Human Services (HHS) and the Food and Drug Administration (FDA) published a Final Rule (which we summarized here) that implemented Section 804 of the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 384, to allow states and other entities (Sponsors) to develop a Section 804 Importation Program (SIP) to import certain prescription drugs from Canada into the United States (the “Final Rule”). As we previously reported, the Final Rule and HHS’s certification thereof was swiftly challenged in court by the Pharmaceutical Research and Manufacturers of America (PhRMA), the Partnership for Safe Medicines (PSM), and the Council for Affordable Health Coverage (CAHC).

After receiving a few extensions from the court, on May 28, 2021, the government filed a motion to dismiss the lawsuit for lack for subject matter jurisdiction, and alternatively, for failure to state a claim. According to the government’s memorandum in support of the motion, the complaint “presents ‘abstract hypotheticals or requests for advisory opinions’” and must fail on standing or ripeness. The government contends that the plaintiffs, who filed the lawsuit on behalf of their members seven days before the Final Rule went into effect, have not shown any injury-in-fact and merely allege possible future injury. The government argues that deferring the lawsuit until after a SIP is authorized by FDA would not burden plaintiffs’ members.

The government dedicated a substantial portion of its memorandum to describing the Final Rule in order to “reveal[] how many steps must be taken before [the Final Rule and the Certification’s] impact could be felt by any of Plaintiff’s members, let alone the general public.” This description highlighted many of the same concerns that the plaintiffs raised in their complaint. For example, the government cannot approve a SIP that has potential safety concerns, does not adequately ensure the protection of the public health, and does not result in cost savings to the American consumer. But while the plaintiffs asked the court to enjoin the Final Rule based on these concerns, the government assured the court that it could not even approve a SIP that did not adequately address these concerns.

The government’s motion to dismiss reflects an ambivalent attitude on the part of the Biden Administration toward the Trump-era importation rule. On one hand, the government’s motion to dismiss the lawsuit suggests that the Biden administration is not ready to completely close the door on drug importation as a potential approach to lower drug prices. On the other hand, the government’s memorandum goes into great detail on how difficult it will be to pass the statutory bar and obtain FDA approval to import drugs from Canada. The government emphasized that the onus to satisfy the statutory and regulatory criteria falls squarely on the SIP Sponsors. The government also pointed out that Canada’s Minister of Health has issued an interim order that prohibits would-be Canadian sellers from distributing drugs outside of Canada unless they have “reasonable grounds to believe that the distribution will not cause or exacerbate a shortage of the drug” in Canada. According to the government, the Canadian interim order injects further uncertainty into whether and to what extent the Final Rule could be implemented

It remains to be seen how FDA will evaluate SIPs based on the criteria set forth in the Final Rule. Six states (Vermont, Colorado, Florida, Maine, New Mexico, and New Hampshire) have passed laws allowing for the importation of drugs from Canada. We have reported on several of these laws. Two of these states (Florida and New Mexico) have submitted SIP proposals to FDA. We are watching to see FDA’s response, but do not expect to see these plans approved anytime soon, as the government has made no secret of the fact that FDA is not bound to any statutory timeline to make a decision on SIP proposals that have been submitted.

By Jeffrey K. Shapiro —

In our last post on Laboratory Developed Tests (LDTs), we suggested that Congress, not FDA, should lead in directing modernization of LDT regulation.  Any change should be made by enacting new law, and not by Food and Drug Administration (FDA) administrative fiat.

Coincidentally, on the same day the post went up, Senator Rand Paul introduced the “Verified Innovative Testing in American Laboratories Act of 2020” or the “VITAL Act of 2020,” a new bill clarifying that the Centers for Medicare and Medicaid Services (CMS), not FDA, is to regulate LDTs.  It would require also that CMS hold a public meeting to solicit recommendations on updating existing Clinical Laboratories Improvement Amendment (CLIA) regulations related to clinical testing laboratories.  This step would help propel forward a public conversation (which CMS has already started) about how to update these regulations in light of technological advances.

FDA argues that technological advances in LDTs necessitate FDA’s regulatory oversight pursuant to the Food, Drug, and Cosmetic Act (FDCA).  Senator Paul’s bill would likewise facilitate regulatory reform to meet technological advances, but it would place the responsibility on CMS and use the vehicle of updating the CLIA regulations.  This approach makes more sense, because the CLIA regulations have always been the main vehicle for regulating clinical laboratory testing.

