On January 27, 2026, the Department of Health and Human Services (“HHS”) Office of Inspector General (“OIG”) issued a Special Advisory Bulletin addressing direct-to-consumer (“DTC”) prescription drug programs.  These DTC programs allow cash-paying patients, including those enrolled in Federal health care programs such as Medicare and Medicaid, to purchase prescription drugs directly from pharmaceutical manufacturers, often at lower prices than those available through traditional pharmacy benefit channels.

While OIG supports efforts to improve affordability and patient access, the Bulletin emphasizes that such arrangements must be carefully structured to avoid violating the Federal Anti-Kickback Statute (“AKS”).

Mitigating AKS Risks: The “Seeding” Concerns

OIG identified two primary risk areas associated with DTC models:

• “Seeding” Programs: Using initial discounts to induce a patient to initiate therapy with the expectation that a Federal health care program will be billed for that same drug in the future.
• Marketing Inducements: Offering discounted DTC drugs as a marketing tool to induce the purchase of other federally reimbursable items or services.

OIG’s Compliance Roadmap

To minimize these risks, OIG outlined several “low-risk” characteristics that manufacturers should adopt:

• The “Full Plan Year” Requirement: To prevent Medicare Part D enrollees from “program hopping” – using DTC pricing only during high-cost periods (such as the deductible phase) and then reverting to Federal benefits – manufacturers must make the DTC pricing available for at least one full plan year. This requirement ensures that the program is a genuine alternative rather than a mechanism for benefit manipulation.
• Financial Separation from Federal Programs: DTC transactions must be strictly cash-pay. No claims may be submitted to any Federal health care program.  Importantly, these payments do not count toward a Medicare Part D enrollee’s true out-of-pocket costs or total Part D spending.
• No Conditioning on Future Purchases: Manufacturers may not condition DTC pricing on the current or future purchase of any other items or services.
• Independent Third-Party Prescribers: A valid prescription must be issued by an independent, third-party prescriber unaffiliated with the manufacturer.

Key Caveats and Limitations

A critical limitation of the Bulletin is what it expressly does not address:

• Telehealth or Telemedicine Vendors: Despite the ubiquity of integrated DTC-telehealth models, OIG explicitly stated that this guidance does not cover telehealth arrangements. Manufacturers relying on telemedicine platforms for prescribing or drug delivery should remain vigilant.  Compliance with the Bulletin’s pricing guidelines alone does not insulate telehealth-linked programs from AKS scrutiny, particularly with respect to prescriber compensation or selection.
• Controlled Substances: Prescription drugs offered by manufacturers through DTC programs must not include controlled substances.

Overall, the Bulletin provides a narrowly tailored compliance roadmap for manufacturers and Federal healthcare program enrollees focused on pricing and cash-pay mechanics.  Because the AKS is a criminal statute, OIG reiterates that compliance ultimately depends on a case-by-case assessment of the relevant facts and circumstances, including the parties’ intent.

The American Conference Institute’s (“ACI”) milestone 10th Anniversary edition of its Advanced Summit on Food Law, Compliance and Regulation is scheduled to take place from April 28–29, 2026 at the Hilton Chicago/Magnificent Mile Suites in Chicago, IL.

Since ACI’s last summit, the food industry continues to navigate legal and regulatory uncertainty marked by shifting federal priorities, state-level activism, and global trade disruptions.  With FDA and USDA reorganizations underway, pending rulemaking on GRAS reform, ultra-processed foods, and labeling mandates, plus heightened state activity affecting food, and new litigation risks, this year’s program will deliver critical insights to help you stay ahead.

Key topics to be discussed at this year’s event include:

• Reconcile state and federal food laws amid federal regulatory pendency
• Prepare for potential GRAS reform and elimination of self-GRAS
• Assess how state and federal initiatives are converging to define “processed” vs “ultra-processed” in food production
• Anticipate the MAHA Report’s impact on dietary guidelines and industry priorities
• Navigate the legal fallout of tariffs and immigration enforcement on the food industry
• Align packaging and recycling practices to comply with state EPR packaging laws and PFAS restrictions
• Develop practical crisis management protocols through a mock recall and inspection

This is your exclusive opportunity to connect with leading legal and regulatory minds in the food industry as they address the most urgent challenges of 2026 and beyond. Attend and gain invaluable insights to shape actionable strategies, benchmark with industry peers, and prepare for the upcoming wave of regulatory and legal hurdles that will impact the food sector.

Hyman, Phelps & McNamara, P.C.’s Riëtte van Laack will be speaking at the conference.  FDA Law Blog is a conference media partner. As such, we can offer our readers a special 10% discount. The discount code is: D10-999-FDA26.  You can access the conference brochure and sign up for the event here.  We look forward to seeing you at the conference.

On January 12th, FDA approved Zycubo (copper histidinate) injection as the first treatment for Menkes disease in pediatric patients.  Menkes disease is a rare, congenital X-linked genetic disorder characterized by impaired copper absorption, leading to severe copper deficiency, progressive neurologic deterioration, and death in early childhood.  The estimated incidence of Menkes disease is approximately 1 in 100,000 live births.

Zycubo is a bioavailable copper replacement therapy that is administered as a subcutaneous injection to deliver copper in a form that bypasses the impaired gastrointestinal absorption in patients with Menkes disease.  FDA approved Zycubo based on evidence from single-arm clinical trials compared to external control groups.

Hyman, Phelps & McNamara, P.C.’s Mark Schwartz, Richard Lewis and Frank Sasinowski were honored to have assisted on the path to approval of this therapy.

On December 23, 2025, FDA approved Omeros’s Yartemlea (narsoplimab-wuug) for the treatment of adult and pediatric patients 2 years of age and older with hematopoietic stem cell transplant-associated thrombotic microangiopathy (TA-TMA), another example of reliance on single-arm evidence of effectiveness for an ultra-rare condition.

TA-TMA is a life-threatening complication of transplantation caused by endothelial injury, which leads to a microangiopathic hemolytic anemia, thrombocytopenia, and renal damage, which can lead to death.

Until now, there had been no specific treatment options for TA-TMA.  Clinical management had largely been supportive, focusing on controlling hypertension, providing transfusion support, modulating immunosuppressants, and dialysis.

Yartemlea is a monoclonal antibody that targets mannan-binding lectin-associated serine protease-2 (MASP-2), a key enzyme in the lectin pathway of the complement system.  By inhibiting MASP-2, Yartemlea blocks downstream lectin pathway activation without affecting the classical or alternative complement pathways.  Prior to Yartemlea’s approval, FDA had not approved any inhibitor of the lectin pathway, so this represented a challenging first-in-class approval for a drug with a novel mechanism of action.

Yartemlea was approved on the basis of a single-arm, open-label study involving 28 adult patients with TA-TMA following hematopoietic stem cell transplantation, as well as patient-level data from 19 adult and pediatric patients with TA-TMA enrolled in an expanded access program (EAP).

The primary efficacy endpoint was TMA response, defined as improvement in two laboratory TMA markers—lactate dehydrogenase (LDH) levels and platelet counts—together with either improvement in organ function or achievement of transfusion independence.  All patients met internationally harmonized criteria for high-risk TA-TMA, which is associated with poor prognosis and high mortality.  For the primary endpoint, response rates were 61% and 68% in the TA-TMA Study and EAP, respectively, and 100-day survival was approximately 73% in both groups.

