Last week, FDA announced the publication of a report by the Agency’s Nanotechnology Task Force (“NTF”) that recommends that FDA develop guidance and take other steps to address regulatory and scientific issues related to nanotechnology.  Nanotechnology is an emerging field of applied science and technology covering a broad range of topics in which the primary unifying theme is the control of matter on a scale 1/100,000th the thicknes of a sheet of paper (or one billionth of a meter).  FDA announced the creation of the NTF in August 2006 and charged it with “determining regulatory approaches that encourage the continued development of innovative, safe and effective FDA-regulated products that use nanotechnology materials.” In October 2006, the NTF held a public meeting to discuss some of the issues discussed in its report. 

The NTF report acknowledges that although products incorporating nanotechnology pose regulatory challenges similar to those posed by other FDA-regulated products using new technologies:

[t]hese challenges may be magnified both because nanotechnology can be used in, or to make, any FDA-regulated product, and because, at this scale, properties of a material relevant to the safety and (as applicable) effectiveness of FDA-regulated products might change repeatedly as size enters into or varies within the nanoscale range.  In addition, the emerging and uncertain nature of the science and potential for rapid development of applications for FDA-regulated products highlights the need for timely development of a transparent, consistent, and predictable regulatory pathway.

As such, the NTF report recommends that FDA take several actions.  First, with respect to scientific issues, the NTF “recommends strengthening FDA’s promotion of, and participation in, research and other efforts to increase scientific understanding, to facilitate assessment of data needs for regulated products,” for example, by “[a]ssessing data on general particle interactions with biological systems and on specific particles of concern to FDA,” and “[c]ollecting/collating/interpreting scientific information, including use of data calls for specific product review categories.”  Second, with respect to regulatory policy issues, the NTF recommends that FDA:

[i]ssue guidance to sponsors regarding identification of the particle size for:

• Products subject to premarket authorization, including OTC drugs (when a new monograph or amendment to a monograph is being proposed), and food and color additives (in petitions to approve new additives or to amend existing approvals); and

• Products not subject to premarket authorization but for which the sponsor is required to provide notice (such as dietary supplements containing certain new dietary ingredients), or may choose to provide notice (such as a GRAS notification).

In addition, although several comments were submitted to the FDA docket established for the October 2006 NTF meeting urging the disclosure (in labeling) of the presence of nanoscale materials in FDA-regulated products, the NTF recommends otherwise:

Because the current science does not support a finding that classes of products with nanoscale materials necessarily present greater safety concerns than classes of products without nanoscale materials, the [NTF] does not believe there is a basis for saying that, as a general matter, a product containing nanoscale materials must be labeled as such.

In May 2006, prior to the creation of the NTF, the International Center for Technology Assessment (“CTA”) submitted a citizen petition to FDA requesting that the Agency create a new regulatory framework to address nanoscale particles –one that treats all nanoparticles as new substances subject to nano-specific paradigms of health and safety testing, and labeling requirements. In addition, CTA requests, among other things, a product recall and development moratorium for sunscreens and cosmetics using nanoscale materials.  Although FDA has not substantively responded to the petition, clearly the NTF report is urging a more tempered FDA approach to nanotech products at this time.

RELATED READING:

• National Nanotechnology Institute
• FDA Consumer Article on Nanotechnology
• FDA Nanotechnology FAQ

Every so often something comes across our desk that is so comical that we feel compelled to share it with others in the food and drug community who will also appreciate it.  One such story comes from a case involving Biovail and FDA in the U.S. District Court for the District of Maryland concerning certain Hatch-Waxman issues.  The following is an excerpt from the transcript of a December 21, 2006 oral argument before Judge Roger W. Titus in that case.  Gerald C. Kell from the Department of Justice argued the case for FDA.

THE COURT:  The [Federal Food, Drug, and Cosmetic Act] itself uses the term “strength.”  It references the drug with respect to which the certification is made.  The certification will mention the listed drug which includes the strength; correct?

MR. KELL:  That’s correct, Your Honor.

THE COURT:  All right.  There’s a special place in Hell where they torture people who write things like this.  For 14 years I was on the Rules Committee of Maryland’s Court of Appeals that didn’t have as many subsections as this, so I would flunk the person who gave me this as a draft rule.  I would say this is 50 rules.

Anyway, I wanted to wander into the right place of this endless section.  When I first went to Westlaw and said, just give me section 355, it had to tell me it was going to be 85 pages.  I said, no, no, no, no.  Let’s try (j), and I get this huge thing here.

MR. KELL:  Well I hope that our brief lays out the precise subsections, Your Honor.  I believe it does.  But that is the sum of my argument, unless the court has any further questions.

THE COURT:  No.  You’ve been very helpful.  I’m glad to have somebody here who knows what they’re talking about.

MR. KELL:  So am I, Your Honor.  It’s just not me.  Thank you.

THE COURT:  Thank you.

