The Dark Side of PREA . . . . But is There a Way to Churn the Cream Into Butter and Crawl Out? Catch Me If You Can!

Two little mice fell in a bucket of cream.  The first mouse quickly gave up and drowned. The second mouse, wouldn’t quit.  He struggled so hard that eventually he churned that cream into butter and crawled out.  Gentlemen, as of this moment, I am that second mouse.  —Frank Abagnale Sr. (played by the great Christopher Walken) “Two Little Mice” speech from the 2002 film “Catch Me If You Can”

FDA’s pediatric assessment requirement—first promulgated as the Pediatric Rule in December 1998, and then transformed into the Pediatric Research Equity Act (“PREA”) in December 2003 (FDC Act § 505B) after the U.S. District Court for the District of Columbia, in October 2002, held in Ass’n of Am. Physicians & Surgeons, Inc. v. United States FDA, 226 F. Supp. 2d 204 (D.D.C. 2002), that the Pediatric Rule exceeded FDA’s authority and invalidated its application—has been a topic of interest for this blogger for decades.  The then-Pediatric Rule and then-relatively new pediatric exclusivity incentive added to the statute at FDC Act § 505A by Section 111 of the 1997 FDA Modernization Act (later known as the Best Pharmaceuticals for Children Act, or “BPCA”) was the focus of my first law review article in 2000: Pediatric Testing of Prescription Drugs: The Food and Drug Administration’s Carrot and Stick for the Pharmaceutical Industry, 49 Am. U.L. Rev. 739 (2000).

In short, PREA, which Congress has amended here and there over the years (more on that later), gives FDA the authority to require pediatric studies of certain drugs and biological products.  As FDA explains in guidance:

The BPCA and PREA are designed to work together to encourage the development of data to inform the safe and effective use of drugs in pediatric populations.  Under PREA, pediatric assessments are required for drug products with a new active ingredient, new indication, new dosage form, new dosing regimen, or new route of administration unless the drug is for an indication for which orphan designation has been granted.  Also under PREA, molecularly targeted pediatric cancer investigations are required for original new drug applications (NDAs) or biologics license applications (BLAs) submitted on or after August 18, 2020, for a new active ingredient, if the drug that is the subject of the application is intended for the treatment of an adult cancer, and directed at a molecular target that FDA determines to be substantially relevant to the growth or progression of a pediatric cancer.  Studies conducted under the BPCA, on the other hand, are optional because sponsors have the option of declining to undertake them in response to a written request (WR).  Nevertheless, it is critical that sponsors consider both laws when planning their pediatric clinical development programs.

Given the broad reach of PREA—applying to non-orphan drug products with a new active ingredient, new indication, new dosage form, new dosing regimen, or new route of administration—it is no surprise that the number of products assessed under PREA is in the hundreds.  In fact, there are 541 PREA-assessed products from 2012-2026 alone, according to FDA.  But PREA pediatric studies are difficult and expensive to conduct.  They can make a profitable drug unprofitable and effectively worthless.  But the PREA assessment requirement remains regardless of the success or profitability of a drug.  That’s the dark side of PREA; it can destroy a good drug.

Because of delays in conducting and completing PREA assessments, Congress amended FDC Act § 505B several years ago to include certain consequences if the holder of an approved marketing application fails to, among other things, meet the timetable for submission of the pediatric assessment specified by FDA pursuant to FDC Act § 505B(a)(3). Specifically, until recently, the statute (at FDC Act § 505B(d)) stated:

(d) SUBMISSION OF ASSESSMENTS.—If a person fails to submit a required assessment described in subsection (a)(2), fails to meet the applicable requirements in subsection (a)(3), or fails to submit a request for approval of a pediatric formulation described in subsection (a) or (b), in accordance with applicable provisions of subsections (a) and (b), the following shall apply:

(1) Beginning 270 days after the date of enactment of the Food and Drug Administration Safety and Innovation Act, the Secretary shall issue a non-compliance letter to such person informing them of such failure to submit or meet the requirements of the applicable subsection. Such letter shall require the person to respond in writing within 45 calendar days of issuance of such letter. Such response may include the person’s request for a deferral extension if applicable. Such letter and the person’s written response to such letter shall be made publicly available on the Internet Web site of the Food and Drug Administration 60 calendar days after issuance, with redactions for any trade secrets and confidential commercial information. If the Secretary determines that the letter was issued in error, the requirements of this paragraph shall not apply. The Secretary shall inform the Pediatric Advisory Committee of letters issued under this paragraph and responses to such letters.