For a first-in-class therapeutic with a novel endpoint and no regulatory precedent, it can be challenging to assess the clinical meaningfulness of results of a single-arm trial.  Although not mentioned in the drug labeling (the review materials are not yet available), Omeros’s press release refers to an external control cohort, citing a publication that compares survival in narsoplimab-treated patients to those in a registry.  The extent to which FDA’s review relied on this external control to contextualize the data is unclear.  The publication notes that mortality in narsoplimab-treated patients was reduced by more than 60% compared to the external control; presumably, these data were important to FDA in their assessment of the applicant’s uncontrolled data.  The finding of improvement in survival is always of paramount importance, regardless of whether or not it is the primary endpoint.

Notably, the approval was in adult and pediatric patients despite the fact that the only pediatric patients evaluated were in the EAP, demonstrating the potential value of such a program to a sponsor.  It is rare to see data from an EAP in Section 14 of drug labeling; in this case, there were 19 patients with available patient-level data out of the 221 patients in the program (~9%).  Although this was a small fraction of the total number of patients in the EAP, it is notable.  FDA’s recent pronouncement may facilitate even greater acceptance of such real-world evidence in the future.

Several of us from Hyman, Phelps & McNamara, P.C. were honored to have assisted Omeros on Yartemlea over many years.  With appropriate exercise of FDA flexibility, we are glad to have contributed to treatment options for adult and pediatric patients with TA-TMA and their loved ones.

We applaud FDA on the flexibility applied in these disease settings where randomized controlled trials present substantial feasibility challenges.  We look forward to the publication of FDA’s Summary Basis for Approval for the Zycubo NDA and the Yartemlea BLA, which should provide valuable insight into how the Agency determined that these applications met the effectiveness standard.

The American Conference Institute’s (“ACI”) FDA Boot Camp returns March 25-26, 2026, at the New York City Bar, New York, NY.  This foundational training brings together life sciences attorneys, in-house counsel, and compliance professionals to dissect FDA law, policy, and enforcement trends.

What You’ll Gain:

• A clear understanding of FDA structure, approval pathways, and regulatory enforcement
• Legal insights into current issues: off-label communications, accelerated programs, cGMPs, and recalls
• Practical knowledge from case studies, hypotheticals, and expert-led sessions

What’s New in 2026:

• Analysis on how the second Trump administration and RFK Jr. are influencing FDA priorities.
• Breakdown of the impact of the Commissioner’s National Priority Voucher (CNPV) Pilot on development incentives.
• Reviewing FDA’s shifting approach to Complete Response Letters and disclosure standards.

Key Topics Include:

Drug and biologic approvals, Hatch-Waxman and BPCIA litigation, advertising and promotion law, clinical trial compliance, cGMPs, and sooooo much more.

Hyman, Phelps & McNamara, P.C.’s Kurt R. Karst will once again co-chair the conference, this year with Jones Day’s Melissa K. Mannion.

FDA Law Blog is a conference media partner. As such, we can offer our readers a special 10% discount. The discount code is: D10-999-FDA26. You can access the conference brochure and sign up for the event here.  We look forward to seeing you at the conference.

The skinny label has hit the big time.  Last week, the Supreme Court agreed to hear Hikma v. Amarin to address the burning question of whether a carve-out induces infringement.  As of now, the Federal Circuit has been very clear that a carve-out can induce infringement but whether it does is a fact-specific inquiry under basic patent law.  But that patent law conflicts with an FDA law that expressly permits a carve-out (also called a “skinny label”), leaving generic manufacturers in a bit of a quagmire as to whether the use of a carve-out in and of itself can constitute induced infringement.  Hikma v. Amarin gets to the heart of the question because it involves a Motion to Dismiss rather than a finding of induced infringement, rendering the relevant question how much is necessary to plead induced infringement rather than find induced infringement.  This is significant because the specter of going to court may be enough to dissuade generic companies from using the carve-out, regardless of whether a court finds that, on the specific facts, labeling or statements actually do induce infringement.

As a quick refresher, Amarin sued Hikma in 2022 alleging that Hikma’s generic of Amarin’s Vascepa induced infringement of Amarin’s method of use patents because Hikma’s labeling does not adequately carve out Amarin’s protected cardiovascular indication.    As we explained back in 2022, the District Court of Delaware rejected that suit, granting a Motion to Dismiss finding that Amarin’s failed to state a claim.  Though we didn’t blog on it at the time, this case was appealed, and the Federal Circuit reversed, concluding that Amarin’s allegations plausibly state a claim for induced infringement.

Hikma appealed, arguing that the Federal Circuit’s decision “effectively nullifies” the skinny label when it found that “accurately calling a generic drug the ‘generic version’ of a branded drug and citing public information about the brand (e.g., annual sales) now exposes a generic drugmaker to potential damages for inducing infringement of patents . . . [when] the generic drug is labeled only for an unpatented use.”   Hikma argued that the Supreme Court should grant certiorari because the Federal Circuit decision, in which the Court admitted that Hikma fully carved out the patented uses, creates a “very permissive pleading standard for induced infringement,” which would allow induced infringement allegations to apply to every generic drug with a carve-out, regardless of the claims the generic sponsor makes.  Amarin disagreed with this position, arguing instead that the Federal Circuit correctly decided the case because its “complaint gives rise to a disputed question of fact about whether Hikma’s statements communicated to healthcare providers that they should prescribe Hikma’s generic drug for a patented use.”  Amarin also disputed the impact of the case.

Adding fuel to the fire, the Solicitor General submitted a brief (at the Court’s invitation) urging the Court to take the case.   There, the Solicitor General explained that the Federal Circuit decision “subverts Congress’s balance between competing interests” and that the carve-out “cannot function as Congress intended if a generic manufacturer’s anodyne descriptions of its product create a serious risk of massive patent liability.”

Allegations of induced infringement arising from a carve-out are not new.  They’ve been kicking around for more than 10 years, when GSK brought suit against Teva for inducing infringement of Coreg.  The Supreme Court, however, declined to hear that case, leaving the Federal Circuit’s fact-specific inquiry for any allegation of induced infringement arising from a carve-out in place.

As we noted when the Federal Circuit issued its first decision in GSK v. Teva, these skinny label cases highlight “the delicate balance that Congress tried to walk between intellectual property rights and facilitating generic drug access when passing the Hatch-Waxman Amendments, and how that balance can be upset by a single court decision.”   This remains true.  That one single decision now, however, will come from the highest court rather than the Federal Circuit.

President Donald Trump’s Executive Order directed the Attorney General last month to expedite the completion of marijuana rescheduling, but also mandated that the Administration work with Congress to update the statutory definition of final hemp-derived cannabidiol (“CBD”) products for medical use of full spectrum CBD.  Increasing Medical Marijuana and Cannabidiol Research, Executive Order 14370, (Dec. 18, 2025).  The President’s Executive Order noted that hemp-derived cannabinoid products have shown potential to improve patients’ symptoms for common ailments, but some full-spectrum CBD products will once again be controlled as marijuana in November.  Id.

That is because, in case you missed it, the FY2026 Agriculture Appropriations Act, that also helped end the longest federal government shutdown in U.S. history, amended the statutory definition of hemp.  Agriculture, Rural Development, Food and Drug Administration, and Related Agency Appropriations Act, 2026 (“FY2026 Agricultural Act”, P.L. 119-37, Division B).  The revisions of the definition of hemp become effective on November 12, 2026.

From enactment of the federal Controlled Substances Act in 1970 until 2018, the definition of marijuana, regulated as a schedule I controlled substance, included hemp and its derivatives.  Cultivation, production, distribution, and possession were prohibited except for approved research.