If so, the Department of Health and Human Services (“DHHS”) is convening a four day stakeholders workshop in Washington, D.C. beginning on July 31, 2007.  The purpose of the workshop is to enable stakeholders from government, industry, and academia to discuss the government’s plans to implement the legal authorities granted to DHHS and other federal agencies by the Project BioShield Act of 2004 and the Pandemic and All-Hazards Preparedness Act of 2006 to develop medical responses to chemical, biological, radiological, and nuclear (“CBRN”) attacks and to the possible outbreak of influenza or other pandemics.  Information regarding the stakeholders workshop, portions of which will be webcast, can be found here and here.

An article written by Hyman, Phelps & McNamara attorney Paul Ferrari that appears in the July/August 2007 edition of the Food and Drug Law Institute’s (“FDLI’s”) Update magazine provides an analysis of the government’s current efforts to develop and procure CBRN countermeasures and updates a similar article that appeared in an earlier edition of the FDLI publication.

FDA has released a new draft guidance for In Vitro Diagnostic Multivariate Index Assays (“IVDMIAs”).  The first version, which was released on September 7, 2006, attracted many critical comments.  The new draft seeks to address some (but not all) of those concerns.

Creating a new classification of devices called IVDMIAs, FDA is seeking to regulate a subset of laboratory developed tests.   Even though they would not be sold outside of a single laboratory, IVDMIAs would be subject to the full device regulatory scheme, including the need for FDA clearance or approval.

One of the major criticisms of the first draft was that the definition of an IVDMIA was not clear.  The proposed definition has been modified.  An IVDMIA is now defined as a device that:

1)  Combines the values of multiple variables using an interpretation function to yield a single, patient-specific result (e.g., a “classification,” “score,” “index,” etc.), that is intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment or prevention of disease, and

2)  Provides a result whose derivation is non-transparent and cannot be independently derived or verified by the end user.

The second prong of the definition is likely to attract the most attention, since it will not always be clear whether a result is “non-transparent” or how the phrase “cannot be independently derived or verified” will be applied.  FDA has given some examples of tests that are IVDMIAs, and some that are not.  These illustrations provide some greater clarity, but even so there will almost certainly be controversy over whether a particular test falls inside or outside the IVDMIA definition.

Another area of concern for commenters related to the scope of the IVDMIA “device.”  Was the device the algorithm; the algorithm and software; the algorithm, software, and laboratory tests; or something else?  FDA has definitively answered that question, although not in a way that will satisfy those who proposed a narrow definition.  The new draft guidance states:

FDA believes that any safety and effectiveness determinations that are part of the premarket review process should include review of the performance of the entire system, including the accurate measurement of the input variables, directions for use, and expected analytical or clinical performance, rather than a review of only certain subcomponents of the test.

The impact of that broad definition may be partially softened (at least in the short term) by FDA’s acknowledgement that the Clinical Laboratory Improvement Amendments (“CLIA”) “requirements may partially fulfill corresponding” Quality System (“QS”) requirements.  FDA states that it will issue guidance to help laboratories comply with QS requirements.  Furthermore, FDA will “exercise enforcement discretion” (i.e., presumably not apply QS requirements until the final guidance has been issued).  How FDA will ultimately minimize the overlapping requirements of CLIA and the QS regulations is not discussed in the document.

FDA also adopted the suggestion offered by many commenters that there be a transition period.  The grace period will be 12 months from the date of the final guidance document “for currently marketed” IVDMIAs, and then six more months if a 510(k) or premarket approval application is submitted.  These transition periods are certainly better than requiring immediate compliance, but they are significantly shorter than some commenters had proposed.

While FDA did adopt the concept of a transition period, it rejected the many comments that requested the agency to proceed through notice and comment rulemaking.  FDA’s decision to use the guidance document process instead of rulemaking may result in a legal challenge over whether FDA violated the Administrative Procedure Act.  Even more fundamentally, FDA continued to assert that IVDMIAs are devices that are subject to FDA regulation.  This position, too, has been sharply questioned.

The comment period is a rather short 30 days.  After the first draft guidance was issued, FDA extended the initial 90-day comment period by 90 days.  It remains to be seen whether FDA will extend the comment period again in light of the significant impact that would follow adoption of an IVDMIA category.

By Jeffrey N. Gibbs 

After a highly anticipated revision of Medicare’s Clinical Trial Policy (“CTP”) that was issued in a July 9, 2007 Decision Memorandum (“Proposed Decision”) left many scratching their heads, the Centers for Medicare & Medicaid Services (“CMS”) issued a Proposed Decision Memorandum for Second Reconsideration of the CTP (“Second Reconsideration of the Proposed Decision”) on July 19, 2007.  A Proposed Decision Memorandum was issued on April 10, 2007 to clarify and expand Medicare coverage of items and services in clinical research.  The April 10, 2007 proposed policy generated many public comments from providers and industry.  Based in part on significant concerns raised in public comments, including the apparent confusion among Medicare contractors on interpretation of the CTP, CMS decided to “preserve the status quo” and made just two changes, including addition of Coverage with Evidence Development (“CED”) to Medicare clinical research policy.  CMS explained that based on several important issues raised in public comments on the Proposed Decision, the agency would reopen reconsideration of the CTP and issue a new proposed National Coverage Determination (“NCD”), which CMS did on July 19th.