Indeed, the effort these past few years to apply the FDCA and its implementing regulations to clinical laboratory testing has been a failure.  The outcome was not a surprise, because the FDCA was designed for regulatory oversight of medical device manufacturing and distribution, not clinical laboratory testing.  Applying the FDCA to clinical laboratory testing is akin to putting a square peg in a round hole; it will work for a portion, but there are sharp corners that just do not fit.

The background to this discussion is as follows:  In 1976, Congress amended the FDCA to add a basic regulatory framework for medical devices.  A little more than a decade later, in 1988, Congress amended Public Health Service Act (PHSA) to add the CLIA, which provided a basic regulatory framework for clinical laboratory testing.  The Centers for Medicare and Medicaid Services (CMS) implements CLIA, largely based upon regulations issued in 1992.

Shortly after CLIA was enacted, FDA asserted authority to regulate LDTs under the FDCA.  This conclusion was strange, since CLIA is obviously intended for clinical laboratory testing while the FDCA is obviously intended for medical devices.

Nonetheless, FDA implemented the claimed authority by adopting “enforcement discretion” for all LDTs unless the public health supposedly demanded intervention.  That is, FDA claimed the authority to regulate LDTs while for the most part declining to do so.  Think of a lion watching a gigantic herd of wildebeests thundering past.  Every so often, FDA would charge and pounce, picking off a test here and there for active regulation, while it left the rest alone.

The agency choice of which tests to regulate was not based on factors set forth in a statute or even a regulation.  It was all decided by administrative fiat.  This abuse of enforcement discretion was arbitrary, capricious and likely unconstitutional.  Fortunately, The Department of Health and Human Services (HHS) finally put a stop to it last summer.

With this background, we return to Senator Paul’s bill.  It would require CMS to initiate a public conversation about how best to update the regulations for modern diagnostic technologies.  If there is good follow through, CMS would ultimately issue new regulations reflecting appropriate changes.  In this discussion, we would suggest that CMS also should seek to identify amendments to its statutory authority under CLIA, if any, that are necessary to complete the job of reform.

We predict that the discussion to be initiated by Senator Paul’s bill, focusing on CMS and CLIA, will be much more fruitful than FDA’s attempt (and recent legislative efforts) to apply the FDCA broadly to LDTs.  It is time to recognize that an FDA‑centric approach is not desirable.  That said, because some still argue for FDA oversight of LDTs, at least in part, we will consider in a future blog post whether there exists an appropriate (if limited) role for FDA in oversight of LDTs, even if CMS should take the lead through CLIA, as it has done for three decades or more.

By Sara W. Koblitz —

While typically, FDA is responsible for setting forth its own agenda and enforcing compliance with its own regulations, the Trump Administration’s HHS, on its way out the door in late 2020, took the unusual steps of withdrawing an important FDA Compliance Policy Guide, “Marketed Unapproved Drugs – Compliance Policy Guide Sec. 440.100, Marketed New Drugs Without Approved NDAs or ANDAs,” which set forth FDA’s approach to prioritizing enforcement actions and exercising enforcement discretion with respect to marketed unapproved drug products.   As explained in CPG 440.100 and on FDA’s website, FDA adopted the “Unapproved Drug Initiative” (“UDI”) in 2006—later revised in 2011—to remove unapproved drugs from the market using a risk-based approach both to ensure the safety and efficacy of all drug products on the market and the integrity of the drug approval process.  Yet HHS, without input from FDA, “terminated” the UDI, citing increased drug pricing and shortages supposedly arising from the UDI.  HHS further withdrew all FDA materials relating to the UDI to “prevent actors from using Food and Drug Administration (FDA) rules to enjoy artificial monopolies over older drugs.”  While FDA was silent on the withdrawal for about 6 months, FDA finally withdrew HHS’s withdrawal of CPG 440.100 and the UDI on May 27, 2021.