Congress, with the Agriculture Improvement Act of 2018 (“Farm Bill,” P.L. 115-334) parsed out hemp from the definition of marijuana.  The Farm Bill defined hemp as the Cannabis sativa L. plant and any part of the plant, including the seeds “and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol (“delta-9 THC”) concentration of not more than 0.3 percent on a dry weight basis.” Id. § 10113; 7 U.S.C. § 1639o.  The definition distinguished non-controlled hemp from schedule I marijuana solely on the delta-9 THC concentration level.  The definition did not take into consideration other psychoactive cannabinoids including delta-8 THC and delta-10 THC.  Allowing cannabinoids other than delta-9 THC has been referred to as the “Farm Bill loophole” because it has seemingly allowed intoxicating products meeting the definition as hemp to be marketed as hemp.

With the Farm Bill, hemp was no longer subject to regulation by the Drug Enforcement Administration (“DEA”) but remained regulated by the U.S. Department of Agriculture and the Food and Drug Administration (“FDA”).

The FY2026 Agricultural Act significantly narrows the definition of non-controlled hemp and will once again include certain currently excluded hemp within the definition of marijuana, which remains a schedule I federally controlled substance at present.  Senator Mitch McConnell (R-KY) added the hemp redefinition provision to the appropriations bill because of the “intoxicating THC products” made legal by the Farm Bill, and the revised definition cracks down on synthetic products with intoxicating THC while preserving non-intoxicating CBD and industrial hemp products. Joe Sonka, McConnell, Paul clash over Senate provision that critics say will destroy US hemp industry, Louisville Public Media (Nov. 11, 2025) (link).

The FY2026 Agricultural Act statute explicitly continues to include non-controlled industrial hemp grown for producing products, including stalks, fibers, whole grains, oils, and edible greens, within the definition of hemp. P.L. 119-37, Division B, § 781(2).

However, the statute reduces the total THC concentration, not just delta-9 THC concentration, to less than 0.3% on a dry weight basis.  The new definition excludes:

• Viable seeds from a cannabis plant if the plant exceeds a total concentration of 0.3% on a dry weight basis;
• Hemp-derived cannabinoid products containing cannabinoids not capable of being naturally produced by a cannabis plant or that are capable of being produced by a plant but were synthesized or manufactured outside of the plant;
• Intermediate (not final) hemp-derived products containing more than 0.3% total THC concentration and “any other cannabinoids that have similar effects (or are marketed to have similar effects) on humans or animals . . . (as determined by Health and Human Services (“HHS”))”; and
• Final hemp-derived cannabinoid products containing more than 0.4 mgs combined total per container of total THC and “any other cannabinoids that have similar effects (or are marketed to have similar effects) on humans or animals . . . (as determined by HHS).” Id.

Intermediate hemp-derived cannabinoid products are defined as products derived from hemp and intended for human or animal use not in final form. Id. By contrast, final hemp-derived cannabinoid products would appear to be those in final form marketed for human or animal use.

The statute requires FDA within 90 days (February 10, 2026) to publish lists of:

• All cannabinoids that can be naturally produced by a cannabis plant;
• All THC class cannabinoids known to occur naturally in the plant;
• All other known cannabinoids with similar effects, or are marketed to have similar effects, to THC class cannabinoids. Id. § 781(3)(C).

FDA must also define “container” as applied to final hemp-derived cannabinoid products.  Id.

The definitional change will recriminalize certain hemp and hemp-derived products that once again are pulled within the definition of marijuana.  It remains to be seen how marijuana will be controlled when November rolls around.  If marijuana remains controlled after November, the question will become how DEA and other federal authorities will enforce cultivation, manufacturing, and distribution of prior uncontrolled hemp-derived products.  This at a time when numerous states have decriminalized and authorized marijuana for medical and/or recreational use.

The American Conference Institute’s (“ACI”) 13th Annual Legal, Regulatory & Compliance Forum on Cosmetics & Personal Care Products returns March 12-13, 2026 at the New York City Bar, New York, NY.  The forum once again brings together the legal and regulatory leaders of the cosmetics and personal care industries for another year of learning, benchmarking, collaborating, and connecting with industry peers.  From MoCRA and state-driven rulemaking, to class actions, to the challenges surrounding packaging EPR, to working with influencers or generative AI, this forum will allow you to get the insights you need to stay compliant and competitive.

2026 Forum Highlights include:

• Two Tracks – Regulatory & Legal: Choose sessions most relevant to your role, from Chemical Contamination, Ingredient Safety, Testing, and Adverse Event Reporting to Class Actions, Product Liability, and M&A Trends
• Hands-On Workshops: Deep dives on Global Compliance Outlook (LATAM, EU, Asia), Working with Influencers, and Packaging EPR Compliance
• E-Commerce Corner: Exploring Generative AI, Data Privacy, IP Protections, and strategies for Safeguarding Consumer Trust
• Roundtable Discussions: Practical benchmarking on Licensing & Partnerships, Retailer Requirements, and Pop Culture & IP Challenges
• Highlight Sessions: Claims Substantiation, Risk Management & Insurance, and the latest State & Federal Developments

Hyman, Phelps & McNamara, P.C.’s Ricardo Carvajal will be speaking at a session titled “From Alert to Action: Mastering Recalls and Adverse Event Reporting.”

FDA Law Blog is a forum media partner. As such, we can offer our readers a special 10% discount. The discount code is: D10-999-FDA26. You can access the conference brochure and sign up for the event here.  We look forward to seeing you at the forum.

Hyman, Phelps & McNamara, P.C. Director Kalie E. Richardson will be moderating a Food and Drug Law Institute webinar this coming Wednesday on Ensuring Effective Responses to FDA 483s and Warning Letters.  This webinar will cover fundamental considerations for responding to FDA 483s and Warning Letters, discussion of real-world case studies, and actionable strategies to help life sciences companies avoid regulatory escalation.  Time will also be reserved for participant questions.  The webinar is on Wednesday, January 21 at 12 PM ET and will also be recorded.  Registration information is available here: Got Observations?: Ensuring Effective Responses to FDA 483s and Warning Letters.

In light of the fast-approaching compliance date of February 2, 2026, FDA convened a town hall discussing last-minute issues governing its priorities for the Quality Management System Regulation (QMSR), which incorporates by reference ISO 13485: 2016 Medical devices — Quality management systems — Requirements for regulatory purposes, and specifically the requirements related to risk management and design and development.  The town hall included an overview of the QMSR requirements around risk and design and development, followed by a moderated panel discussion where frequently asked questions were asked and answered.  FDA reinforced its emphasis on applying risk management to each aspect of the quality system, and of management building a culture of quality from the top.

FDA noted that risk management provides a framework for regulatory decision making in the design and development of medical devices, and also for other company processes, including planning, purchasing, production and service, monitoring and measuring equipment, monitoring and measuring, control of nonconforming product, and improvement.

Quality culture was not something specifically discussed in the context of the current Quality System Regulation (QSR), but has been discussed in various pilot programs, which we blogged on here and here.  FDA brought in this concept in the town hall stating that a culture of quality starts at the top, and reviewed one of their responses to comments to the proposed rule that states “FDA expects medical device manufacturers, led by individuals with executive responsibilities to embrace a culture of quality as a key component in ensuring the manufacture of safe and effective medical devices…” and “a culture of quality meets regulatory requirements through a set of behaviors, attitudes, activities, and processes.”  FDA emphasized that it is not just about what is documented, but how quality is embedded in decision making, accountability, and operations throughout the organization.

Specific to design and development, FDA noted that the design and development process should begin when research is ending, after feasibility and proof of concept have been demonstrated, and before any clinical evaluations are started.  As with design controls in the QSR, design and development under QMSR included stages and control for planning, input, output, review, verification, validation, transfer, and design changes.