The Second Reconsideration of the Proposed Decision is intended to clarify many of the issues that were identified in public comments on the Proposed Decision, renames the CTP to “Clinical Research Policy,” and expands the policy’s scope to cover a broad range of clinical research.  The Second Reconsideration of the Proposed Decision addresses many issues raised in comments on the Proposed Decision and defines new terms, including:

1. Explaining the scope of the policy by defining “clinical research” and renaming the overall NCD to clearly include all clinical research.
2. Replacing the requirements and other necessary characteristics for qualifying clinical trials under the CTP with scientific and technical standards for certified clinical research studies.
3. Preserving CMS authority to permit CED when appropriate.
4. Redefining coverage for qualifying clinical research studies or CED to avoid confusion with terms used in other contexts, using the term “usual patient care.”
5. Defining “routine clinical services” that are included in “usual patient care.”
6. Clarifying the extent to which “investigational clinical services” are included in “usual patient care.”
7. Clarifying that coverage does not include “administrative services” required to carry out studies but not required to furnish usual patient care.
8. Establishing a process that clinical research study sponsors/principal investigators must use to certify to CMS that their study meets the standards described in the policy, including registration with ClinicalTrials.gov.
9. Enumerating the types of clinical research studies that are excluded from the policy.
10. Clarifying the relationship between coverage under the policy and local coverage determinations.
11. No change in Medicare coverage policy for category A and B Investigational Device Exemptions (“IDEs”) (e.g., IDE category B devices remain eligible for coverage).
12. No change in contractor discretion to cover humanitarian use devices.
13. No effect on Medicare Part D policy.
14. No effect on any clinical research study that was covered under any previous policy that began enrollment prior to the effective date of the policy.

Medicare has covered routine costs incurred by Medicare beneficiaries in clinical trials since 2000.  However, CMS guidance on “routine costs” has been confusing and interpreted differently by various Medicare contractors.  CMS explained in the Proposed Decision that several comments showed there is significant confusion about the 2000 CTP, including the fact that Medicare contractors have been paying claims for items and services outside the terms of the CTP. 

The Proposed Decision added language intended to clarify when routine costs in clinical trials are covered.  Specifically, routine costs of a clinical trial include all items and services that are otherwise covered by Medicare that are provided in either the experimental or the control arms of a clinical trial, except the investigational item or service itself, unless otherwise covered outside of the clinical trial.  CMS added the phrase “unless otherwise covered outside of the clinical trial” to clarify that investigational items that are already covered by Medicare may also be covered when they are an investigational item in a clinical trial.

CMS also added to the CTP Medicare coverage of certain items and services under CED.  CMS uses CED to impose Medicare coverage with conditions — Medicare coverage is conditioned on the collection of additional evidence on appropriateness or effectiveness using either data submission to registries or data developed in further clinical research.  The CED policy was discussed in a December 13, 2006 meeting of the Medicare Coverage with Evidence Development & Coverage Advisory Committee and was supported by the committee.  Based on that support and the support of a federal panel convened by the Agency for Healthcare Research and Quality, CMS decided to adopt the policy as part of CTP coverage.  Although public comment highlighted the burden and additional expense that may be imposed on beneficiaries, providers, and sponsors/investigators under CED, CMS chose not provide funding for the additional data collection.  CMS explained that it appreciates the additional burden that further clinical research adds to patient care, but CED allows Medicare coverage for items and services that would not otherwise be covered.  Therefore, according to CMS, the benefits of covering additional items and services under CED outweigh the burden.  CMS includes the addition of CED policy in the Second Reconsideration of the Proposed Decision.

The Second Reconsideration of the Proposed Decision is intended to “[build] upon the input from the previous reconsideration.”  At the outset, CMS explains its authority for making coverage decisions under § 1862(a)(1)(A) of the Social Security Act when evaluating evidence to whether items and services meet the reasonable and necessary standard.  However, evidence-based review is not feasible for the broad range of items and services used in clinical research.  As a result, CMS relies on the integrity of clinical research protocols to gain assurance that research interventions are reasonable and necessary, expose participating beneficiaries to the least amount of risk, and maximize health outcomes.

In an apparent effort to clarify Medicare coverage policy on items and services already covered outside the clinical research context, CMS proposes Medicare coverage of “usual patient care” in qualified clinical research.  “Usual patient care” is defined as routine clinical services and investigational clinical services in clinical research when the investigational clinical services would be covered outside of the clinical research and the clinical research meets the standards for a clinical research study. 

CMS defines “clinical research,” and proposes standards that it believes exposes beneficiaries to the least amount of risk and maximizes the potential for improvement of health outcomes.  Clinical research is defined as “any systematic investigation involving human participants which is designed to contribute to generalizable knowledge and which involves a clinical intervention, care delivery strategy, or diagnostic technique designed to potentially improve predefined health outcomes.”  CMS identifies 13 scientific and technical standards for clinical research that would be required for providers, practitioners, or suppliers who request payment for usual patient care furnished to Medicare beneficiaries participating in clinical research. 