In a somewhat scathing Federal Register Notice, FDA—noting that FDA “did not find any evidence that HHS consulted with, otherwise involved, or even notified FDA before issuing the HHS Notice”—explained that it was withdrawing HHS’s UDI Termination because “the HHS Notice contained multiple legal and factual inaccuracies.”  Specifically, FDA raised concerns with HHS’s misrepresentation of the term “new drug.”  A key term integral to the application of the drug approval requirements to a given product, FDA has always interpreted the term “drug” in the definition of a “new drug” to refer to the “entire drug product” rather than only the active ingredient, and courts consistently have upheld that interpretation.  The November 2020 HHS Notice, however, suggested that FDA previously had defined “new drugs” to mean active ingredient, and, therefore, the Notice reasoned that any active ingredient marketed prior to 1938 should not constitute a “new drug,” could be considered “grandfathered,” and may not require approval prior to marketing.  In this Federal Register Notice, FDA explained that it has never taken that position, as doing so “could result in significant harm to public health by suggesting that unsafe or ineffective drugs could circumvent the drug approval process.” FDA also criticized the implication in the HHS Notice that the CPG changed FDA’s interpretation of “new drug,” “grandfathered,” or “GRASE” status (formally known as drugs that are “Generally Recognized as Safe and Effective”) without required notice and comment.  FDA explained that the CPG changed no interpretations or definitions but merely reflected FDA’s decades-long interpretations and advised the public of FDA’s enforcement priorities.

Further, FDA assiduously defended the success of the UDI program.  Rejecting HHS’s position that the UDI program resulted in the “unintended” and “adverse” consequences of increased drug pricing and shortages, FDA explained that “the HHS Notice is supported by flawed facts,” as the single study relied upon was an observational study of only 26 products without adjustments for inflation, potentially resulting in an overestimation of real price changes.   Contrary to HHS’s assertions, FDA emphasized that the program and related compliance actions have resulted in approval of safe and effective versions of previously unapproved drugs.  FDA also cited carbinoxamine-containing products and quinine as examples of unapproved new drugs that, due to significant adverse events, were ultimately removed from the market as a result of this program.  And FDA refuted the HHS Notice’s association between the UDI and a Daraprim price increase for Daraprim: Daraprim was an approved drug without generic competition, and it was the absence of generic competition—not FDA enforcement under the UDI—that led to the increase in price.

Finally, FDA’s rebuke of the HHS Notice suggested that HHS did not have the statutory authority to withdraw the CPG as only the FDA Commissioner is “responsible for executing” the FDC Act.   FDA concluded its withdrawal notice by stating that “[t]he HHS Notice did not, and legally could not, provide a new pathway for the legal marketing of unapproved new drugs” as “[n]either HHS nor FDA has the authority to exempt a product or class of products that are new drugs under the FD&C Act from the new drug approval requirements of the FD&C Act.”

This is not the first time this year that FDA and HHS have given industry whiplash.  HHS withdrew FDA’s December 29, 2020 Federal Register Notice announcing OTC monograph fees only eight days after publication.  There, HHS threw FDA under the bus, issuing a statement that the imposition of user fees on hand sanitizer manufacturers “was not cleared by HHS leadership, who only learned of it through media reports” and that the HHS Secretary “would never have authorized such an action.”  Similarly, HHS and FDA withdrew HHS-proposed exemptions for 83 medical devices published in the Federal Register by the Trump Administration just days before leaving office.  There, HHS and FDA explained that “the proposed exemptions and bases for them are flawed.”  Once again, the Federal Register Notice explained that FDA “did not find evidence that HHS consulted with or otherwise involved FDA in its proposed exemption or the issuance of the January 15, 2021, Notice” and explained that only FDA ‘‘shall be responsible for executing’’ the FD&C Act.   The Agencies further explained that “it is particularly important that FDA have at least some level of involvement in this type of an action given the expertise needed . . . to assure the safety and effectiveness of a device,” and it’s clear from FDA’s withdrawal of the UDI withdrawal that the same premise applies to drugs.

As we explained back in late 2020 (after calling the HHS’s reasoning “malarkey”), the rescission of the UDI could mark “a return to the Wild West of marketed unapproved drugs instead of companies deciding to seek FDA approval.”  Thankfully, FDA has stepped in to reverse HHS’s thinly-veiled attempt to circumvent statutory drug approval requirements at the expense of safety and efficacy in an effort to control prices.

By Frank J. Sasinowski & James E. Valentine —

Yesterday’s FDA approval of Biogen’s Alzheimer’s drug, Aduhelm (aducanumab-avwa), is historic and is of a magnitude that it may be harbinger for future Agency actions, especially in neuropsychiatric conditions.   This has been a decision we’ve been closely following.  So much so, in November, right after the FDA Peripheral and Central Nervous System Drugs (PCNS) Advisory Committee had met on this therapy, the Pink Sheet quoted HP&M’s Frank Sasinowski in its coverage of the advisory committee as he floated the idea that FDA may turn to consider Accelerated Approval as a path forward on this therapy as the advisory committee had not been asked to nor had offered any opinion on this approval pathway.