For Class I devices exempt from design and development requirements as well as contract manufacturers or initial importers that do not perform design and development activities, FDA confirmed that risk management should still be used for other aspects of product realization, such as purchasing, production, or complaint handling.

With respect to design review, FDA confirmed that the ISO 13485 standard does not explicitly require an independent reviewer as was required in the QSR and that FDA expects appropriate personnel who can provide meaningful oversight of the design process to participate in design reviews.

FDA noted that there are no requirements in the QMSR or ISO 13485 to follow ISO 14971 Medical devices — Application of risk management to medical devices, to utilize any specific risk management tools, or to use quantitative descriptions of risk.  However, FDA noted that if not following ISO 14971, that an appropriately validated risk management process should be used to conduct risk management activities and that if data are available, it is useful to quantify risk of device.

For devices designed previously, FDA recognizes that the requirements of the QMSR are substantively similar to those of the QSR and noted that manufacturers do not need to retrospectively reference the QMSR in previous files.  FDA recommended that a gap analysis be performed to ensure requirements of ISO 13485 and the QMSR are met.

For postmarket surveillance, FDA recommended connecting analysis of processes and data, such as production data, nonconformities, complaints, adverse events, and customer feedback to the risk management process to ensure that emerging risk information is captured and evaluated in a timely manner.

FDA’s final thoughts included making sure manufacturers document risk management activities thoroughly and revisit them frequently, using risk management as a framework for sound decision making and using the design and development process to design quality, safety, and effectiveness into medical devices.

The QMSR town hall offered clarity on FDA’s expectations as industry transitions from the longstanding QSR to a framework aligned with ISO 13485. FDA’s emphasis on risk management reinforces its role as the backbone of sound regulatory decision‑making. Equally notable was FDA’s renewed focus on cultivating a culture of quality, signaling that compliance under the QMSR will extend beyond documentation.  However, in the final days before the QMSR is effective, FDA has still not released its new inspection process to provide clarity in just how inspectors will evaluate compliance under the QMSR.  If you have any questions about implementation of QMSR before the compliance deadline, please do not hesitate to call on us.

Artificial Intelligence (“AI”) in the life sciences has moved from pilot to production, across discovery, trials, and post-market.  With the EU AI Act taking effect, evolving FDA expectations, and looming litigation and enforcement risk, getting it right has never mattered more.

Join the American Conference Institute (“ACI”) for two days of practical, case-based guidance on the legal and regulatory realities of AI in life sciences on February 24-25, 2026 at the New York City Bar Association, New York, NY.   Learn how to deploy AI in discovery and trials – and manage the risks – with clear playbooks for FDA/EU compliance, defensible documentation, contracting, data/privacy controls, and IP protection, delivered by agency leaders, in-house counsel, and top practitioners. Leave with tools you can use immediately to implement AI responsibly and at scale.

Conference highlights to be discussed at this year’s event include:

• Adapting risk and compliance frameworks for next-generation, agentic AI
• Navigating data, privacy, and transparency in drug development and clinical trials
• Contracting for AI-enabled systems and services
• Implementing IP strategies to protect innovation in AI-driven life sciences
• Understanding the impact of the EU AI Act and patchwork U.S. state laws
• Emerging litigation trends and governance structures shaping the AI landscape

Hyman, Phelps & McNamara, P.C.’s Jennifer D. Newberger will be speaking at a session titled “AI Use Cases in MedTech: Stress-Testing Legal and Compliance Challenges Through Case Studies.”

FDA Law Blog is a conference media partner. As such, we can offer our readers a special 10% discount. The discount code is: D10-999-FDA26.  You can access the conference brochure and sign up for the event here.  We look forward to seeing you at the conference.

Yesterday, FDA announced “Flexible Requirements for Cell and Gene Therapies to Advance Innovation.”  This regulatory flexibility, FDA hopes, will be “helpful in expediting product development and will help guide the FDA’s evaluation of development strategies in preparation for a Biologics License Application (BLA) submission.”

The announcement covers three broad areas: Clinical Development, Commercial Specifications, and Process Validation.  It is important to note that this announcement is not the signaling of a new program or regulatory paradigm. The very general potential regulatory flexibilities are not new and have been extended to companies on an individual basis for years.

It is encouraging that CBER is appearing to make these potential flexibilities public and therefore increase the uniformity in which they are available to companies in the Cell and Gene Therapy space.

Hopefully, CBER will take a page out of CDER’s playbook and issue a public facing SOPP akin to the MAPP CDER has issued for expedited products under their purview “MAPP 5015.13 Quality Assessment for Products in Expedited Programs” (this author’s favorite MAPP).

We must wait and see if CBER follows-up on this announcement with specific guidance or direction that can expedite clinical development programs for this product area.

DEA’s Former Chief Administrative Law Judge John J. Mulrooney, II (Partner, Belanger, Rae & Mulrooney, PLLC) and HPM’s Andrew Hull will be presenting at the American Conference Institute’s 7th Annual Summit on Controlled Substances taking place in New York City on January 26 & 27.  This fireside chat with Judge Mulrooney will cover numerous topics of interest to the DEA bar, including best practices for litigating before DEA, the current state of DEA’s Office of Administrative Law Judges, and the impact of recent Supreme Court administrative law decisions (e.g., Loper Bright, Jarkesy) on DEA precent and hearing procedures.

There’s still time to register for this exciting conference, which also offers CLE credits for attorneys.

FDA Law Blog readers: if you are planning on attending, please let Andrew know by sending him an email (ahull@hpm.com).  We hope to see you there!

On January 6, 2026, FDA issued two revised guidance documents related to clinical decision support (CDS) software and low-risk general wellness products. In a video announcing the revised guidance documents, Commissioner Makary states that they are intended to “cut unnecessary regulation and promote innovation” in the field of artificial intelligence (although neither guidance specifically mentions artificial intelligence). The guidance documents were issued without seeking public comment, which is unusual given the more than minor changes to policy and/or statutory interpretation embodied in the revisions.

CDS Guidance

The 2026 CDS Guidance, consistent with the tenor of Commission Makary’s announcement, reflects a more expansive reading of the statute’s CDS exemption and a greater willingness to exercise “enforcement discretion” with respect to software that may not technically qualify for exemption (more about that later). This updated guidance supersedes the 2022 CDS Guidance, about which we’ve previously blogged.

As a brief refresher, the Cures Act established four criteria for Non-Device CDS software.  Below we describe the key interpretive changes made by the new CDS Guidance with respect to each criterion; this in no way captures all the changes made in the update.

Criterion 1: Non-Device CDS software functions do not acquire, process, or analyze medical images, signals from an in vitro diagnostic (IVD) device, or patterns or signals from a signal acquisition system.

The 2026 CDS Guidance reinforces that CDS software can acquire, process or analyze more than one measured signal and still meet this non-device criterion, stating that “discrete, episodic, or intermittent point-in-time physiological measurements (e.g., routine vital signs obtained at discrete clinical encounters) generally do not, by themselves, constitute a pattern” and that signal acquisition systems measure parameters “through continuous, near-continuous, or otherwise streaming measurement.”

The 2022 version of the guidance already stated that “FDA recognizes there is a continuum between a single sample and a continuous sample,” so the new language is more a clarification than a real change.

Criterion 2: Non-Device CDS software functions display, analyze or print medical information about a patient or other medical information.

The 2022 CDS Guidance raised eyebrows when it interpreted “medical information about a patient” to mean “the type of information that normally is, and generally can be, communicated between HCPs in a clinical conversation or between HCPs and patients in the context of a clinical decision, meaning that the relevance of the information to the clinical decision being made is well-understood and accepted.” It was not at all clear what type of information is normally communicated between HCPs and/or patients.