Medicare secondary payer concerns have been a lingering cloud of disquiet for sponsors and principal investigators.  The Second Reconsideration of the Proposed Decision appears to shed some light on these concerns by explaining that Medicare does not cover usual patient care when the care is provided free to the Medicare beneficiary, or when the study sponsor agreement with the investigator sites or the informed consent documents provided to the patient specify that the care will be provided free to participants.  In other words, if a study sponsor or agreement states that routine or investigation clinical services otherwise covered by Medicare are free, Medicare will not pay for the services.

Interested stakeholders have 30 days to comment on the Second Reconsideration of the Proposed Decision.

By Kirk L. Dobbins 

Support for legislation that would create a biogenerics approval path is reportedly crumbling.  Last month, the Senate Health, Education, Labor, and Pensions (“HELP”) Committee passed S. 1695, “the Biologics Price Competition and Innovation Act of 2007.”  Although neither the full Senate, nor the House Energy and Commerce Committee have passed similar legislation, it was widely speculated that S. 1695 (or similar legislation) would be considered in the conference committee established to iron out differences between the House- and Senate-passed versions of FDA reform legislation.  S. 1695 would amend the Public Health Service Act to add § 351(k) to provide for an approval pathway for “biosimilar” and “interchangeable” biologics that rely, in part, on FDA’s previous licensure of an innovator’s product.  In addition, the bill would provide a 12-year period of innovator marketing exclusivity, limited “generic” exclusivity under certain circumstances, and patent resolution provisions. 

Over the past several days, a provision of that legislation providing brand name sponsors with additional exclusivity periods for certain product improvements, such as new indications and structural modifications, has been questioned by the generics industry.  A similar two-tier exclusivity paradigm is currently in place for drug products approved under the FDC Act, where innovators can obtain 5-year new chemical entity exclusivity and 3-year exclusivity for certain product improvements. Generic supporters have reportedly suggested lowering the 12-year exclusivity period in S. 1695 in exchange for providing a period of “new use” exclusivity.  Innovator companies want to stick with the 12-year period agreed to under S. 1695.

In addition, some House Members have signed a letter sent to the chairmen and ranking members of the House Energy and Commerce Committee and the Senate HELP Committee opposing the current consideration of biogenerics legislation.  According to the letter’s signatories:

We believe the establishment of a pathway for biosimilars is appropriate for Congress to consider, but only after consideration of the views of all stakeholders and full deliberation, hearings, and markup by the appropriations committees.  Until such time, we oppose inclusion of biosimilar legislation in the context of unrelated FDA reauthorizations.  We are also deeply concerned that efforts to resolve differences over biosimilars will endanger prompt enactment of legislation which provides necessary funding for vital FDA functions such as drug and medical device approval and safety monitoring. 

Finally, we have learned that the Congressional Budget Office (“CBO”) is drafting a report and a score of biogenerics legislation (that could be published in the next few weeks) that would reportedly place economic savings of biogenerics over the next 10 years at an amount significantly less than the estimates of some biogeneric proponents.  CBO is reportedly taking a hard look at reports by Avalere Health and Duke University Fuqua School of Business Professor Henry Grabowski.  The Avalere report pegs government savings around only $3.6 billion over the next 10 years. 

Because some of the momentum for biogenerics legislation has been the belief that it will create significant economic savings, a CBO report to the contrary, coupled with innovator/generic and House member disagreements, could destroy the fragile support for biogenerics legislation that had led to the Senate HELP Committee’s passage of S. 1695.

RELATED READING:

• FTC Commissioner Pamela Jones Harbour BioGenerics Speech

Before you do, be sure to become familiar with the Federal Trade Commission’s (“FTC’s”) regulation of the advertising of such products.  Hyman, Phelps & McNamara attorneys Cassandra Soltis and John Fleder noted in an article for the Food and Drug Law Institute’s Update magazine that the FTC has stepped up its enforcement activity against weight-loss and diet products.  They warn that companies can expect that trend to continue as they market an increasing number of products to help consumers combat excess weight and obesity. 

ADDITIONAL READING:

• FTC Diet & Fitness Homepage

On Tuesday, July 17th, Hyman, Phelps & McNamara attorneys Michelle Butler and Jeff Wasserstein gave a teleconference, titled “False Claims Act Compliance Strategies: Don’t Lose Access to Medicare and Medicaid Reimbursement.”  Audio copies of the teleconference, along with a transcript of the witty, yet thoughtful, presentation can be obtained here.

Increasing cooperation between U.S. and European food and drug regulatory authorities are creating efficiencies for regulated industries and that benefit the public health.  In two recent press releases, FDA announced that the European Medicines Agency (“EMEA”) has agreed to expand current regulatory cooperation with the FDA, and that FDA and the European Food Safety Authority (“EFSA”) signed an international cooperation agreement to facilitate the sharing of confidential scientific and other information in the area of food safety, respectively. 

Since the creation of the International Conference on Harmonization in 1990, and the later establishment of the EMEA in 1995, FDA and European drug authorities have sought to harmonize regulatory requirements (where possible).  In September 2003, FDA and EMEA authorities signed a Confidentiality Arrangement that, among other things, identified a number of areas for future cooperation between the two agencies.  Since then, FDA and EMEA have cooperated in various areas, including vaccines, oncology, pharmacogenomics, and with respect to providing parallel scientific advice. 