Our reading of yesterday’s action is that while this is the direct action of the Director of the Office of Neuroscience, Dr. Billy Dunn, this approval has the full support of the Director of the FDA Center for Drug Evaluation and Research (CDER), Dr. Patrizia Cavazzoni.  This is because, not only did the FDA issue a press release, which is typical of any FDA regulatory action of this consequence but, in addition to the conventional press release which quotes Dr. Cavazzoni, she also issued her own personal, fairly extensive public statement explaining and defending this action.  Moreover, in her statement, Dr. Cavazzoni observes too that the advisory committee had not discussed the possibility of the Accelerated Approval pathway for this therapy.

While we do not yet have the FDA summary basis for approval, which we expect will contain very illuminating review memos, we can turn to the label and other overarching aspects of the approval for insights.  Below we highlight those observations that we believe, in the context of the broader regulatory landscape, set a positive trajectory for future Agency actions.  As you will see, ultimately, this Accelerated Approval may have benefited from FDA’s experience in evaluating products under the Emergency Use Authorization (EUA) regulatory framework.

Key Takeaways from the Aduhelm Label: What’s in It and What Isn’t

First, it was noteworthy what was missing from the label.  What do we mean?  Well, the FDA initially issued draft guidance on how to label drugs approved via the Accelerated Approval (i.e., Subpart H) pathway in 2014, then issued it as final guidance in January 2019.  In this guidance, FDA explains that sometimes “[s]imply reporting the endpoint used may convey sufficient information about uncertainty with regard to the limitations of usefulness drug and of uncertainty about anticipated clinical benefits…” Recent Accelerated Approvals we have been involved with, such as the 2017 approval of benznidazole for Chagas and the 2019 approval of Oxbryta for sickle cell disease, have taken this approach as they do not say anything more than identify the surrogate endpoint that was the basis of the approval and noting “continued approval…may be contingent upon verification and description of clinical benefit in confirmatory trials.”

However, the FDA guidance goes on to say in some cases, additional context is needed by specifically inserting a sentence in the indications statement that: no clinical benefit has been established.  This sentence was included in the 2016 approval of Exondys 51 for Duchenne muscular dystrophy and the 2018 approval of Andexxa for reversal of anticoagulation therapy.

It is noteworthy that this sentence that no clinical benefit has been established was deemed by FDA as unnecessary for Aduhelm to provide additional context beyond that the approval is based on reduction in amyloid beta plaques.  As an aside, we have found this inconsistency between which accelerated approval therapies are saddled with this sentence to be a paradoxical FDA policy as there is but a single standard for surrogate endpoints to be utilized for purposes of every Accelerated Approval (i.e., be “reasonably likely to predict” ultimate clinical benefit).  Moreover, in every Accelerated Approval, the clinical benefit must be confirmed in a post-approval clinical study, just as the labels for all Accelerated Approval drugs state.

Second, it was notable that the trials of Aduhelm were conducted in those with early Alzheimer’s disease, and the indication that FDA approved is for anyone and everyone with Alzheimer’s disease.  In many development programs, there is strong scientific rationale for generalizing the results (e.g., consistencies in the disease process, drug’s overall benefits and risks) and, as a result, indicating a drug for a population broader than those that were studied in clinical trials (see FDA’s indications and usage labeling guidance here).  This approach to labeling encourages sponsors to undertake rationale drug development planning, allowing them to focus on study designs that can most effectively capture treatment benefits (or lack thereof) (e.g., through enrichment – a technique particularly necessary in rare disease settings where numbers are small and heterogeneity is high).

Reflecting on the Use of Accelerated Approval as an Appropriate Tool for Regulatory Flexibility

There is a long and vibrant history of FDA using the Accelerated Approval pathway to help expedite drug development and approval.  This goes back to when Sasinowski was at FDA in the 1980’s, he had a hand in aiding others at FDA, like Dr. Bob Temple, to create on the Agency’s own initiative the Accelerated Approval pathway in order to address the raging AIDS crisis.  Later, in 1993, in private practice Sasinowski advocated for the first use of Accelerated Approval outside of AIDS and cancer, when Dr. Janet Woodcock approved Betaseron as the first drug for multiple sclerosis.  Over the past half of a decade, Sasinowski and Valentine have been involved in more than half of the Accelerated Approvals outside of cancer.  Ever since Sasinowski’s 2012 paper, cataloguing FDA’s exercise of flexibility in its approval of drugs for rare diseases (later followed-up in 2015 with an updated analysis by both HP&M’s Valentine and Sasinowski; both papers available here), the word “flexibility” has been used widely, but what it means or how to apply it is still subjective and largely unknown and unknowable except in hindsight such as in these two papers.