The 2026 CDS Guidance modifies this somewhat with the caveat that “[w]hether particular information is commonly discussed in a clinical conversation is not, by itself, determinative of whether it is ‘medical information about a patient’ under Criterion 2, provided the information’s relevance to patient care is supported by well-understood and accepted sources and can be appropriately understood in context.” This language is helpful in that it removes the question of what constitutes information that is “normally communicated” between a patient and an HCP and instead reflects a broader interpretation that would likely cover most topics discussed between a patient and an HCP.

Criterion 3: Non-Device CDS software functions are intended for the purpose of supporting or providing recommendations about a patient’s care to a health care professional (HCP) user.

The changes to FDA’s interpretation of Criterion 3 are perhaps the most substantive and significant, but also a bit confusing. Both the 2022 and 2026 versions of the guidance state that a software function fails Criterion 3 if it “provides a specific preventive, diagnostic or treatment output or directive.” Seemingly in support of that position, the 2022 guidance was clear that a software function that provided “a user with a single, specific, selected output or solution rather than a list of options or complete information for the user to consider” was a device. That language no longer appears in the 2026 version. Instead, the guidance now states that “if only one option is clinically appropriate and the software function otherwise meets all criteria under section 520(o)(1)(E), FDA intends to exercise enforcement discretion” for such function and provides several examples of software functions that would and would not fall within this new enforcement policy. In other words, FDA is not saying that devices that provide a single output meet Criterion 3, but rather that even though they fail Criterion 3, FDA is choosing not to regulate them. It is not clear why FDA is enacting this enforcement discretion policy rather than merely expanding its view of the types of features that meet Criterion 3. The outcome is the same for developers, although this approach gives FDA the flexibility to withdraw that discretion should it deem necessary.

Similarly, the 2026 guidance deletes a controversial statement from the 2022 version that “FDA considers software that provides information that a specific patient ‘may exhibit signs’ of a disease or condition or identifies a risk probability or risk score for a specific disease or condition as providing a specific preventive, diagnostic, or treatment output. Therefore, such software would not satisfy Criterion 3.” Although the 2026 guidance stops short of saying such functions can satisfy Criterion 3, it includes several risk score functions as examples of products over which FDA would exercise enforcement discretion.

One such example is as follows:

A software function that predicts risk of future cardiovascular events for an HCP to consider based on a patient’s weight, current and historical smoking status, blood pressure, and brain natriuretic peptide (BNP) in vitro diagnostic (IVD) test results.

What is particularly interesting here is that FDA is attempting to carve out narrow circumstances in which this type of prediction would be acceptable without marketing authorization. While the above example would be permitted, if the same functionality relied on “variant genomic data as an input that does not have established relevance to the diagnostic recommendation” then the feature would be subject to FDA oversight. Additionally, if the feature “predicts risk of a cardiovascular event in the next 24 hours” then it would also require premarket review. It is not clear what predication time frame would be appropriate to benefit from enforcement discretion, and what would require review. It is also clear that manufacturers of CDS will need to carefully consider the inputs to the feature to determine whether they fit within the enforcement discretion carve-out.

Criterion 4: Non-Device CDS software functions provide sufficient information about the basis for the recommendations to the HCP user, so that the HCP user does not rely primarily on any of the recommendations to make a clinical decision about an individual patient.

This last Criterion has always been a difficult one for developers to implement. The 2022 CDS Guidance seemed to impose disclosure requirements that were virtually impossible to meet, and it was not clear how to strike a balance between providing sufficient information to allow an HCP to review and confirm the feature’s output without needing to disclose proprietary information. The 2026 version helps clarify these disclosure requirements. It largely maintains the list of “software and labeling recommendations” that the 2022 guidance set forth in order to satisfy Criterion 4, including a recommendation in both versions that the software or labeling provide a plain language description of the software inputs and underlying algorithm that form the basis of the CDS output. However, the 2026 guidance makes several new statements suggesting that FDA is looking for less detailed labeling disclosures than previously expected.  For example, it recommends that the software or labeling include a “summary of the general approach relied upon to provide the recommendations . . . at a level of detail appropriate for the intended user and use environment, which could include, for example, the logic or methods relied upon.” Similarly, the new guidance states that “Information that enables an HCP to independently review the basis of provided recommendations is presented in a manner that promotes usability and avoids information overload, including prioritizing the most-decision-relevant information and making additional detail available as appropriate.” For companies with complex algorithms or that want to protect proprietary technology, this update is a welcome change, as the disclosed information can be more general and include only the information most important to the intended users.

The 2026 guidance also moved the discussion of automation bias that previously appeared in the section interpreting Criterion 3 to the section interpreting Criterion 4, concluding that:

FDA considers the (a) level of software automation and (b) time-critical nature of the HCP’s decision making when determining whether a software function allows an HCP to independently review the basis for the recommendations presented by the software so that they do not rely primarily on such recommendations.

Interestingly, FDA removed all but one of the references to “time-critical” from Criterion 3, but revised examples of device and non-device CDS at the end of the guidance to state that time-critical software functions failed both Criterion 3 and 4. Practically speaking, if a software function would have failed Criterion 3 due to a high level of automation or the time-critical nature of its intended use, it would already have been considered a regulated device. Clarifying that such a software function would also fail Criterion 4 doesn’t change anything.

General Wellness Guidance

CDRH also issued an update to its guidance, General Wellness: Policy for Low Risk Devices, commonly known as the “General Wellness Guidance.” Although FDA did not change its definition of a general wellness product, it greatly expanded the scope of products that can fit within that definition. This is likely to result in many more products coming to market without FDA premarket review.  Perhaps most notably, language in this revised document guts the WHOOP Warning Letter, on which we posted here. As a quick refresher, in that Warning Letter FDA stated that WHOOP’s blood pressure wearable could not be a general wellness product even if tied to wellness uses because “the product is intended to provide a measurement or estimation of a user’s blood pressure, which is inherently associated with the diagnosis of hypo- and hypertension, and is therefore intended for use in the diagnosis of a disease or other condition, or in the cure, mitigation, treatment, or prevention of disease.”

Enter the revised General Wellness Guidance, which states:

FDA may consider certain products that use non-invasive sensing (e.g. optical sensing) to estimate, infer, or output physiologic parameters (e.g. blood pressure, oxygen saturation, blood glucose, heart rate variability) to be general wellness products when such outputs are intended solely for wellness uses, and provided they:

• are non-invasive and not-implanted;
• do not involve an intervention or technology that may pose a risk to the safety of users or other persons if specific regulatory controls are not applied;
• are not intended for the diagnosis, cure, mitigation, prevention, or treatment of a disease or condition;
• are not intended to substitute for an FDA-authorized, cleared, or approved device;
• do not include claims, functionality, or outputs that prompt or guide specific clinical action or medical management; and
• do not include values that mimic those used clinically unless validated (e.g. manufacturer testing, peer-reviewed clinical literature) to reflect those values.

Products that meet the aforementioned criteria may display values, ranges, trends, baselines, or longitudinal summaries, and may contextualize these outputs in relation to sleep, activity, stress, recovery, or similar wellness domains.

As we noted in our prior blog post, FDA seemed to be on thin ice in the Warning Letter, having crafted out of nowhere the concept of a claim being “inherently associated” with a disease or condition and therefore seemingly barred from being deemed a general wellness product. Now, the agency has done a pendulum swing in the opposite direction, essentially stating that any non-invasive sensing of physiologic parameters can fit within FDA’s view of general wellness, so long as they steer clear of any disease claims and avoid claims of clinical accuracy. The guidance also states that it expects general wellness products to have labeling consistent with, and not exceeding, the general wellness intended use.