In June, FDA announced that the EMEA agreed to expand regulatory cooperation under the Confidentiality Arrangement to include pediatrics and orphan drugs.  (In addition, new areas of transatlantic regulatory cooperation are also being discussed, including medical devices and cosmetics.)  Legislation similar to that enacted in the U.S. requiring the study of drugs in pediatric patients and providing data exclusivity was recently enacted in the European Union.  According to a Principles of Interactions document agreed to by both agencies, FDA and EMEA agree:

– to facilitate regular exchange of scientific and ethical issues and other information on pediatric development programmes in Europe and the US to avoid exposing children to unnecessary trials[; and]

– to aim at global pediatric development plans based on scientific grounds, and compatible for both Agencies.

Also, under a revised Implementation Plan for the Confidentiality Arrangement, FDA and EMEA agreed to establish a framework for “upstream regulatory cooperation” on orphan drugs.  Although the Implementation Plan is not specific as to what such orphan drug cooperation would entail, FDA has recently indicated in public talks that the Agency is drafting a guidance document that would describe how companies may submit a single orphan drug designation request to both agencies. 

With respect to food safety, FDA announced on July 2, 2007 that the Agency “signed the first U.S./European agreement in the area of assessing food safety risk.”  The agreement was entered into with EFSA, which was established by the European Parliament in 2002 to perform risk assessment and risk communication on food safety issues.  According to FDA, the agreement:

is designed to facilitate the sharing of confidential scientific and other information between EFSA and the FDA, such as methodologies to ensure that food is safe.  A formal agreement ensures appropriate protection of such confidential information under the applicable legal frameworks in both the United States and the European Union.  Informal cooperation and dialogue have already been established between the two bodies; this agreement will enable these to be formalized and extended.

Given the increasingly global nature of companies regulated by U.S. and European food and drug authorities, and with that, the growing need for a coordinated regulatory plan that improves efficiencies (both for the regulated and the regulators) greater cooperation between FDA and agencies like the EMEA and EFSA, as well as other foreign agencies, will likely continue to increase.        

ADDITIONAL INFORMATION:

• EMEA’s International Cooperation homepage

• FDA’s International Cooperation homepage

On July 6, 2007, the Centers for Medicare & Medicaid Services (“CMS”) posted on its website a pre-publication copy of a final rule with a comment period to implement the Medicaid Rebate Program.  The regulation, which finalizes a proposal that was published in the Federal Register last December, will be published in the Federal Register on July 17th. It will become effective on October 1, 2007, which means that quarterly Average Manufacturer Price (“AMP”) and best price submissions for the fourth quarter of 2007 and monthly AMPs for October will be required to comply with the regulation.  Although the rule addresses many aspects of the Medicaid Rebate Program, CMS has solicited comments only on the AMP and Federal Upper Limit (“FUL”) provisions.  Comments are due by January 17, 2008.  Below are some highlights of the most notable provisions of the rule (with page references to the pre-publication copy of the final rule). 

AMP

• Quarterly AMP is no longer calculated by dividing net AMP-eligible quarterly sales dollars by net AMP-eligible quarterly units.  Instead, it is the weighted average of the three monthly AMPs for the quarter.  CMS does not specify whether the weighting is to be done on the basis of sales dollars or units (page 357).

• In a departure from the proposed rule, manufactures should report subsequent revisions to monthly AMPs.  This should be done up to 36 months after the reporting month, but should not be done if the revision is due solely to data on lagged price concessions.  (pages 382-383).   Although FULs will be established based on monthly AMPs, subsequent revisions of monthly AMPs will not affect FULs (pages 383, 462).  Quarterly AMP must be restated when there is a restatement of one of the monthly AMPs on which the quarterly AMP is based (page 375).

• In calculating monthly AMP, manufacturers must use a 12-month rolling average to estimate lagged price concessions (e.g., chargebacks and rebates) (pages 388-89).  The 12-month rolling period should include the reporting month (page 390).

• Addressing for the first time the issue of whether a lagged price concession should be accounted for on a “paid” or an “earned” basis, CMS states in the preamble that it will allow manufacturers the flexibility to count chargebacks based on their Generally Accepted Accounting Principles, as long as they use one method uniformly (page 384).  Presumably, the same flexibility is permitted for rebates.

• “Retail pharmacy class of trade” is defined for the first time.  It is any outlet that purchases drugs from a manufacturer, wholesaler, or distributor, and subsequently sells or provides them to the general public.