(2) The drug or biological product that is the subject of an assessment described in subsection (a)(2), applicable requirements in subsection (a)(3), or request for approval of a pediatric formulation, may be considered misbranded solely because of that failure and subject to relevant enforcement action (except that the drug or biological product shall not be subject to action under section 303), but such failure shall not be the basis for a proceeding—

(A) to withdraw approval for a drug under section 505(e); or

(B) to revoke the license for a biological product under section 351 of the Public Health Service Act.

In other words, the consequences for non-compliance with PREA were two-fold: (1) identification of the non-compliant company on a public list; and (2) the possibility of the subject drug product being identified as “misbranded” and the product sponsor being subject to “relevant enforcement action.”  “Relevant enforcement action” excluded the financial and incarceration penalties under FDC Act § 303, but included the injunction and seizure proceedings at FDC Act § 302 (Injunction Proceedings) and FDC Act § 304 (Seizure).

The consequences for PREA noncompliance changed with the February 3, 2026 enactment of the Consolidated Appropriations Act, 2026 (Public Law No. 119-75).  In addition to providing FDA with additional authorities regarding molecularly targeted           cancer drugs (Section 6601), the new law includes Section 6602, titled “Ensuring completion of pediatric study requirements,” which amended PREA at FDC Act § 505B.  Now the statute at FDC Act § 505B(d) states:

(d) SUBMISSION OF ASSESSMENTS AND REPORTS ON THE INVESTIGATION.—If a person fails to submit a required assessment described in subsection (a)(2) or the investigation described in subsection (a)(3), fails to meet the applicable requirements in subsection (a)(4), or fails to submit a request for approval of a pediatric formulation described in subsection (a) or (b), in accordance with applicable provisions of subsections (a) and (b), the following shall apply:

(1) NONCOMPLIANCE LETTER.—Beginning 270 days after the date of enactment of the Food and Drug Administration Safety and Innovation Act, the Secretary shall issue a noncompliance letter to such person informing them of such failure to submit or meet the requirements of the applicable subsection.  Such letter shall require the person to respond in writing within 45 calendar days of issuance of such letter.  Such response may include the person’s request for a deferral extension if applicable.  Such letter and the person’s written response to such letter shall be made publicly available on the Internet Web site of the Food and Drug Administration 60 calendar days after issuance, with redactions for any trade secrets and confidential commercial information.  If the Secretary determines that the letter was issued in error, the requirements of this paragraph shall not apply.  The Secretary shall inform the Pediatric Advisory Committee of letters issued under this paragraph and responses to such letters.

(2) EFFECT OF NONCOMPLIANCE.—The drug or biological product that is the subject of an assessment described in subsection (a)(2) or the investigation described in subsection (a)(3), applicable requirements in subsection (a)(4), or request for approval of a pediatric formulation, may be considered misbranded solely because of that failure and subject to relevant enforcement action (except that the drug or biological product shall be subject to action under section 303 only if such person demonstrated a lack of due diligence in satisfying the applicable requirement), but such failure shall not be the basis for a proceeding—

(A) to withdraw approval for a drug under section 505(e); or

(B) to revoke the license for a biological product under section 351 of the Public Health Service Act.

(3) LIMITATION.—The Secretary shall not issue enforcement actions under section 303 for failures under this subsection in the case of a drug or biological product that is no longer marketed.

(4) DUE DILIGENCE.—Before the Secretary may conclude that a person failed to submit or otherwise meet a requirement as described in the matter preceding paragraph (1), the Secretary shall—

(A) issue a noncompliance letter pursuant to paragraph (1);

(B) provide such person with a 45-day period beginning on the date of receipt of such noncompliance letter to respond in writing as set forth in such paragraph; and

(C) after reviewing such written response, determine whether the person demonstrated a lack of due diligence in satisfying such requirement.