On the whole, the updates to this general wellness guidance do provide much-needed clarity regarding FDA oversight of monitoring of physiological parameters for non-medical purposes. While many large companies, such as Apple, Garmin, and Google, have long had unregulated heart rate and other monitors on their fitness watches, the basis for concluding that those were not medical devices was always a little hazy, particularly when those features alert users to heart rates above or below established thresholds. It is now clear that, so long as labeling for these products follows the recommendations set forth in the guidance, measurement of a physiological parameter alone is not enough for the product to be deemed a medical device. These updates may also help level the playing field; in our experience, smaller, more risk-averse companies would seek FDA guidance on products that seemed similar to some of the large tech company offerings, only to be told that their products were devices due to the measurement of physiological parameters, even if not intended for use in a clinical environment. Such a position would now appear to be in contrast with the updates to the General Wellness Guidance.

While the guidance provides helpful instructions as to boundaries for general wellness products, one area of potential confusion pertains to the ranges that can be utilized in a general wellness product. The guidance appears internally inconsistent in this regard. On the one hand, the guidance states that a general wellness product may “not include values that mimic those used clinically unless validated (e.g., manufacturer testing, peer-reviewed clinical literature) to reflect those values.” (Emphasis added.) However, the guidance later states that a general wellness product may not include diagnostic thresholds at all, although it may include a notification “informing a user that evaluation by a healthcare professional may be helpful when outputs fall outside ranges appropriate for general wellness use, provided that such notifications . . . do not characterize the output as abnormal . . . [and] do not include clinical thresholds . . .”

The idea of a “range appropriate for general wellness use” that is somehow distinct from clinical thresholds is novel and seems to indicate that the manufacturer would need to establish its own independent range distinct from clinical utility. It is not clear how such ranges would be determined, and whether they would be consistent across similar general wellness products. It also cuts against other language indicating that clinical values may be included so long as they are validated.

While it is helpful that the guidance explicitly states that a general wellness product can tell a user to seek input from a healthcare professional, the guidance states that the feature cannot tell the person to seek such input because a result is abnormal. Telling a person to seek medical advice without telling them why will undoubtedly create confusion for consumers.

What Does It All Mean?

If you have read this far, thank you, and you may be past the point of wanting the TLDR, but we’ll give it to you anyway. These updates, made without any public input and by the Commissioner himself, may indicate that the administration, for better or worse, is beginning to pay more attention to medical devices, or at least to digital health products. They also appear to reflect an intent to align the interests of the administration with the approach taken by CDRH, which, as we have previously noted, have been seemingly inconsistent to date.

Overall, these updates strike us as reflecting this administration’s push towards deregulation and broader uptake of wearables, but there is a question as to whether the agency has, to some extent, prioritized innovation over patient safety. We agree that FDA’s oversight of low-risk software products has historically been overly conservative at times, but software products providing risk scores or likely diagnostic outcomes to HCPs may present certain risks to patients if those features have not been properly validated.

We encourage companies to reach out to us with any questions you have in interpreting FDA’s new guidance documents and how they may apply to your products.

We follow the civil settlements agreed to by the Drug Enforcement Administration (“DEA”) and registrants that are announced in press releases by U.S. Attorney’s Offices and DEA.  We were interested to observe what appeared to be a recurring theme running through four of the six settlements announced from November 24th through December 11th.  The recurrent theme was issuing or filling prescriptions for controlled substances, or ordering controlled substances, “outside the usual course of professional practice.”  We asked ourselves whether the theme was a trend, a coincidence or just a passing fancy.

Legal Points:

• For a controlled substance prescription to be effective, it must be issued for a legitimate medical purpose by an individual practitioner acting in the usual course of their professional practice. 21 C.F.R. § 1306.04(a).
• A prescription that is not issued in the usual course of professional practice or in legitimate and authorized research is not a prescription within the meaning of 21 U.S.C. § 829, and the person knowingly filling such a purported prescription, as well as the person issuing it, is subject to penalties. Id.
• Prescribing “[r]ed flags are circumstances surrounding a prescription that cause a pharmacist to take pause, including signs of diversion or the potential for patient harm.” Gulf Med Pharmacy; Decision and Order, 86 Fed. Reg. 72,694, 72,703 (Dec. 22, 2021).
• The presence of a red flag does not prohibit a pharmacist from filling a prescription, but “means the pharmacist must address and resolve, and … make a record of its resolution assuming it is resolvable. Id.
• The Department of Justice adjusted civil penalties under the Controlled Substances Act assessed after July 3, 2025, up to $19,246 (generally recordkeeping and reporting) and up to $82,950 (other prohibited activity). Civil Monetary Penalties Inflation Adjustments for 2025, 90 Fed. Reg. 29,445, 29,448 (July 3, 2025).

Three Physicians and a Hospital…

The first settlement, announced by U.S. Attorney’s Office, District of Colorado, press release on November 24th, involved three physicians at a hospital who wrote prescriptions “not issued for a legitimate medical purpose or were outside the usual course of professional practice.”  Doctors Sheryll Castro-Flores, Joseph Jimenez, and Douglas McFarland, and Mt. San Rafael Hospital and Rural Health Clinic, their employer in Trinidad, Colorado, agreed to pay a total of $650,000 under the Controlled Substances Act and damages under the False Claims Act for allegedly issuing invalid prescriptions between January 2016 and December 2023.  The physicians allegedly ignored red flags that indicated the prescriptions were “improper or unsafe” that included high daily opioid doses, dangerous drug combinations, signs of substance abuse, prolonged opioid use, cash payments despite insurance coverage, travelling long-distances to obtain prescriptions, and repeated early refills.

The government alleges that the hospital that employed the doctors “is also liable under the Controlled Substances Act for the illegal prescribing of its employees, and under the False Claims Act for causing claims for payment for these invalid prescriptions to be submitted to the government.”

The $650,000 aggregate penalty was allocated in the following manner:

• Drs. Castro-Flores and Jimenez-$112,500 each;
• Dr. MacFarland-$100,000; and
• •Mt. San Rafael Hospital-$325,000.

To prevent recurrence, the hospital issued new policies and implemented new protocols that disallowed prescribing opioids for chronic pain management and to ensure that opioid prescribing for acute and sub-acute pain is done safely and meets state guidelines.

Federal Court Permanently Prohibits a Pharmacist from Filling Prescriptions…

The Department of Justice announced via press release on December 10th that a federal court prohibited Nathaniel Esalomi from filling opioid and other controlled substance prescriptions.  In addition, the pharmacist had a civil penalty entered against him for $10,000 of a $500,000 suspended civil penalty.  Esalomi had owned and been the sole pharmacist at Apexx Pharmacy in Hudson, Florida, that was dissolved following a 2022 complaint and a temporary restraining order.  The government alleged that Esalomi unlawfully distributed “powerful” opioids when he filled prescriptions he knew were not valid.  He allegedly charged “dramatically inflated prices” to fill opioid prescriptions, accepted thousands of dollars in cash, instructed individuals to forge signatures and falsify addresses, and filled numerous prescriptions for deceased persons.  Esalomi agreed to a consent judgment to settle the allegations in the complaint.

