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  • M.C. Escher By Way of Generic Drug Pricing

    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.

    AdvaMed Updates Code of Ethics

    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.

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

    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.

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

    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.

    Updated CLIA Waiver Guidances Lack Details in Original Draft

    In the midst of the government shutdown and with its accompanying lull in new FDA documents, we thought it would be a good time to update our readers on some guidances that were issued late last year.  Two such notable draft guidances were the, “Select Updates for Recommendations for Clinical Laboratory Improvement Amendments of 1988 (CLIA) Waiver Applications for Manufacturers of In Vitro Diagnostic Devices” (CLIA Waiver Guidance) and “Recommendations for Dual 510(k) and CLIA Waiver by Application Studies” (Dual Waiver Guidance).  CDRH issued draft versions of these guidance documents on November 29, 2017, and exactly one year later the Center reissued updated drafts of these guidance documents.  We blogged on the 2017 drafts here.  The overall requirements and framework of the guidances have not changed substantively since 2017.

    In a recent pre-submission meeting that we had with CDRH, the Center stated that CLIA categorization is one of the most misunderstood regulatory schemes because it is counterintuitive.  It has nothing to do with the importance of the test; rather it focuses on a user’s interaction with the test.  Given this context, it was somewhat surprising to see the updated drafts cut down significantly in length with the CLIA Waiver Guidance going from 24 pages to 13 pages and the Dual Waiver Guidance going from 49 pages to 12 pages.

    Most notably, CDRH removed virtually all of the examples from the 2017 drafts.  We have read that this removal will provide additional “flexibility” for manufacturers.  But, as many in industry know, examples can be very helpful.  Having a list of requirements for waiver studies, as set out in the draft guidances is useful, but illustrative examples give an additional level of interpretation that can be tremendously informative for companies when they are designing their own studies.  Rather than removing all examples, it might have been more useful for CDRH to have retained some examples to give some more concrete indications of FDA’s expectations.  We also note that FDA has made much more prominent reference to the CLSI guidelines in the 2018 drafts, moving these references from footnotes, in many cases, to the body of the guidance.  It is possible that some of the omitted examples can be found in these CLSI guidelines, but many manufacturers, especially small ones, may not have access to these documents because they can be costly to obtain.

    While there were many deletions from the 2017 to 2018 drafts, there were also a couple of noteworthy additions.  First, in the Dual Waiver Guidance, in the context of explaining the content requirements for a Dual Submission, CDRH states, “[m]ost 510(k)s and Dual Submissions do not include a clinical performance study.”  This is an interesting statement to have added.  In our experience, in vitro diagnostic devices, more than most types of devices, include clinical study data in their submissions.  It is unclear what purpose this new statement serves other than to state that – at least in theory – a clinical study is not always required for a Dual Submission.  While it may appear to give additional flexibility, we are unaware of any situations where FDA has granted CLIA waiver without some form of clinical data.

    Second, in the CLIA Waiver Guidance, the 2017 draft guidance contemplates two waiver study designs: (1) by comparison to a traceable calibration method; and (2) without comparison to a traceable calibration method.  In the 2018 draft guidance, the Center lists four possible options for demonstrating waiver: (1) comparison of a candidate test in the hands of trained and untrained users; (2) assay migration study design; (3) flex and human factors studies alone without additional comparison studies; and (4) comparison of a candidate test in the hands of untrained users compared to a comparator method in the hands of trained users.  These added options should give study sponsors additional flexibility when designing their studies.  Examples of how the designs of these studies might look in practice would have been helpful, as discussed above.

    CDRH is accepting comments through February 27, 2019.  The regulations.gov website currently displays a banner stating that the Federal Register feed will not be processed during the shutdown.  It does, however, appear that the “Comment Now” function to comment on existing documents, such as the draft CLIA guidances, is functioning.  Although, we are unsure whether comments will be reviewed during the shutdown.

    Categories: Medical Devices

    FDA Solicits Feedback on Grace Period Timing for GUDID Submissions

    On December 18, 2018, FDA opened a docket for public comment regarding its intention to shorten the grace period for Global Unique Device Identification Database (GUDID) submissions from thirty days to seven days.  The grace period starts when Device Identified (DI) information is first entered by a labeler ends when the DI information it is released to the public on AccessGUDID and openFDA.  During the grace period, a labeler can edit any part of the Device Identifier (DI) submission other than the publication date (i.e., the date it was first entered).  According to FDA, the grace period is intended to provide labelers a second chance to review and revise a DI record after it is published but before it becomes public.

    FDA’s Global Unique Device Identification Database (GUDID) guidance, issued on June 27, 2014, allows for a grace period of seven days from publication.  Shortly after FDA issued this guidance, however, FDA announced via GovDelivery that the grace period would be temporarily extended to thirty calendar days.  FDA explained that this thirty-day extension would accommodate new users beginning to learn GUDID and allow FDA additional time to manage the processing of large volume of GUDID submissions.  The extension allows for a thirty-day delay in public access to Device Identifier records.  This temporary extension is still in effect over four years later.

    FDA is now proposing to end the temporary extension and revert to the original grace period of seven calendar days beginning some time in 2019 [note: no specific timeline was stated in the notice].  In explaining the need to reduce the grace period back to seven days, FDA cites feedback from healthcare providers that thirty days is too long for key information on devices used in patient care to be made available for public use.  While we understand why a thirty-day grace period was necessary as industry acclimated to the new system, it seems reasonable that any required revisions to the DI can be made in seven calendar days.  This is especially true given the fact that information can be saved on the system in draft form, prior to publication, as manufacturers prepare device labels for new products.  It also seems that manufacturers and labelers, in addition to healthcare providers, have an interest in this information being made available to the public in a timely manner.