Under the newly-amended PREA, the consequences for non-compliance are still two-fold—(1) identification of the non-compliant company on a public list; and (2) the possibility of the subject drug product being identified as “misbranded” and the product sponsor being subject to “relevant enforcement action”—but what constitutes “relevant enforcement action” has changed.

The old statute said “relevant enforcement action (except that the drug or biological product shall not be subject to action under section 303),” while the newly-amended statute says “relevant enforcement action (except that the drug or biological product shall be subject to action under section 303 only if such person demonstrated a lack of due diligence in satisfying the applicable requirement).”  That means “relevant enforcement action” now includes not only the injunction and seizure proceedings at FDC Act § 302 (Injunction Proceedings) and FDC Act § 304 (Seizure), but the financial and incarceration penalties under FDC Act § 303 as well (after a lack of due diligence to conduct PREA studies determination).  To that end, we also note that new law amended Section 508(b) of the 2012 Food and Drug Administration Safety and Innovation Act concerning FDA’s annual BPCA/PREA Report to Congress.  Those reports now need to include “a listing of penalties, settlements, or payments under section 303 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 353) for failure to comply with requirements under such section 505B, including, for each penalty, settlement, or payment, the name of the drug, the sponsor thereof, and the amount of the penalty, settlement, or payment imposed.”

There is a new exception in the statute that FDA “shall not issue enforcement actions under section 303 for failures under this subsection in the case of a drug or biological product that is no longer marketed,” and, of course, PREA requirements no longer apply once FDA withdraws approval of a marketing application.  But that means an application holder has to give up on its product to escape PREA and FDA enforcement action.

So . . . . now consider two companies (i.e., two little mice) subject to expensive and time-consuming PREA assessments (i.e., who fell in a bucket of cream).  The first mouse quickly gave up and drowned.  It either stopped marketing its product or risked FDA enforcement action and the new enhanced penalties abive.  The second mouse, wouldn’t quit.  He struggled so hard that eventually he churned that cream into butter and crawled out.  Gentlemen, here’s how the second mouse might crawl out of the bucket of cream with a product to market and without PREA studies . . . .

A company—either the holder of an NDA, a subsidiary of the NDA holder, or another interested party with some contractual relationship with the NDA holder—may submit an ANDA to FDA seeking approval to market a “generic” version of a drug product approved under an NDA.  ANDAs are not subject to PREA.  Indeed, such a “generic” version of the brand-name drug may be identical to the drug product approved under an NDA (other than perhaps the use of a proprietary name).  While this blogger is not aware of any instance in which FDA has approved an ANDA under these circumstances—i.e., a “cloned ANDA”—it appears to be a viable pathway to approval.  (There are, however, instances in which FDA has approved ANDAs submitted—or that were otherwise owned—by the generic subsidiary of the brand-name drug holder.  For example, Novartis Pharmaceuticals Corporation (“NPC”) is the holder of NDA 050715 for NEORAL Soft Gelatin Capsules (cyclosporine capsules, USP), and the company’s former generic subsidiary, Sandoz Inc. (“Sandoz”), was identified in the Orange Book as the holder of ANDA 065017, a generic equivalent of NEORAL.  NPC is also the holder of NDA 020142 for CATAFLAM (diclofenac potassium) Immediate-release Tablets), and Sandoz was the holder of ANDA 075229, a generic equivalent of CATAFLAM.   Similarly, Boehringer Ingelheim is the holder of NDA 020393 for ATROVENT (ipratropium bromide) Nasal Spray, and the company’s former generic subsidiary, Roxane Laboratories, Inc., was the holder of two ANDAs—ANDA 076664 and ANDA 076598—for generic versions of each approved ATROVENT strength.)