• The final rule clarifies the treatment of a number of customer categories and transactions for which guidance has been lacking in the past.  For example:

1. Physicians, home health care providers, outpatient clinics, surgical centers (if they provide drugs to the public), direct sales to patients, and mail order pharmacies (including those owned by PBMs) are retail and included in AMP (pages 172-199).
2. Sales to hospitals for inpatients continue to be non-retail.  Sales for use in the hospital outpatient pharmacy are retail if there is adequate documentation of such use; otherwise, they are excluded along with inpatient sales (page 179).
3. Long-term care pharmacies and hospices are considered non-retail and sales to them are excluded from AMP (pages 172, 176).
4. Sales of units that are reimbursed by third-party payors that do not take possession, and rebates to those payors, are treated uniformly under the rule: the sales are included in AMP, but the rebates are excluded.  This applies to sales reimbursed by, and rebates paid to, HMOs and other managed care organizations, as well government programs such as Medicaid (including Medicaid supplemental rebates), SCHIP, Part D plans (including Medicare-subsidized retiree plans), State Pharmaceutical Assistance Programs (“SPAPs”), and TriCare TRRx (pages 205-230).  The same applies to Pharmacy Benefit Managers (“PBMs”), in a departure from the proposed rule (page 152).  Sales to HMOs that take possession continue to be excluded from AMP.
5. Manufacturers may optionally choose, on a product-by-product basis, to restate their base date AMPs to ignore prompt pay discounts and otherwise conform to the final AMP rule.  Manufacturers have through the third quarter of 2008 to do this.  The restatements must be based on actual sales data, not estimates, and will be effective only prospectively from the quarter in which they are submitted to CMS (not retroactive to the first quarter of 2007) (pages 393-98).

Best Price

Noteworthy changes from prior CMS policy or from the proposed rule include the following:

• PBM rebates (except mail order) are excluded from best price, in a departure from the proposed rule (pages 325-26).

• Direct sales to patients are included (page 327).

• In order for sales to an SPAP to be excluded, the SPAP must be designated by CMS as meeting the requirements of Release 68.  The preamble gives the web address of CMS’s list of designated SPAPs (page 318).

Bona Fide Service Fees

Bona fide, fair market value services fees, including administrative fees to Group Purchasing Organizations and distribution fees, are excluded from AMP and best price, as long as there is no evidence that the fees are passed on by the entity to any pharmacy or other entity included in AMP.  The rule adopts the definition of bona fide service fees in the Average Sales Price regulation at 42 C.F.R. § 414.804.  Fair market value is not defined, but should be determined consistent with industry accepted methods (pages 231-39, 245, and 329). 

Bundled Sales

Unlike the current Rebate Agreement definition, the rule’s definition of a “bundled sale” explicitly includes a contingent arrangement involving drugs (of different package sizes) that share the same nine-digit National Drug Code (“NDC-9”), or drugs with different NDC-9s, or drugs and other products.  Also, a bundle exists where a discount is conditioned, not only on the purchase of another drug or product, but on the achievement of some other performance requirement for another drug, such as achievement of market share or placement on a formulary tier.  As currently, the total discount must be proportionally allocated among all the items in the bundle (pages 94-106).

Coupons, Vouchers, and Patient Assistance Programs

In a change from the proposal, patient coupons redeemed, not only directly to the manufacturer, but also through another entity such as a pharmacy, are excluded from AMP and best price as long as the entity receives no payment other than a bona fide service fee (pages 263-64, and 322).  Free drug vouchers not contingent on a sale are also excluded (pages 267-68), as are free drugs provided under a patient assistance program (pages 269-70, and 322-23).

Authorized Generics

In a departure from the proposed rule, the final rule does not require an NDA-holder (primary manufacturer) to include in its AMP or best price the sales from an authorized generic distributor (secondary manufacturer) to its customers.  This eliminates the need for data sharing.  However, the sales price from the primary manufacturer (adjusted upward by license or royalty fees) to the secondary manufacturer must be included in best price.  It appears that the latter sales are not required to be included in AMP, though there is ambiguity in the rule and the preamble on this point (pages 331-56).

ADDITIONAL READING:

• CMS Press Release
• CMS Final Rule Summary

We previously reported on a proposed rule issued by the U.S. Department of Agriculture (“USDA”) to amend the agency’s National Organic Program (“NOP”) regulations at 7 C.F.R. Part 205 to add 38 non-organic minor ingredients to the National List of Allowed and Prohibited Substances (“National List”) (§ 205.606) that may be included in foods labeled “organic.”  Pursuant to the Organic Foods Production Act of 1990, “organic” food products may contain 5% of non-organic minor ingredients. 

To prevent a disruption of organic business, and to meet the deadline of June 9, 2007 imposed by the U.S. District Court of Maine in Harvey v. Johanns, NOP provided only 7 days for the public to comment on the proposed rule.  Despite the unusually short comment period, USDA received approximately 1,250 comments on the proposed rule.  Many of the comments opposed the 7-day comment period and suggest that the proposed rule constitutes a lowering of the standard for the label “organic.” 

On June 27, 2007, USDA published an interim final rule.  The interim rule, which is effective as of June 21, 2007, provides a 60-day comment period on the amendments.  An NOP press release discussing the interim final rule states that the amendment is consistent with the law and does not lower the standard for “organic.”  As of June 9, 2007, a non-organic agricultural ingredient must be included on the National List before its use is permitted in organic foods.  Moreover, an organic handling operation may use any of the non-organic National List agricultural ingredients only after a certifying agent determines that the operation has sourced the organic form and confirmed that an organic version is not commercially available.  Before June 9, 2007, the only requirement for non-organic agricultural ingredients was the lack of commercial availability.  Thus, the 38 substances added to the National List have been used in foods marketed as “organic.”  The interim final rule merely permits organic businesses to continue the use of these 38 non-organic agricultural ingredients. 