    Industry and other stakeholders can submit comments to the Public Docket by January 18, 2019.

    Categories: Medical Devices

    A Pair of FDC Act-Related Convictions Upheld on Appeal in the Eighth and Eleventh Circuits

    In two unrelated cases, two U.S. Courts of Appeal affirmed FDC Act-related convictions earlier this week.  In United States v. Patino, the Eighth Circuit held that it was not an abuse of discretion to allow the government to introduce, in connection with a 2016 prosecution for illegal distribution of HGH, evidence of the defendant’s conviction for essentially the same crime in 1998.  Under the applicable Federal Rule of Evidence, the court concluded that that the evidence was: relevant to the issues of knowledge and intent, similar, not overly remote in time, supported by sufficient evidence, and more probative than prejudicial.  As to the last factor of prejudice, the court simply noted, “The district court gave two limiting instructions, mitigating any potential prejudicial effect. See United States v. Horton, 756 F.3d 569, 580 (8th Cir. 2014).”  While we have no reason to doubt the court’s conclusion regarding the efficacy of the limiting instruction, the ruling does demonstrate the evidentiary difficulty that faces any defendant threatened by the government with a successive prosecution for a similar crime, namely that at trial, the government will almost certainly seek to put the earlier conviction before the jury.

    In the Eleventh Circuit, the court affirmed the conviction of a former medical device company salesperson on, among other charges, conspiracy to transport stolen prescription medical devices.  In brief, the government alleged a conspiracy to steal medical devices from the manufacturer and resell them to hospitals.  Among the arguments on appeal were due process and evidentiary issues arising out of what the defendant contended were inconsistent government theories.  Specifically, the defendant argued that in a 2007 trial against an alleged co-conspirator, the government claimed that the victim was the device manufacturer, but in the defendant’s trial, the government claimed that the victims were the hospitals to which the stolen devices were sold.  A different aspect of this case was the subject of a divided Supreme Court decision in 2014.  In this appeal, the defendant argued that the government’s separate prosecutions under inconsistent theories constituted a due process violation; and in the alternative, that the government’s prior statements were admissible as statements of a party-opponent, namely the U.S. Department of Justice.  The court rejected both arguments on the grounds that the government’s theories were not, in fact, inconsistent.  Because of this conclusion, the decision discusses—but does not decide—the interesting issues of when inconsistent government prosecutions run afoul of constitutional due process considerations, and when the government’s statements in those prosecutions can be admitted into evidence.  This is more than a theoretical issue for FDC Act regulated entities and individuals, as we’ve seen instances of the government taking enforcement action in one case under the theory that the product is a drug, but arguing that it’s a dietary supplement in another; or arguing the product is adulterated in one case, but misbranded in another.

    HP&M Releases 2018 Litigation Briefing

    Hyman, Phelps & McNamara, P.C. (“HP&M”) is pleased to present its annual report highlighting the leading cases and settlements from 2018 that affect the FDA- and DEA-regulated industries. Each page provides a concise summary of the relevant facts and key takeaways for our clients. We also include at the end of the report the hot-button cases we are monitoring in 2019 that may shape future FDA regulation.

    We hope this report proves useful and interesting to you. For more information about HP&M, please go to our website at www.hpm.com.

    Does the 510(k) Program Need Predicate Modernization?

    The 510(k) program is based on substantial equivalence.  A 510(k) submitter wishing to market a new device must establish that it is as safe and effective as a legally marketed device that has already received clearance.  The baseline comparison device is known as a “predicate device.”  It is permissible to rely on more than one predicate, but all elements of substantial equivalence must be established with respect to each predicate.  FDA has explained the 510(k) program and substantial equivalence in more detail here and here.

    FDA Is Concerned That Predicates Are Too Frequently Too Old

    Recently, the Food and Drug Administration (FDA) announced a push for “predicate modernization” a “key component of promoting innovation to help patients access safe and effective treatments.”  The problem was defined in these terms:

    When new devices rely on older predicates, they may not be accounting for, in their new submissions to the FDA, the latest advances in technology that could benefit patients.  Older predicates might not reflect the newest performance standards or the FDA’s most recent understanding of the benefits and risks associated with a type of device.  We want to create policy vehicles that will move the market toward reliance on newer predicates that reflect more modern characteristics related to their safety and performance.

    It was observed that “from 2015 through 2018, approximately 20 percent of 510(k)s that were cleared based on substantial equivalence to a predicate device relied on a predicate that was more than 10 years old.”

    FDA acknowledged: “We don’t think these devices are unsafe—they met our standards for reasonable assurance of safety and effectiveness.”  Nonetheless, FDA is “concerned that this practice of relying on predicates that are old, and may not reflect modern performance characteristics, means that some devices are not continually improving.  Yet beneficial iteration is at the heart of health technology advancements that can truly benefit patients.”

    As a first step, FDA will “make public information about cleared devices that demonstrated substantial equivalence to older predicate devices, focusing on those that use predicates that are more than 10 years old.”

    The agency also will “seek public feedback on whether predicates older than 10 years are the right starting point and if there are other actions we should take to advance the use of modern predicates.”

    What Are The Stats?

    We looked at the average and median age of predicates a few years ago in an article on substantial equivalence in the Food and Drug Law Journal.  As described in more detail in the article (p. 387), the review was based on a sample of two consecutive series of 100 traditional 510(k) clearances.  The first series started on February 14, 2013 and the second series started on January 1, 2014 (both dates chosen at random).  Out of 200 traditional 510(k) clearances, 393 predicates were cited.  They had a mean age of 74 months (6 years, 2 months) and a median age of 53 months (4 years, 5 months).  The min-max age range was 1 month to 353 months.