Years ago this blogger inquired with FDA about the possibility of submitting a “cloned ANDA.”  After discussing the issue internally, FDA officials informed me that the approval of such an ANDA would ultimately be a policy issue the Agency would need to investigate further and resolve, but that for ANDA submission and review purposes, FDA would likely accept the submission of a cloned ANDA and would review the application if the ANDA “stands on its own.”  That is, FDA would generally require that all of the information typically included in an ANDA, see generally 21 C.F.R. § 314.94 (ANDA content and format), must be generated anew by the “cloned ANDA” applicant; however, stability data generated with respect to the NDA-approved drug product could conceivably be included in a Type V Drug Master File (“DMF”) and referenced for ANDA submission and review purposes.  Such an ANDA applicant would not be permitted to cross-reference or otherwise rely on information included in the brand-name NDA.  Thus, for example, such an ANDA applicant would need to conduct bioequivalence studies and either generate new separate stability data and information or have independent (of that used for NDA submission requirements) stability data by virtue of reference to a Type V DMF containing stability data and information based on the NDA-approved drug product.

FDA’s basis for requiring an independent data and information package for a “cloned ANDA” is rooted in the Agency’s so-called “anti-franchising policy” at 21 C.F.R. § 314.101(d)(8).  This regulation states that FDA will refuse to receive an ANDA if:

The drug product that is the subject of the submission is already covered by an approved application or abbreviated application and the applicant of the submission:

(i) Has an approved application or abbreviated application for the same drug product; or

(ii) Is merely a distributor and/or repackager of the already approved drug product.

FDA has interpreted this regulation to require that, as a general matter, each ANDA stand on its own, and without reference to bioequivalence studies contained in another ANDA.  We blogged on the “anti-franchising policy” several years ago: FDA’s Anti-Franchising Policy: What Is It and Where Did It Come From? (Mar 4, 2015).  Extending this interpretation to a “cloned ANDA” scenario, FDA would require that such an ANDA applicant generate data and information independent from, and without reference to, the data and information in an approved NDA.

Although we are not antitrust experts, we note that the submission and approval of a “cloned ANDA” could raise antitrust concerns.  Specifically, if the NDA holder (or a related party) is also the sponsor of an ANDA containing a Paragraph IV certification that qualifies the ANDA applicant as a “first applicant” eligible for a period of 180-day exclusivity, such exclusivity could prevent FDA from approving subsequent ANDAs containing a Paragraph IV certification to a patent listed in the Orange Book for the brand-name NDA drug product.  Absent that “cloned ANDA” relinquishing 180-day exclusivity eligibility, FDA might resolve the issue by determining that the marketing of the brand-name drug by the ANDA applicant constitutes commercial marketing of the drug product that is the subject of the ANDA, and, therefore, triggers the period of 180-day exclusivity; however, FDA has not yet been forced to make a determination under such circumstances.

We note that in a somewhat related scenario, FDA determined that that Teva’s commercial marketing of an authorized generic version of PROVIGIL (modafinil) Tablets, after Teva acquired the holder of the NDA for PROVIGIL, Cephalon, triggered Teva’s 180-day exclusivity.  FDA also hypothesized in a 2012 Letter Decision the following scenario:

We have considered finding that Teva’s marketing of PROVIGIL upon its acquisition of Cephalon triggered its 180-day exclusivity, and believe that there is a strong argument for finding so. We have refrained from adopting that interpretation in this case, however, because that exclusivity, if it were triggered by Teva’s acquisition of Cephalon, would expire on April 11, 2012 and, given the multiple uncertainties in this case, Teva had no notice that FDA considered it to be running.  Because of the potential for collusion between NDA holders and captive first generics, and the subversion of the statutory scheme that could result, the agency may in the future provide guidance on the effect of such a relationship between NDA holder and first applicant upon any claim for 180-day exclusivity.

But we digress . . . .

Because ANDAs are not subject to PREA, the “cloned ANDA” scenario above means that absent a waiver or release of a PREA study requirement, a company now has a third option to remove the study requirement: (1) conduct the PREA assessment to FDA’s satisfaction; (2) request that FDA withdraw the approval of the NDA and await FDA’s publication of a notice in the Federal Register withdrawing the NDA approval; or (3) obtain approval of a “cloned ANDA” (and request that FDA withdraw NDA approval) and market the product with the proprietary name (either pursuant to approval under the ANDA or with distributor labeling).