The interim final rule prevents disruption of organic business and provides the NOP with time to evaluate the comments.  A final rule will not be published before the NOP has considered all comments.

By Riëtte van Laack

Late Wednesday, the House of Representatives passed, by a vote of 403-16, H.R. 2900, “the Food and Drug Administration Amendments Act of 2007.”  The Senate passed its version of omnibus FDA reform legislation in May 2007 — S. 1082, “the Food and Drug Administration Revitalization Act” (“FDARA”) (Unfortunately, the House version does not lend itself to a good acronym, “FDAAA”).  A draft House Report on H.R. 2900 (that when finalized will be assigned #110-225) circulating on Capitol Hill is available here.

H.R. 2900, like S. 1082, reauthorizes the Prescription Drug Use Fee Act (as PDUFA IV) (FDC Act §§ 735-736), the Pediatric Research Equity Act (FDC Act § 505B) and the Best Pharmaceuticals for Children Act (FDC Act § 505A), and includes provisions amending the FDC Act with respect to so-called blocking citizen petitions, among other things.  There are differences between the two bills, however. H.R. 2900 does not include provisions on transferable priority review, enantiomer exclusivity, and “old” antibiotics.  In addition, H.R. 2900 does not include the “blockbuster drug” provision in S. 1082 that would limit pediatric exclusivity to 3 months for drugs with annual sales over $1,000,000,000.  These differences will be ironed out in conference committee debate.   

Neither the House nor Senate FDA bills include provisions on biogenerics.  It is our understanding, however, that language similar to that included in S. 1695, “the Biologics Price Competition and Innovation Act of 2007,” will be added in conference committee.  S. 1695 would amend the Public Health Service Act to add § 351(k) to provide for an approval pathway for “biosimilar” and “interchangeable” biologics that rely, in part, on FDA’s previous licensure of an innovator’s product.  In addition, the bill provides a 12-year period of innovator marketing exclusivity, limited “generic” exclusivity under certain circumstances, and patent resolution provisions. 

For the third time in as many years, FDA has been requested to provide an advisory opinion on the Agency’s policy for the submission of patents for Orange Book listing that cover drug delivery systems (e.g., metered-dose and dry powder inhalers, and transdermal patches) that do not recite the approved active ingredient or formulation.  FDA’s failure to provide clear statements on the issue has led some companies to interpret the law and FDA’s patent listing regulations at 21 C.F.R. § 314.53 to require patent submission and Orange Book listing if such patents claim an integral part of an approved drug product rather than merely packaging (patents claiming packaging may not be submitted for Orange Book listing). 

On June 21, 2007, AstraZeneca submitted a request for an advisory opinion (Docket No. 2007A-0261) requesting that FDA comment on two issues:

(1) what constitutes an approved pre-filled drug delivery system for the purposes of determining whether patents relating to that system should be listed [in the Orange Book]; and

(2)  whether patents relating to an approved pre-filled drug delivery system should be listed if they (a) disclose but do not claim the active ingredient or formulation of the approved drug product or (b) neither disclose nor claim the active ingredient or formulation of the approved drug product.

Similar requests were submitted to FDA in 2006 by AstraZeneca (Docket No. 2006A-0318), and in 2005 by GlaxoSmithKline (Docket No. 2005A-0015), but the Agency has failed to substantively respond to either request thus far.  In those requests, FDA was asked whether “patents directed to drug delivery systems . . . that do not recite the approved active ingredient or formulation should be listed in the [Orange Book],” and whether “a patent [that] claims a drug delivery device or elements of a drug delivery device as part of [an NDA], but the patent does not specifically claim the active ingredient or mention the active ingredient or ingredients contained in the approved drug product, or if a patent claims the protective overwrapping of a drug delivery system,” should be submitted to FDA for Orange Book listing, respectively. AstraZeneca’s latest advisory opinion request differs from the previous requests in that it specifically asks FDA about “what types of products fall within the meaning of the term ‘pre-filled drug delivery systems.’” 

In response to comments seeking clarification as to whether patents claiming delivery devices or containers “integral” to a drug product should be submitted for Orange Book listing, FDA stated in the preamble to the Agency’s June 2003 regulations implementing the FDC Act’s patent listing provisions that the key factor in determining whether a drug product patent must be submitted for Orange Book listing is “whether the patent being submitted claims the finished dosage form of the approved drug product.”  In this respect, FDA also noted in the preamble that Appendix C of the Orange Book includes a current list of approved drug product dosage forms. 

Although FDA’s distinction between patents covering packaging and drug delivery systems is helpful in a very general sense, the Agency’s failure (or unwillingness) to provide more specific comment at that time (and in subsequent years) “leaves certain questions unanswered and in need of further clarification,” as AstraZeneca correctly points out in the advisory opinion request.  Specifically, AstraZeneca’s advisory opinion request states:

First, it remains unclear as to what types of products fall within the meaning of the term “pre-filled drug delivery systems,” particularly when such products are not expressly identified in the definition of dosage forms or listed in Appendix C of the Orange Book.  This is also especially true when the agency has not in other contexts, such as guidance documents, expressed any opinion on such questions. . . .  Second, FDA has not directly addressed the question whether the listing requirement applies to patents for approved drug delivery systems where the patents disclose but do not claim, or neither disclose nor disclaim, the active ingredient or formulation of the approved drug product.