So, it is not surprising there have been questions about the future of Accelerated Approval making their way through the industry in the last year. While historically it seemed that the barrier to use of the pathway was a seemingly high evidentiary bar for demonstrating that a surrogate endpoint is “reasonably likely to predict” ultimate clinical benefit, recent concerns expressed by senior CDER officials indicated the barrier to its use was instead fears of whether the Agency could be sure that post-approval confirmatory studies would be conducted in a timely manner and could be designed in a way that would reliably produce interpretable data.  The basis for this concern materialized in October 2020 when CDER proposed withdrawal of approval for Makena after completion of its confirmatory study.  Then further, in April of this year, when FDA’s Oncologic Drug Advisory Committee met to review several oncology indications granted Accelerated Approval over the last five years in what appeared to be part of a broader evaluation of Accelerated Approvals in oncology.  The question was raised: does FDA still view Accelerated Approval as a realistic tool for expediting drug development?

Yesterday’s approval of Aduhelm helped answer that.  Both Dr. Dunn, in his memo to the PCNS Advisory Committee members, and Dr. Cavazzoni, in her statement, emphasized the utility of Accelerated Approval in devastating conditions where the needs for treatments are urgent.  This is certainly the case in Alzheimer’s disease – and as FDA articulates in its December 2019 draft guidance on substantial evidence of effectiveness, is exactly the context in many rare diseases.

In fact, it is in that document where FDA most extensively describes its flexibility in drug review.  For example, it describes the three major ways in which this substantial evidence of effectiveness standard may be met, the latter two which reflect a demonstration of flexibility via approval based on a single study: (1) two positive adequate and well-controlled studies, (2) one positive adequate and well-controlled study with confirmatory evidence, or (3) one adequate and well-controlled study with statistically very persuasive evidence.  FDA also describes how FDA will apply flexibility in applying this standard to different data sets on a case by case basis where either the condition is rare or is serious or there is a great unmet medical need.  To us, through this approval action, it seems that FDA is showing that the Agency it intends to include the Accelerated Approval pathway in its armamentarium of ways in which to exercise flexibility.  The evidence on the surrogate endpoint would still have to meet the substantial evidence standard by one of those three ways, but the Accelerated Approval pathway is clearly a type of flexibility that FDA has available to it in its discretion.

Closing Thoughts: A Non-COVID-Related Approval Based on Review Experience During the COVID-19 Pandemic 

So how did we get here? There is no question the last year has been unlike any other for all of us, but FDA has been steeped in “new” too.  From PPE to diagnostics, treatments to vaccines, the review staff have been applying a new statutory standard: that which supports Emergency Use Authorization (EUA) of a product for COVID.  While this is not new (see, e.g., EUAs during the Ebola epidemic), the COVID-19 pandemic required all-hands-on-deck.

Yesterday’s action by FDA gives the world a window on one way in which the Agency may be turning to Accelerated Approval; FDA has a regulatory tool, “Accelerated Approval”, that does, in some way, allow reviewers to approach the types of flexibility seen in FDA’s EUA authority where reviewers look to see that “known and potential benefits” outweigh the “known and potential risks”.  FDA always considers protecting against “known and unknown risks” when evaluating every new drug, so the risk evaluation side of this EUA equation would be one familiar to FDA reviewers (see, e.g., the Aduhelm warning for Amyloid-Related Imaging Abnormalities (ARIA)), and is not unique to Accelerated Approval.

Instead, what stands out is the reliance on an unvalidated surrogate that is merely “reasonably likely to predict” clinical benefit (i.e., it is a surrogate that is not so well established that it would support a full, or traditional, approval).  This is, in fact, accounting for “potential benefits”.  So, maybe yesterday’s action is in some way a hidden outgrowth of the Agency’s new experience with and comfort from exercise of its EUA authority in these COVID times.  It may well be that FDA’s COVID experiences have revealed to FDA that it could employ that “potential benefit” part of the EUA standard in the context of Accelerated Approval….such an epiphany could come from being hidden in plain sight all this time.  Perhaps someday we will look back and count today’s action as the harbinger of those unexpected findings and this epiphany that led to a new way to position Accelerated Approval as a finding the potential benefits of a therapy outweighed its known and potential risks.  Onward!