    We recently repeated the review with the same methodology.  We reviewed a consecutive series of 100 traditional 510(k) clearances starting on February 1, 2017, and another series starting on February 1, 2018 (both dates chosen at random).  Out of 200 traditional 510(k) clearances, 369 predicates were cited.  They had a mean age of 77 months (6 years, 5 months) and a median age of 50 months (4 years, 2 months).  The min‑max age range was 2 months to 432 months.

    It seems valid to pool these two reviews, since the same methodology was used.  If so, out of 400 clearances, with 762 predicates, the mean age of the predicates was 76 months (6 years, 4 months), the median age was 52 months (4 years, 4 months), and the min‑max age range was 1 month to 432 months.  This table summarizes the pooled review:

    Table:  Predicate Age (n=400)

    76 months
    (6 yrs, 4 mos)
    52 months
    (4 yrs, 4 mos)

    What about predicates older than 10 years (120 months)?  We did not look at that question in the first review, but we did so this time around, because FDA has raised the issue.  In our 2017‑2018 sample, 53 clearances out of 200 clearances (27%) cited at least one predicate older than 10 years.  That is somewhat higher than the 20% that FDA found.  The FDA’s figure apparently is based on the entire population of clearances in 2015 through most of 2018 and is therefore most likely closer to truth.

    Judging from FDA’s statement, it appears that they included in the 20% figure all clearances in which at least one predicate was older than 10 years.  What about clearances relying on multiple predicates where at least one predicate was older than 10 years, but at least one predicate was also under 10 years?  In our sample, out of 53 clearances with predicates older than 10 years, 27 clearances also cited at least one predicate under 10 years old.  These “mixed bag” clearances amount to 14% out of total clearances.  The other 26 clearances relying exclusively on predicates over 10 years were 13% of total clearances.

    What Do These Data Tell Us?

    What inferences can be drawn from these data?  First, the age characteristics of the predicate devices in the 2017‑2018 sample are consistent with the 2014‑2015 sample.  That suggests that the age distribution of predicate devices is fairly stable, and that these samples are likely to be representative of the population.

    The fact that the median age of predicate devices is about 4 years establishes that 50% of all predicates are under 4 years.  The mean (average) is 2 years higher, about 6 years.  No doubt the average is skewed upward from the median by some especially old predicates.  Nonetheless, these figures show that the center of gravity for predicates is well under 10 years.

    It is a judgment call whether the “mixed bag” clearances should be considered a problem.  FDA clearly thinks so, since they did not provide a separate breakdown of mixed bag clearances.  But if a 510(k) submission reaches back to include a predicate that is older than 10 years, while at the same time citing a predicate that is under 10 years, can one say a priori that insufficient innovation has taken place?  It would seem that one would need to examine the clearances in detail to reach an informed judgment.

    A Closer Qualitative Look (Two Examples)

    To provide some qualitative color to the data, we looked in detail at clearances relying on at least one predicate older than 10 years.  Here are two examples:

    The first device in our 2017 sample with a predicate older than 10 years was a pre‑formed penile silicone block (K162624).  It cited four predicates, two dating to 2002 and two dating to 2004.  Like the predicates, the cleared device is a block of medical grade silicone with an embedded polyester mesh.  A physician carves a shape out of it to implant for “the cosmetic correction of soft tissue deformities in the penis.”  The predicate devices were intended for areas of the body other than the penis.  To ensure that the new anatomical location would be safe, clinical data were collected on 100 patients out to 12 months to evaluate the risks of pain, erosion, migration, and infection.  The conclusion was “that rates of pain, erosion, migration, and infection are low compared to reports of other silicone implants on the market.”

    In this case, the long marketing history due to the age of the predicates potentially provides greater assurance of safety than would have been the case with a novel material.  Combining that fact with the submitter’s clinical study in the new anatomical location, it is difficult to see a problem with the use of older predicates in this particular clearance.

    As another example, consider a hip fracture plating system with the oldest predicate device in the pooled review, dating back 432 months to 1982 (K173826).  One would think that the use of such an old predicate would be troubling.  But a closer look suggests otherwise.  Specifically, this device is a “set of metal plates and associated screws designed to affix to the lateral aspect of the proximal femur and provide fracture stabilization for femoral neck fractures and intertrochanteric fractures.”  It turns out this device was actually cleared in 2014 (K140018).  After marketing commenced, a problem emerged with screw heads breaking off, leading the manufacturer to conduct a recall.  To address the problem, the manufacturer increased the length of the screw and redesigned the geometry to address the head breakage issue.

    The regulatory strategy of this 510(k) submission was to cite the 2014 clearance for the same device as a predicate.  Additionally, the submission cited as a predicate the manufacturer’s hip screw system cleared in 1982.  This latter predicate was cited solely as support for the redesigned bone screw.  Although this predicate was old, bone screws are not a device type that is evolving particularly rapidly; a bone screw designed in 1982 would still likely be fine today.  Testing submitted to FDA showed that the new screw was significantly stronger than the predicate and also resolved the head breakage issue.

    Obviously, these two examples do not speak to the remaining 51 devices citing a predicate older than 10 years.  But they do establish that a predicate older than 10 years can sometimes be appropriate.  Not all device types are realistically subject to rapid iterative improvement.  One needs to look at each clearance individually to arrive at an informed judgment.

    Is There A Problem?