Physician Alleged to Have Issued 1,400 Invalid Prescriptions Over Seven Years

According to the press release, also published on December 10th by the U.S. Attorney’s Office for the Eastern District of Washington, Dr. Duncan Lahtinen of Spokane, Washington, allegedly issued over 1,400 prescriptions to thirteen patients “that lacked legitimate medical purposes or were outside the usual course of his professional practice.”  Many of the prescriptions were issued in some combination of opioids, benzodiazepines, sedatives and carisoprodol.  What has been dubbed “the Holy Trinity,” is a combination of opioids, benzodiazepines and a muscle relaxant that DEA has alleged is never for legitimate medical purpose.  Lahtinen also allegedly failed to address numerous red flags of his patients’ substance abuse.  The press release noted that the Washington Department of Health sanctioned Lahtinen twice previously for improper controlled substance prescribing.  The matter was resolved with Lahtinen agreeing to pay $120,000, which equates to about $87.00.

Physician Ordered Controlled Substances “Outside the Course of Professional Practice”

Lastly, the U.S. Attorneys’ Office for the Eastern District of Oklahoma announced on December 11th that osteopath Jonathan Clark of Poteau, Oklahoma, agreed to pay $105,000 to resolve allegations that he ordered controlled substances “outside the usual course of professional practice.”  We are unclear precisely what “ordering outside the usual course of professional practice” meant.  Dr. Lahtinen also allegedly stored and dispensed controlled substances at an unregistered location and failed to maintain records documenting when they were received and dispensed.

“Outside the Usual Course of Professional Practice:” Trend, Coincidence or Passing Fancy?

We were struck that four of the last six DEA civil settlements involved prescribing, dispensing or ordering controlled substances “outside the usual course of professional practice.”  So we asked ourselves whether this theme was a becoming a trend?  Was it a coincidence?  Or was it a passing fancy soon to disappear?  To answer our questions we looked at reported civil settlements dating from the early 1990s to present.  We found that of the 432 reported settlements, 45 settlements involved allegations of issuing or filling prescriptions “outside the usual course of professional practice.”  One settlement involved a physician who allegedly dispensed “outside the course of professional practice,” and there was the recent settlement that alleged a doctor ordered controlled substances “outside the usual course of professional practice.”

We conclude that allegations that a physician issued prescriptions, or that a pharmacy filled prescriptions, “outside the usual course of professional practice” is neither a recent trend nor a passing fancy.  Rather, we believe that it is a coincidence that the most recent settlements involved allegations of prescribers and pharmacies acting “outside the course of professional practice.”

Yesterday, we posted Part I of our update on CMS’s proposed regulations to establish two most favored nation (MFN) demonstration models under Medicare Parts B and D, focusing on the Part D model, called Guarding U.S. Medicare Against Rising Drug Costs (GUARD).  In this post, we cover the main features of the Part B model, Global Benchmark for Efficient Drug Pricing (GLOBE).  Comments on both proposed models may be submitted here (for GLOBE) and here (for GUARD) until February 23, 2026.

Duration:  GLOBE would have a seven-year test period consisting of five performance years beginning on October 1, 2026 and ending on September 30, 2031, for which GLOBE rebates would be due, and during which beneficiary coinsurance and adjusted payments to providers and suppliers would apply, followed by two additional years beginning on October 1, 2031 and ending September 30, 2033, during which CMS would calculate, invoice and reconcile GLOBE rebates owed for previous performance years.

Drugs Covered:  Drugs covered under GLOBE would be a subset of Part B rebatable drugs which (1) are single source drugs and sole source biological products, (2) are classified as antigout agents, antineoplastics, blood products and modifiers, central nervous system agents, immunological agents, metabolic bone disease agents, or ophthalmic agents as specified in the USP Drug Classification (DC) criteria, and (3) have a HCPCS Level II code with Medicare Part B fee-for-service spending greater than $100 million over a 12-month period.  “Single source drugs” are defined as drugs approved under a new drug application (NDA), including authorized generics, that have no therapeutic equivalents listed in FDA’s Orange Book; CMS proposes to define “sole source biological” as biologics approved under a biologic license application (BLA), including unbranded biologics, and that are not a reference biologic for a biosimilar application.  GLOBE drugs that became multi-source during a performance year would no longer be subject to GLOBE after that point.

Regarding the drug classification criteria, once CMS has identified the USP DC category for a GLOBE drug or biological product, it would remain in that category for the duration of the GLOBE model.  Similarly, CMS proposes that Part B rebatable drugs that meet this criterion one time during the duration of the GLOBE Model will be considered to have met this criterion for all subsequent GLOBE Model ASP calendar quarters.

GLOBE would exclude (1) drugs or biological products without a calculable “specified amount” under the Part B inflation rebate program, (2) drugs for which a maximum fair price (MFP) under the Medicare Drug Price Negotiation Program is in effect, and (3) drugs or biological products that are no longer Part B rebatable drugs during the duration of the GLOBE Model.

Geographical area and Medicare population covered:  No later than 60 days before each performance year, CMS proposes to randomly select 25% of the Zip Code Tabulation Areas (ZCTAs) in the U.S.  ZCTAs are geographical areas roughly equivalent to zip codes.  Part B enrollees who reside in the selected ZCTAs (which would also represent approximately 25% of all Part B beneficiaries) would be added to CMS’s GLOBE Model Eligible Beneficiary List, and remain on this list until the model concludes or the beneficiary is no longer eligible for inclusion.  Part B enrollees who do not reside in the selected ZCTAs would be assigned as being eligible for inclusion in the comparison group.

Manufacturer participants:  Participation in GLOBE is mandatory for all manufacturers of GLOBE drugs that are furnished to a GLOBE beneficiary during the performance period.  No enrollment activities are necessary.

Basis for rebates – the International Pricing Benchmark:  Broadly, the proposed GLOBE Model modifies the existing Part B inflation rebate amount calculation by comparing a GLOBE Model drug’s “specified amount” for a quarter as determined for the standard Part B inflation rebate (i.e., the Part B payment limit) to an international benchmark.  If the specified amount is greater, the excess would be rebated to CMS, after subtracting any inflation rebate due.  The starting point for determining GLOBE rebates is therefore the international benchmark.

The international benchmark would look at prices in 19 reference countries: Australia, Austria, Belgium, Canada, Czech Republic, Denmark, France, Germany, Ireland, Israel, Italy, Japan, the Netherlands, Norway, South Korea, Spain, Sweden, Switzerland, and the United Kingdom.  These are the same reference countries listed in the proposed GUARD Model, which are members of the Organisation for Economic Co-operation and Development (OECD) that have a purchasing power parity-adjusted per-capita gross domestic product (GDP) of at least 60% that of the U.S., and that have an annual GDP of at least $400 billion.

CMS proposes to allow manufacturers to choose between relying on a CMS-calculated international pricing benchmark (the Method I GLOBE benchmark) or submitting their own international drug net pricing information (the Method II GLOBE benchmark).  CMS would determine the applicable GLOBE benchmark as the greater of the Method I and Method II benchmark, if available.

Under the default method, the Method I GLOBE benchmark would be the lowest country-level average price among the set of average prices for each reference country, adjusted by the country-specific gross domestic product (GDP) based on purchasing power parity (PPP).  To calculate the Method I GLOBE benchmark, CMS would rely on existing data sources with available drug pricing information in the reference countries, using data from two calendar quarters prior to the first applicable calendar quarter to which the total GLOBE rebate would apply (or, if unavailable, drug pricing information from the most recent ASP calendar quarter for which data are available).  The preamble identifies three such sources:  IQVIA’s MIDAS, Eversana’s NAVLIN, and GlobalData Pharmaceutical Prices (POLI).