The RAPS Wisconsin Chapter is hosting a webcast on Wednesday, June 23, 2021, discussing device requirements for drug-led combination products.  Hyman, Phelps & McNamara, P.C.’s Adrienne Lenz will be the speaker.  This webcast will cover U.S. FDA requirements applicable to sponsors of drug-led drug/device combination products, including device requirements for the quality management system and good manufacturing practices (GMPs), device content to include in a new drug application (NDA), registration and listing, and post market reporting.  Attendees will gain a broad understanding of integrating device requirements into plans for development, NDA submission, and post market compliance.  A live Q&A portion with the speaker will follow the presentation.

FDA Law Blog readers are offered a discount of $5 off the RAPS member and nonmember prices.  ($5 for RAPS members and $20 for nonmembers).  The discount code is:  CHAPSPK5315DF.  You can access the webcast information and sign up for the event on the RAPS website.

Every year, the Food and Drug Law Institute (FDLI) publishes a compendium of the Top Food and Drug Cases from the previous year, as well as Cases to Watch, in conjunction with its popular Annual Conference.  This year was no different.  Recently, FDLI published on its website  its Top Food and Drug Cases 2020, and Cases to Watch 2021.  Hyman, Phelps & McNamara, P.C. attorneys Sara Koblitz and Anne Walsh contributed to this year’s installment.  We invite you to read Sara Koblitz’s chapter on the GSK v. Teva skinny-label carve-out case (see our previous coverage here and here), and Sara Koblitz’s and Anne Walsh’s contributions to Cases to Watch 2021.

By Serra J. Schlanger —

While federal efforts to address prescription drug prices are debated, states have continued to pursue their own measures that require drug manufacturers and other entities in the drug supply chain to disclose information about pricing. (See our previous coverage of such state laws here, here and here.) In passing HB 1032, North Dakota became the most recent state to enact a prescription drug price transparency law. In addition, Texas recently passed HB 1033 to update its prescription drug price disclosure law that took effect in 2019. A summary of these new state law developments is included below.

Texas

As we initially reported here, Texas enacted a law in June 2019 requiring manufacturers to submit two types of reports beginning in January 2020. First, manufacturers must submit an annual report by January 15 stating the wholesale acquisition cost (WAC) of every approved drug sold in Texas. Second, manufacturers are required to submit a price increase report for a drug within 30 days after a WAC increase of 40% or more over the preceding three calendar years or 15% or more in the preceding calendar year. This report is due only for a drug with a WAC of at least $100 for a 30-day supply before the increase. Under the 2019 law, the price increase report had to contain, among other things, aggregate research and development costs, factors that led to the WAC increase, and the role of each factor’s impact on the cost. The 2019 law did not include any penalties for noncompliance with these reporting requirements.

Texas has now updated its price disclosure law to require that the manufacturer’s annual WAC report include additional information for any drugs that had a reportable price increase during the year. The additional information includes the aggregate, company-level research and development costs, the name of each of the manufacturer’s drugs approved by the FDA in the previous three calendar years, and the name of each drug that lost patent exclusivity in the previous three calendar years. Manufacturers will also now be required to submit a fee not to exceed $400 with their annual report. Manufacturers must still submit a WAC increase report within 30-days of an increase, and must still describe the factors that led to the price increase, but the disclosure of aggregate research and development costs has been removed from the price increase report and added instead to the annual report.

Texas has also added new provisions regarding enforcement of the reporting requirements. If a manufacturer fails to submit a report or fee, or fails to timely submit a report or fee, the manufacturer may be subject to administrative penalties of up to $1,000 per day. The state is supposed to provide manufacturers with written notice of noncompliance and administrative penalties may not be assessed if the manufacturer submits the required report or fee within 45 days after receiving the notice of noncompliance.

These changes take effect on September 1, 2021 and will therefore be applicable to the annual reports due by January 15, 2022.