    FDA’s proposal to highlight devices with predicates greater than 10 years is not likely to cause great harm.  The information is already publicly available in the 510(k) database.  FDA did not explain how it will highlight the information, but presumably there will be some sort of notation in the 510(k) database or perhaps there will be a master list posted on FDA’s web site.

    At the same time, we do not think the proposal is necessary.  If a device type has been evolving rapidly, a submitter always has an incentive to choose the most up‑to‑date predicate possible in order to take advantage of FDA’s prior clearances and reduce the data burden.  That is why our review found a strong natural slant toward more recent clearances.  There are some device types that may not evolve rapidly.  In these cases, there is nothing pernicious about reaching back to older predicates.  It may be somewhat misleading in such cases for FDA to suggest that there is.  There is also a certain tension between FDA’s proposal and its claim that the cleared devices met all standards for safety and effectiveness.

    In our view, the 510(k) system is working quite well in fostering rapid iterative improvement of medical devices.  The use of older predicates is not central to the 510(k) system, but it is appropriate in some cases.  It does not deserve special opprobrium.

    Categories: Medical Devices

    Congratulations to HPM’s Newest Director, Allyson Mullen

    Hyman, Phelps & McNamara, P.C. (HPM) is pleased to announce Allyson B. Mullen has become its newest Director.  Allyson joined HPM in June 2013.  Since that time, her years of service have made significant contributions to the firm and its clients.

    Prior to joining HPM, Allyson served as in-house counsel at Waters Corporation.  Earlier in her career, Allyson also worked in regulatory affairs for medical device companies including Boston Scientific and Johnson & Johnson.  In these roles Allyson gained a deep understanding of both the regulatory and business considerations of medical device clients.

    As a Director, Allyson will continue to provide counsel to medical device and in vitro diagnostic (IVD) manufacturers.  Allyson assists clients with a wide range of pre and postmarket regulatory topics including developing regulatory strategy, preparing regulatory submissions, drafting regulatory policies and procedures, reviewing advertising and promotional materials, and addressing enforcement matters.

    In the premarket area, Allyson prepares IDEs, 510(k)s, de novos, and PMAs. She also prepares pre-submissions, and assists clients in preparing for and represents clients at pre-submission meetings with FDA. In the postmarket area, she advises clients on complaint handling, MDRs, field actions, and QSR compliance. Ms. Mullen also helps clients with contract matters and regulatory due diligence.  Allyson’s full bio can be found here.

    Breakthrough Designation Guidance Finalized

    On December 18, 2018, FDA issued a final guidance document on the Breakthrough Devices Program created by the 21st Century Cures Act.  The Breakthrough Device Program is meant to speed access to new devices that treat or diagnose “life-threatening or irreversibly debilitating diseases or conditions.”  The final guidance document is largely unchanged from the October 2017 draft, which we reviewed in detail in a prior post, here.

    By way of background, a device must meet two criteria to qualify for participation in the Breakthrough Devices Program:

    1. The device facilitates more effective treatment or diagnosis of life-threatening or debilitating diseases or conditions; and
    2. The device must meet one of the following criteria:
      • Represents breakthrough technology;
      • No cleared or approved alternatives is available on the U.S. market;
      • Offers significant advantages over existing alternative devices; or
      • Availability is in patients’ best interest.

    Breakthrough designation can be sought for a device that will require clearance or approval via any premarket approval pathways and grants priority review status for designated devices.  Designated devices are placed at the top of the review queue and are assigned additional review resources, as needed.  Unlike breakthrough drug products, however, breakthrough devices are not guaranteed a faster review.

    The changes to the draft guidance are minor and largely stylistic.  However, as we pointed out in our previous post, the draft guidance did not address what will happen to devices that have been granted Expedited Access Pathway (EAP) status under the existing program.  The finalized guidance clarifies that FDA considers devices granted designation under the EAP to be part of the Breakthrough Devices Program.

    The finalized guidance also provides additional detail on device-led combination products seeking breakthrough designation, noting that such devices might present complex issues requiring expertise from a different Center and may, therefore, require additional time to resolve.  The guidance explains that, when CDRH or CBER receives a Q-Submission, IDE or marketing application for a device-led combination product that has been designated as a Breakthrough Device, CDRH or CBER will notify and engage, as needed, the appropriate review staff from the consulting Center(s).

    The guidance elaborates on the various options on interacting with FDA available to designated products.  For example, when submitting a Q-Submission for a designated Breakthrough Device, sponsors should specify if they are requesting one of the special program features available to designated Breakthrough Devices (i.e., a sprint discussion, review of a Data Development Plan, or a Clinical Protocol Agreement).

    Interestingly, the example Data Development Plan specifically states:

    FDA supports the principles of the “3Rs,” to reduce, refine, and replace animal use in testing when feasible. We encourage sponsors to consult with us if it they wish to use a non-animal testing method they believe is suitable, adequate, validated, and feasible. We will consider if such an alternative method could be assessed for equivalency to an animal test method.

    This addition is consistent with Commission Gottlieb’s statement in early 2018 regarding FDA’s strengthened commitment to humane and judicious animal research following the Agency’s termination of an animal study investigating the role of exposure to various levels of nicotine on the onset of addiction in adolescence and young adults.

    Lastly, the finalized guidance clarifies when breakthrough designation is available for multiple devices with the same intended use.  Specifically, a Breakthrough Device designation will not be revoked solely because another designated device obtains marketing authorization.  This means that multiple Breakthrough Device designations for the same intended use may be granted, with multiple submissions pending simultaneously.   However, once a Breakthrough Device is cleared, approved, or has had a De Novo request granted, additional devices with the same intended use will only be designated as a Breakthrough Devices if they can satisfy the designation criteria considering the first Breakthrough Device’s market availability.