Under the optional method (the Method II GLOBE benchmark), manufacturers may voluntarily submit their own international net drug pricing information to CMS that, if accepted, would serve as an alternative GLOBE benchmark.  The Method II GLOBE benchmark would reflect the volume-weighted average of the GDP (PPP) adjusted manufacturer’s international drug net pricing for sales among reference countries for the applicable ASP calendar quarter based on data calculated and voluntarily reported by the manufacturer to CMS on a quarterly basis.

Prior to the first submission of voluntary international drug net pricing data, the manufacturer would be required to execute a data agreement.  For each submission, CMS proposes that the required basic data elements would include, for example, the GLOBE Model drug brand name, nonproprietary name, HCPCS Level II code, dosage form and route of administration (if applicable), volume per item, package type, etc., and that the manufacturer must provide a list of every “applicable international analog,” defined as a non-U.S. analog whose nonproprietary name, dosage form, and route of administration (if applicable) align with a GLOBE Model drug and that are sold in one or more reference countries during the applicable ASP calendar quarter.

CMS also proposes that manufacturers would have two data submission options—streamlined and limited—for these submissions.  For both options, CMS proposes manufacturers would provide the required volume-weighted average GDP (PPP)-adjusted net pricing per HCPCS billing unit for the applicable international analogs for all reference countries for the applicable ASP calendar quarter (across country volume-weighted average GDP (PPP) adjusted net price per HCPCS billing unit).  The difference between the two options is the level of aggregation CMS would allow. Under the streamlined option, CMS proposes reporting prices for each applicable international analog in each reference country, while in the limited option, CMS proposes reporting prices aggregated at the reference country level.  CMS proposes that both streamlined or limited submissions must occur within 30 days after the end of the applicable ASP calendar quarter.  CMS would then conduct a verification review to determine if the submission is an “applicable submission” to identify a per-unit Method II GLOBE benchmark.

Under either Method I or Method II, CMS would apply an adjustment to the identified per-unit GLOBE benchmark to calculate the per-unit GLOBE Model benchmark amount, which includes an “applicable threshold percentage” and an “add-on percentage amount.”  CMS proposes to apply an applicable threshold percentage of 102 percent to the per-unit Method I GLOBE Model benchmark, and 105 percent to the per-unit Method II GLOBE Model benchmark.  For the add-on percentage amount, CMS proposes to increase the per-unit GLOBE Model benchmark by an add-on percentage amount that would, in general, equal the dollar amount of any add-on percentage included in the Part B payment limit (which generally would be the same as the “specified amount” as determined for the standard Part B inflation rebate under 42 CFR 427.302(b)).

The per-unit GLOBE rebate amount for a quarter would be equal to the greater of (1) the specified amount minus the per-unit GLOBE benchmark amount, or (2) the specified amount minus the inflation adjusted payment amount (i.e., the standard Part B inflation rebate).

Per-Unit and Total Incremental GLOBE Model Rebate:  CMS proposes to calculate a per-unit incremental GLOBE Model rebate amount, which would represent the amount of the GLOBE Model rebate that is in excess of any Part B inflation rebate due.  CMS would then calculate the total incremental GLOBE Model rebate amount as the per-unit incremental GLOBE Model rebate multiplied by the total number of GLOBE Model billing units.  Manufacturers would owe CMS the total incremental GLOBE Model rebate amount in addition to any amount invoiced under the Part B inflation rebate program.

The total incremental GLOBE Model rebate would be reduced for a drug currently in shortage, or when CMS determines that there is a severe supply chain disruption, using formulas similar to the corresponding reductions under the Part B inflation rebate program.

Invoicing and payment process:  CMS proposes two alternative approaches, a combined approach and an incremental approach, for how it would provide rebate reports and reconciliation rebate reports to GLOBE participants, and a process for suggestion of error when GLOBE rebates are owed.  CMS is seeking comment on these alternative approaches for reporting, invoicing, and reconciliation, and intends to adopt only one approach.

Under the combined approach, CMS would delay Part B inflation rebate invoicing for all manufacturers (not just GLOBE Model participants) by up to two months and would provide a combined report (invoice) that would include the total GLOBE rebate amount and incremental GLOBE rebate amount in both the Preliminary Rebate Report and Rebate Report provided to the manufacturer pursuant to the Part B inflation rebate program.  Under this approach, CMS would provide each manufacturer of a Part B rebatable drug a Rebate Report that is the invoice for the total rebate amount due under both the Part B inflation rebate program and the GLOBE Model (if applicable), if any, no later than eight months, instead of the current six months, after the end of each applicable calendar quarter, after sending a Preliminary Rebate Report one month earlier. Payment of rebates would be due no later than 30 calendar days after the date of receipt of the rebate reports/invoices.  In addition, because there would be a single combined report and rebate amount due under this approach, CMS proposes that the suggestion of error process described in the Part B inflation rebate program would be used for both the inflation rebate and the GLOBE rebate, if both are payable.

Under the incremental approach, CMS would use a separate invoicing process that would run approximately two months after issuing Part B inflation rebate reports.  Under this approach, CMS would provide a GLOBE Model Preliminary Rebate Report to each manufacturer of a GLOBE drug at least one month prior to the issuance of the GLOBE Model Rebate Report, which would be provided no later than eight months after the end of each applicable calendar quarter.  CMS would invoice manufacturers of GLOBE drugs for the total GLOBE rebate amount using the incremental GLOBE rebate amount and reconcile the portion of the total GLOBE rebate amount invoiced through the Part B inflation rebate program processes.  Under this incremental approach, CMS proposes a separate suggestion of error process such that a manufacturer would submit its suggestion of error within 10 calendar days from the date or receipt of a GLOBE Model Preliminary Rebate Report (or a report detailing the preliminary reconciliation of a GLOBE Model rebate amount) for the applicable calendar quarter.  CMS proposes that the manufacturer of GLOBE drug would be required to pay the incremental GLOBE rebate amount within 30 calendar days of receiving the GLOBE rebate report.

Enforcement:  Penalties for noncompliance would be the same as those under the Part B inflation rebate program.  Failure to pay an Incremental GLOBE Model rebate within the 30-day deadline would subject a manufacturer to a civil monetary penalty (CMP) of 125% of the rebate (or reconciled amount) that the manufacturer failed to pay.  The penalty would be in addition to the underlying rebate owed.  The CMP notice, hearing, and appeal procedures would be the same as under the Part B inflation rebate program.  CMS notes that it could also refer non-compliance cases to the HHS Office of the Inspector General, the Department of Justice, or the Treasury Department.

Coinsurance adjustment:  The ordinary Part B coinsurance obligation is 20% of the Medicare payment amount.  If a GLOBE rebate is applicable (i.e., if the payment amount exceeds the GLOBE Model benchmark amount), the beneficiary’s coinsurance would be adjusted to 20% of the per-unit GLOBE Model benchmark amount.  Where a beneficiary’s coinsurance is reduced, Medicare would increase the payment to the provider to extent of the reduction in the coinsurance.

Outside of Medicare Part B, CMS expects the proposed GLOBE Model to have only indirect impacts on other government price reporting programs.  For example, drugs selected for Medicare MFP negotiation would be excluded from GLOBE while the MFP is in effect.  In addition, GLOBE Model rebates themselves would not be included in a manufacturer’s determination of Medicaid rebate best price or average manufacturer price (AMP), , because CMS considers GLOBE rebates to be paid under the Part B inflation rebate program, and the latter are excluded by statute from AMP and best price.  Similarly, GLOBE rebates are excluded from ASP and from the calculation of 340B ceiling prices.  Nevertheless, CMS explains in the preamble that the GLOBE Model may indirectly impact these prices if the Model influences a manufacturer to reduce its prices to avoid GLOBE rebates.