North Dakota

North Dakota’s new law, HB 1032, sets forth reporting requirements applicable to drug manufacturers, pharmacy benefit managers (PBMs), and health insurers. Under the new law, PBMs are required to submit an annual report with information about aggregated rebates, fees, payments and financial incentives received by the PBM, distributed to health insurers, collected from pharmacies and passed to enrollees at the point of sale, retained as revenue by the PBM, and passed on to employers. Health insurers are required to submit annual reports with information related to the 25 most frequently prescribed drugs; the 25 prescription drugs dispensed with the highest dollar spend; annual net spending for prescription drugs; increases in premiums attributable to prescription drugs; and specialty drugs with utilization management requirements.

The North Dakota law includes three reporting requirements for drug manufacturers. First, manufacturers are required to submit quarterly reports (due no later than the 15th day of January, April, July and October) with the current WAC information for drugs sold in or into the state. Second, manufacturers are required to submit a report no more than 30 days after a WAC increase of 40% or greater over the preceding five calendar years or 10% or greater in the preceding twelve months for a manufacturer-packaged drug. Each WAC increase report must include:

• The name of the drug;
• Whether the drug is a brand name or generic;
• Effective date of the change in WAC;
• Aggregate, company-level research and development costs for the previous calendar year;
• Aggregate rebate amounts paid to each PBM for the previous calendar year;
• Name of each of the manufacturer’s new drugs approved by the FDA in the previous five calendar years;
• Name of each drug that lost patent exclusivity in the United States in the previous five calendar years; and
• A concise statement regarding the factor(s) that caused the WAC increase.

Third, manufacturers are required to provide notice in writing if the manufacturer is introducing a new prescription drug at a WAC that exceeds the threshold set for a specialty drug under the Medicare Part D program (currently $670 for a 30-day supply). The new drug notice must include a concise statement regarding the factor(s) that caused the new drug price to exceed the Medicare Part D program price and must be submitted within three calendar days following the release of the drug in the commercial market.

Information submitted in response to the new law will be published on a public website that is to be developed by the North Dakota insurance commissioner. The law provides that the quality and type of information submitted by manufacturers must be the same as that included in other public disclosures (for example, filings with the Securities and Exchange Commission).

North Dakota plans to pay for the administrative work related to these new requirements by increasing the license fees for jobbers, brokers, manufacturers, own label and private label distributors, repackagers, third party logistic providers, and wholesalers or distributors, including virtual wholesalers and distributors. Entities that do not comply with the new reporting requirements may be subject to a civil penalty of up to $10,000 per violation.

The North Dakota prescription drug price transparency law will become effective on August 1, 2021, so the first quarterly reports should be due by October 15, 2021. However, in our experience, states have historically struggled to set up the websites and infrastructure necessary for this kind of reporting in short timeframes. We will watch to see if North Dakota delays enforcement of this new reporting requirement.

By Deborah L. Livornese & Josephine M. Torrente —

This sentiment is being exchanged by many with family, friends and colleagues looking forward to what we all hope is a near future in which we meet in person for work, play and everything else life has to offer.  We at Hyman, Phelps & McNamara, P.C. include FDA among those we are eager to see in person again soon.  Due to the COVID pandemic, during the past 14+ months our interactions with the Center for Drug Evaluation and Research (CDER) at all levels on behalf of our clients have been limited to telephone conferences which have by necessity taken the place of in-person meetings at FDA’s offices.  As pointed out by Dr. Patrizia Cavazzoni, Director of CDER, in her remarks at FDLI’s recent annual conference, FDA is to be commended not only for rising to the direct challenges posed by the COVID crisis, but also for adroitly pivoting to conducting the agency’s normal business without the opportunity to meet in-person internally or directly with the regulated community and its advisors.   But it’s just not the same. Meetings in person allow for the pre- and post-meeting informal exchanges that help to build collegiality and good working relationships.  The opportunity to observe body language is, as MasterCard would say, priceless.  And, in our experience, meetings in person result in a more robust dialogue between the agency and sponsors.

That’s why when Dr. Cavazzoni mentioned considering the continuation of virtual meetings with sponsors at CDER even after the pandemic in order to perhaps have more meetings and to avoid “sponsors wasting sometimes a day to travel, waiting at security for another 20 minutes and all that,” we wished we were attending the FDLI conference in person so we could rush to the podium to assure her that no sponsor we know would give up the opportunity to meet with CDER in person to avoid a trek to White Oak.  Offering the option to meet by phone to the sponsor would be appreciated and, in some instances, accepted, but the savings in travel time and costs pales in comparison to the benefits of an in-person meeting.  We hope that our clients will be heading out to White Oak soon.