    The finalized guidance was announced in a broader statement by FDA Commissioner Gottlieb and CDRH Director, Jeff Shuren, M.D. regarding FDA’s steps to promote innovations in medical devices that advance patient safety.  Also included in this statement was FDA’s plan for a new Safer Technologies Program (STeP), originally outlined in April 2018 as part of the Medical Device Safety Action Plan.  While additional details are forthcoming in 2019, Gottlieb and Shuren’s statement alluded to the STeP program incorporating the principles and features of the current Breakthrough Devices Program to devices with the potential for significant safety improvements as compared to available treatment or diagnostic options.  This announcement is noteworthy because it focuses on patient safety features, which is consistent with FDA’s earlier announcement regarding 510(k) devices and the Agency’s desire to “sunset” old predicates that may not incorporate the latest safety features.

    While earlier expedited device programs have not succeeded at increasing speed to market for novel devices, we are optimistic that both the Breakthrough Device Program and STeP will encourage and facilitate innovative technologies that will advance patient safety.  For those interested, FDA is hosting a webinar on January 17, 2019, to help clarify the Breakthrough Devices Program final guidance.

    Categories: Medical Devices

    Coming Soon for Expanded Access Policies

    Many companies with investigational drugs have posted an expanded access policy on their websites as required, but more than a few still have this task left over from the 2018 to-do list.  As the time for New Year’s resolutions and new to-do lists is upon us, those companies, as well as those that already have policies available on-line, may want to start thinking about how they will handle the newest requirements that Commissioner Gottlieb has described as part of a new program coming in 2019.

    In November 2018, FDA released the results of an independent assessment that evaluated the expanded access program at FDA and made recommendations for improvement.  In reporting on the results of the assessment, Commissioner Gottlieb announced a number of program modifications that either had already begun or would begin soon at the Agency to streamline the process and to recognize companies’ concerns about how adverse events related to expanded access might complicate the approval process.

    Recent statements about the coming program signal that FDA is now planning to become more involved in expanded access with the goals of facilitating and expediting access.  As reported by BioCentury, under the new initiative, FDA staff will provide information by telephone to physicians and patients seeking expanded access.  FDA staff also will complete forms for single-patient IND requests and send the completed forms to the physician for signature and then forward the request to the sponsor.

    Particularly noteworthy is that, as reported by BioCentury, although companies will still have the discretion to deny requests for expanded access, under the new initiative, they will have to provide a reason for the denial.  It remains to be seen how comfortable it will be for companies to maintain a policy against granting expanded access when faced with FDA’s queries even in the absence of a regulation requiring a response.  But perhaps that’s the point.  While FDA cannot require that investigational drugs be provided on a compassionate basis, the Agency is well aware of sponsors’ predisposition to maintain positive relationships with their FDA review team.

    It was also reported that FDA will follow-up with the physician or patient who receives an investigational drug to obtain information about the outcome.   The potential for poor outcomes in the expanded access setting and the potential for those outcomes to adversely affect the approval process has been cited historically by sponsors who have shied away from providing expanded access.  FDA has been working to convey the message that providing expanded access is unlikely to lead to such a negative result.  The Agency, however, has not and, under the Food, Drug, and Cosmetic Act, cannot assure sponsors that such a result is impossible.

    Robert Temple, M.D., who was recently appointed to the new position of senior advisor within the Center of Drug Evaluation and Research, Office of New Drugs’ Immediate Office, and Peter Marks, M.D., Director of the Center for Biologics Evaluation and Research, addressed sponsors’ hesitation to make investigational products available through expanded access at the Reagan-Udall Foundation for the Food and Drug Administration program on using real-world evidence from expanded access protocols in November.  Both officials emphasized their belief that sponsors should not fear that adverse events occurring in the context of expanded access use will negatively affect the prospects for approval of an investigational product.  Dr. Marks referred to reports of negative effects as “urban lore,” and Dr. Temple noted that FDA understands that patients receiving treatment under expanded access are likely to be sicker and have multiple comorbidities, among other factors.  Dr. Marks acknowledged that the expense and complications of manufacturing cell and gene therapies currently make providing these investigational products available through expanded access more difficult, but predicted that costs may decrease in the future making these therapies more accessible.

    Although it has not yet been formally announced, as reported by BioCentury, FDA will be having one or more public meetings about the new initiative and plans to launch a pilot program for cancer drugs in 2019.

    Avalanche or Roadblock: FDA Publishes Flurries of Biologic and Biosimilar Materials

    At the end of a calendar year in DC, we expect to see a few flurries. Maybe some light snow, but definitely flurries of regulatory activity.  December is often rich with FDA publications, specifically warning letters and guidance documents.  And things have not changed this December.  Indeed, in one day, FDA announced and published four new guidance documents, one proposed rule (really a technical correction), and one list related to biologics and biosimilars under the Biologic Price Competition and Innovation Act (“BPCIA”).

    These FDA actions arise as part of the Biosimilar Action Plan (“BAP”) announced by FDA earlier in 2018.  With the success of the competition-based generic market, FDA is looking to advance new policies that will have the same effect in the biologics market.  Calling biologic medicines “increasingly the backbone of modern therapy,” Commissioner Gottlieb predicted in the announcement that 2019 will see a significant focus on the biosimilar market.  And FDA decided to ring in the new year a bit early.

    Two of the BAP guidance documents recently released focus specifically on scientific and regulatory considerations for the development of biosimilar and interchangeable products.  These guidance documents are Questions & Answers on Biosimilar Development and the BPCI Act and New and Revised Draft Q&As on Biosimilar Development and the BPCI Act (Revision 2).  These guidances, both in question and answer format, are part of a series to “facilitate development of biosimilar and interchangeable products” and revisions to previously issued guidance documents.  Indeed, much of the information from prior versions remains substantively the same.

    The first of the two guidance documents, Questions & Answers on Biosimilar Development and the BPCI Act, finalizes the questions and answers from both the April 2015 version of this (final) guidance and the May 2015 draft guidance Biosimilars: Additional Questions and Answers Regarding Implementation of the Biologics Price Competition and Innovation Act of 2009.  There does not appear to be any new questions or significant substantive revisions to the answers.

    The second guidance, New and Revised Draft Q&As on Biosimilar Development and the BPCI Act, is still in draft form and includes similar questions as the other guidance and the May 2015 draft guidance with a few new ones sprinkled in.  New questions and answers include questions about post-approval manufacturing changes for licensed biosimilar products; permissible differences in route of administration, dosage form, strength, or condition of use between proposed 351(k) products and reference products (spoiler alert: none); and REMS.  The Commissioner has noted previously that abuse of REMS restrictions has led to problems obtaining comparator samples for the development of small molecule generics; to prevent the same blockade on the biosimilar side, this guidance announces that FDA will review study protocols submitted by biosimilar applicants to assess safety protections and issue a letter from the agency to the reference product holder stating that FDA will not consider it a violation of a REMS for the reference product holder to provide the prospective 351(k) applicant with a sufficient quantity to perform necessary biosimilar application testing.  This is similar to the approach FDA has taken on the small molecule side.

    The proposed technical correction regulation, the other two guidance documents, and the list deal with the transition of certain biological products from NDAs to BLAs.  Starting with the simplest, the proposed (so-called) technical correction would amend the definition of “biological product” in 21 C.F.R. § 600.3(h) to conform to the definition implemented in the BPCIA and provide an interpretation of the statutory terms “protein” and “chemically synthesized polypeptide.”  FDA calls it a “technical correction” in the proposed rule, but this isn’t really technical, nor is it a correction.  Indeed, it reflects a significant change to the definition of biological product because the rule would replace the phrase  “means any” with the phrase “means a” and would add the phrase “protein (except any chemically synthesized polypeptide)” to the definition of “biological product.”  Consistent with the April 2015 Questions & Answers guidance, the proposed rule would amend 21 C.F.R. § 600.3(h) to further define protein as any alpha amino acid polymer with a specific defined sequence that is greater than 40 amino acids in size, and the term chemically synthesized polypeptide as any alpha amino acid polymer that: (1) is made entirely by chemical synthesis and (2) is greater than 40 amino acids but less than 100 amino acids in size.  Given that that FDA has been using this definition since the publication of the April 2015 final version of this Question and Answer guidance,  this proposed regulation is unlikely to catch industry by surprise.  But this is just one of multiple steps FDA is taking to prepare industry for the March 2020 transition of certain biological products approved under NDAs to BLAs.

    As noted, this proposed technical revision arises from the BPCIA’s “Deemed to be a License” provision, which transitions all biological products approved under NDAs to BLAs as of March 23, 2020.  To help ensure a smooth transition, FDA has published a preliminary list of NDAs that will become BLAs on March 23, 2020.  All your favorite insulins are on the list, as are human growth hormones and other hormones.  Commissioner Gottlieb posits that these protein products may be easier to “copy” under biosimilar standards than ANDA standards and may now see more competition.  This, combined with the loss of certain exclusivities (discussed below), FDA expects to see more robust competition for the products transitioning from NDAs to BLAs under the BPCIA.

    Additionally, FDA published two additional guidance documents related to the “Deemed to be a License” Provision of the BPCIA.  The first was a revision of the March 2016 guidance, Implementation of the “Deemed to be a License” Provision of the Biologics Price Competition and Innovation Act of 2009.  Renamed the Interpretation of the “Deemed to be a License Provision” of the BPCIA, the Guidance is largely the same substantively as the earlier version, but provides more specifics.  For example, the new Guidance explains that only applications approved under an NDA will be deemed to be a BLA, and this transition will occur only on the transition date (rather than before or after).  After 11:59 PM March 23, 2020, the guidance explains, a pending original 505(b)(2) application for a biological product will receive a complete response because the NDA for the listed drug relied upon will no longer exist.  Applications may be withdrawn and submitted under sections 351(a) or 351(k) of the PHS Act, but there is no pathway akin to the 505(b)(2) pathway on the BLA side (affected sponsors can have Type 3 meetings with FDA to discuss new development options).  FDA will, however, administratively convert any pending NDA supplements to BLA supplements and will maintain the same goal date.

    Importantly, this guidance stresses that transitioning NDAs will lose all exclusivity other than orphan and pediatric as of March 23, 2020.  And not only will transitioning products lose exclusivity, those that are deemed to be licensed under the Public Health Service Act won’t be eligible for a 12-year period of reference product exclusivity.  As a result, those of you with protein products looking for NCE exclusivity are probably better off filing for BLAs now, which FDA states in this guidance, it will accept prior to the transition date rather than trying to squeeze in NDA approval.  Further, while FDA previously expressed in a footnote of the 2016 version of the guidance that FDA is considering a mechanism that, in limited circumstances, would allow holders of approved applications under section 505 of the FD&C Act that reference a type II DMF to continue to reference the DMF after the application is deemed to be a license, this statement is nowhere to be found in the revised version of the guidance.  Instead, the footnote directs readers to the Question and Answers guidance (discussed below), which includes no discussion of the use of DMFs or cooperative licensing arrangements in BLAs.

    Finally, FDA published a Questions and Answers guidance on the “Deemed to be a License Provision” of the BPCIA.  While the guidance is brand new, it covers a lot of the basics that have been explained in previous iterations (i.e. the April and May 2015 guidances mentioned above), as well as logistics.  Indeed, it provides much of the same information as the Interpretation guidance, just in a different format.  This guidance includes a robust discussion of the products affected by the transition (with a plug for the new Preliminary Transition List), the process for the transition (in which there are no active steps required by NDA holders for transitioning products and no pre-approval inspections for deemed licenses), and the results of the transition (BLA numbers will be sent to NDA holders).  The guidance also informs readers that all NDAs will transition – even if discontinued – as long as FDA has not withdrawn approval of the application, and all transitioned BLAs will be considered 351(a) BLAs rather than 351(k) BLAs.  Review divisions will remain the same, but the guidance provides a reminder that the requirements for approval will not remain the same.  All pending supplements transitioned as of March 23, 2020 will be subject to BLA review processes, and sponsors are expected to revise transitions to meet any differing requirements with a specific emphasis on CMC.  Further, all transitioned products will need to conform to BLA requirements, including labeling, but FDA will exercise enforcement discretion with respect to labeling until March 23, 2025.

    Importantly, the guidance notes that pending NDAs withdrawn and resubmitted as 351(a) applications will not be subject to additional user fees, but pending NDAs withdrawn and resubmitted as 351(k)s will be subject to the biosimilar user fee.  Nothing indicates that such a withdrawn application will be entitled to a refund, so resubmitting as a biosimilar may cost two separate user fees.  Pending NDAs resubmitted as 351(a)s will not require a fee if:

    • The applicant previously submitted an NDA for the same product and paid the associated PDUFA fee;
    • The NDA was accepted for filing; and
    • The NDA was not approved or was withdrawn.

    This makes sense since BLAs are covered by PDUFA, but biosimilars under 351(k) have a separate user fee scheme set forth in BSUFA.  And nothing in the BPCIA appears to grant FDA authority to waive user fees for transitioning products.

    FDA has given us a lot to think about with respect to transitioning biologics.  Luckily, we still have about a year and a half left to plan for and execute the transition, but March 23, 2020 is rapidly approaching.  Collectively, these publications suggest that it’s not really worth rushing to get NDA approval prior to the transition date.  FDA will take BLA applications for transitioning products now (but probably not 351(k)s since there are no reference products until the transition date), and no exclusivity other than orphan and pediatric will transfer.  Going for the BLA may result in 12 years of exclusivity while going for the NDA will result in almost none.

    Federal Court Invalidates CMS’ Reduction of Medicare Hospital Outpatient Payment Rates for 340B Drugs

    On December 27, 2018, the Federal District Court for the District of Columbia enjoined the Centers for Medicare and Medicaid Services (CMS) from implementing a regulation setting reimbursement for hospital outpatient payment rates for 340B drugs at Average Sales Price (ASP) minus 22.5%.

    A brief history: Section 340B of the Public Health Service Act requires 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 HHS. Under the agreement, the manufacturer is obligated to charge no more than a statutorily defined ceiling price to certain types of purchasers (called “Covered Entities”) designated in the statute, which include certain types of clinics that receive federal funding and certain types of hospitals. Congress’s stated rationale for the 340B Drug Discount Program was to maximize scarce Federal resources as much as possible, reaching more eligible patients, and providing care that is more comprehensive.

    Under the Social Security Act, CMS must set reimbursement rates for certain separately payable drugs under the Medicare Part B hospital outpatient prospective payment system (OPPS). Since 2005, CMS has set reimbursement rates for all separately payable hospital outpatient drugs, including 340B drugs, based on average sales price (ASP) plus 6%. However, in 2017, CMS proposed to revise the reimbursement formula for 340B drugs. Concluding that hospital Covered Entities profited too much from reimbursement for 340B discounted drugs, CMS revised the payment amount for hospital outpatient separately payable 340B drugs to ASP minus 22.5%. The American Hospital Association (AHA) and various other hospital associations and non-profit hospitals submitted comments opposing this change in calculation methodology, arguing that CMS was not authorized to make the change. Nevertheless, CMS finalized the rule, asserting that it had the statutory authority under 42 U.S.C. 1395I(t)(14)(A)(iii)(II) to set the rate based on average price for the drug “as calculated and adjusted by the Secretary.”

    Within days of the release of the final rule, a group of hospitals and health organizations—including the American Hospital Association, the Association of American Medical Colleges, and America’s Essential Hospitals—filed suit to stop the cuts. Since at the time of filing of that first complaint, the reduction in reimbursement was not yet effective, the case was dismissed. In 2018, shortly after the Court of Appeals upheld the district court’s dismissal, Plaintiffs refiled the case. By that time, the rule had become effective and Plaintiffs had presented reimbursement claims. Thus, procedural concerns leading to the 2017 dismissal had been resolved.

    Plaintiffs’ core allegation was that CMS acted ultra vires (i.e., it lacked the authority) when it reduced the OPPS reimbursement rate for 340B drugs from ASP plus 6% to ASP minus 22.5%. In the 2017 rulemaking, CMS had based its action on 42 U.S.C. § 1395I(t)(14)(A)(iii)(II), which authorizes CMS to “calculate[] and adjust[]” the statutory benchmark rate of ASP plus 6% as “necessary.” CMS claimed that the statute does not impose any limits on its authority to adjust the rates, as long as they are related to ASP. The judge disagreed and concluded that the statute does not give CMS unbridled authority to change the calculation methodology. In fact, precedent established that the provision allowing CMS to “adjust” does not mean that it is authorized to make “basic and fundamental changes” to statutorily imposed rates.

    Considering the magnitude of the reduction of almost 30% in reimbursement (from ASP plus 6% to ASP minus 22.5%) and the wide applicability (affecting potentially thousands of 340B drugs), the Court concluded that CMS “fundamentally altered the statutory scheme,” thereby exceeding its authority to “adjust[]” the reimbursement rate. The Court agreed that CMS has the authority to base reimbursement rates on the hospitals’ acquisition costs (here the 340B price). However, CMS is so authorized only if it considers hospital acquisition cost survey data, which CMS did not have. Under the statute, if CMS does not have such survey data, CMS must calculate the reimbursement rate based on ASP rather than on acquisition cost, and cannot fundamentally rework the statutory scheme through a purported “adjustment”.

    Although the Court granted Plaintiffs’ motion for a permanent injunction, it did not yet vacate the 2018 rule. Among other relief, Plaintiffs sought a retroactive increase in payment rates for 340B drugs to ASP plus 6% for 2018. However, because of a requirement that all OPPS payment rates be budget neutral, increasing hospital reimbursement rates for 340B drugs retroactively for 2018 would also require retroactive offsets in payments for other items and services, creating a “quagmire that may be impossible to navigate . . . .” Accordingly, the Court decided to postpone a decision on an appropriate remedy, ordering the parties to provide supplemental briefing on this issue. Note that CMS had continued the ASP minus 22.5% reduction through 2019. 83 Fed. Reg. 58818, 58822 (Nov. 21, 2018). However, because Plaintiffs did not explicitly challenge the rule for CY 2019, and could not show that they had submitted a claim for payment under the 2019 rule as required for judicial review, the court declined to review the more recent rule. Presumably, an attempt by CMS to implement the rate reduction for 2019 would be challenged by Plaintiffs, with a similar result.

    Categories: Health Care

    Report on Antimicrobial Drugs for Sale in Food-Producing Animals: Downward Trend Holds; 10 Year Low

    On Dec. 18, 2018, the Center of Veterinary Medicine (CVM) of FDA  announced the publication of its 2017 Report on Antimicrobials Sold or Distributed for Use in Food-Producing Animals.  This report is required by the Animal Drug User Fee Amendments of 2008.  Under that law, every sponsor of an approved or conditionally approved new animal drug application containing an antimicrobial active ingredient must annually report to FDA the amount of each such ingredient in these drug products sold or distributed for use in food-producing animals.  FDA must summarize this information and make it available to the public in annual summary reports.  The data on antimicrobial drugs sales and distribution information are intended to assist FDA in its evaluation of antimicrobial resistance trends as well as its analysis of other issues that may arise relating to the safety and effectiveness of antimicrobial drugs approved for use in food-producing animals.

    The first report was published in 2010.  Since that time,  FDA has taken several measures to reduce the use of antimicrobials in food-producing animals.  Notably, FDA issued Guidance for Industry (GFI) #213,  New Animal Drugs and New Animal Drug Combination Products Administered in or on Medicated Feed or Drinking Water of Food-Producing Animals: Recommendations for Drug Sponsors for Voluntarily Aligning Product Use Conditions with GFI #209.  Based on recommendations in this guidance, all production uses (i.e., non-therapeutic uses) of medically important antimicrobials were eliminated.  As CVM mentions in its press release, this guidance was fully implemented early 2017.  Since that time, medically important antimicrobial drugs can only be used for therapeutic purposes under veterinary oversight.

    The graph below suggests that FDA’s efforts are paying off.

    According to the report, between 2016 and 2017, the sale and distribution of medically important antimicrobials approved for use in food-producing animals that have an approved indication for production use decreased from 5,770,655 kg to 0 kg and the sales and distribution of medically important antimicrobials approved for use in food-producing animals that are sold over-the-counter, decreased from about 8 million in 2016 to 217,280 in 2017.  Overall the reduction in sale and distribution of the relevant drugs decreased by 33% from 2016 through 2017 and by 43% from its peak year (2015).

    Scott Gottlieb issued a statement that he was pleased with the report, but said more work is needed to fight antibiotic resistance.  He pointed to CVM’s 5-year action plan published in September 2018 for additional steps that the FDA plans “to continue fostering our momentum in antimicrobial stewardship across veterinary settings.”

    In its press release, CVM also stressed that the primary goal of its programs is no to reduce antimicrobial sales but “to support the implementation of good antimicrobial stewardship practices . . . to slow the development of antimicrobial resistance” and preserve the effectiveness of antimicrobial drugs.

    The importance of stewardship is recognized by the animal production industry.  On the same day that FDA published its report, major food animal companies from across the supply chain—including retailers, livestock producers, and trade and professional associations such as Elanco Animal Health, Hormel Foods, Jennie-O Turkey Store, McDonald’s Corporation, National Milk Producers Federation, National Pork Board, National Pork Producers Council, National Turkey Federation, Smithfield Foods, Inc., Tyson Foods, Walmart Inc., and Zoetis —announced the publication of a “Framework for Antibiotic Stewardship in Food Animal Production.”  Apparently, these companies came together as a result of a two-year dialogue moderated by the Pew Charitable Trust and the Farm Foundation.  The framework is meant to apply across the animal supply chain.