In addition, AstraZeneca stakes out what could be a reasonable policy position on the issue:

[L]isting in the Orange Book of patents claiming an approved pre-filled drug delivery system and/or one identified in the labeling of the product would further the goals of the Hatch-Waxman Amendments, even if the approved formulation or active ingredient is not claimed but is disclosed in the patent or the active ingredient is neither claimed nor disclosed in the patent.  Listing such patents would provide generic manufacturers with notice of their potential infringement and an opportunity to challenge the patents early on before introducing the generic product into the marketplace.  In fact, because such patents may not claim or disclose the formulation or active ingredient specifically, a generic manufacturer searching for patents that refer to the product might not uncover them if they are not listed in the Orange Book. . . .  Accordingly, AstraZeneca will continue to list these patents unless and until it otherwise receives guidance or an advisory opinion from FDA that such listings are improper.

In a July 3, 2007 filing with the Securities and Exchange Commission (“SEC”), Altus Pharmaceuticals Inc. announced that the company was notified by FDA’s Office of Orphan Products Development (“OOPD”) that the orphan drug designation granted in January 2002 to ALTU-135, also know as TheraCLEC, for the treatment of Exocrine Pancreatic Insufficiency (“EPI”) was being revoked.  OOPD only very rarely revokes orphan drug designation.  According to the Altus filing, “[t]he FDA based its decision on a finding that if one includes all patients with HIV/AIDS who suffer from fat malabsorbtion in this indication, the patient population in the United States appears to exceed 200,000 persons and is thus ineligible for orphan drug designation.”  A March 2007 Altus SEC filing noted that FDA first informed the company in December 2006 of the Agency’s plans to revoke the TheraCLEC orphan drug designation.

TheraCLEC is a Pancreatic Exocrine Product (“PEP”) in clinical development that contains the enzymes amylase, lipase, and protease to break down the complex carbohydrates, fats, proteins, respectively, that are deficient in EPI patients and that causes poor absorption of essential nutrients (thereby often leading to malnutrition, impaired growth, and reduced survival). OOPD’s decision to revoke the Altus designation comes less than one year before the date FDA established in 2004 requiring the submission of NDAs for PEPs for EPI.  In addition, OOPD’s decision avoids the possibility that TheraCLEC, if it were the first product to obtain FDA approval with orphan drug designation, would be granted seven years of exclusivity, during which FDA could not approve an application for the “same drug” for EPI, absent a showing of “clinical superiority.” 

PEPs have been marketed in the United States for EPI since before the enactment of the FDC Act in 1938.  In April 2004, FDA published a Federal Register notice announcing that all PEPs are “new drugs” under the FDC Act, and that sponsors of currently marketed PEPs must submit and obtain approval of an NDA by April 28, 2008, or be subject to FDA regulatory action.  FDA simultaneously published a guidance document to assist sponsors in submitting NDAs for their PEPs.  With regard to patient needs, FDA’s Federal Register notice states:

[T]here is a need for a range of products to remain available for patient use.  The dosage requirements of patients vary, and the appropriate daily dose of pancreatic enzyme supplements must be individualized and adjusted when clinically indicated.  Furthermore, physicians have identified and stabilized their patients on currently available products with different ratios of lipase, protease, and amylase that meet the patients’ needs.  Thus, to meet the dosing requirements and to maintain compliance with treatment, pancreatic supplements are needed with varied concentrations of lipase, protease, and amylase. 

This statement indicates that FDA anticipates the submission of multiple applications for different drugs to meet the varied needs of EPI patients.  By permitting a single applicant with orphan drug exclusivity to monopolize the PEP/EPI market, however, FDA would be unable to meet its stated public health need for “a range of [PEPs].”  FDA’s decision to revoke the Altus designation removes this impediment. 

Presumably the next exclusivity battle over PEPs will concern whether each PEP is a new chemical entity eligible for 5-year exclusivity or whether 3-year “new use” exclusivity applies.  An FDA determination that all PEPs are different and eligible for 5-year exclusivity is arguably consistent with recent FDA policy conferring 5-year exclusivity “to products about which the Agency has insufficient information to know whether they contain a previously approved active moiety.”  Moreover, FDA has indicated (pages 15-21) that such a policy might be applicable to PEPs.       

Positron Emission Tomography drugs, or PET drugs (not to be confused with drugs approved for companion animals), would be accorded more equitable user fee status under PDUFA IV if the Senate-passed version of the FDA Revitalization Act (“FDARA”) is signed into law.  (A similar provision is included in the House version of PDUFA IV, H.R. 2900, introduced late last month.)  FDARA, if enacted, would also address an issue raised by The Council on Radionuclides and Radiopharmaceuticals (“CORAR”) in an August 2005 citizen petition, in which the organization requested that “FDA establish a class waiver under which manufacturers of PET drugs are exempt from multiple establishment user fees, and are subject, at most, to a single establishment fee for each approved ‘human drug application.’” 

The FDC Act defines the term “compounded positron emission tomography drug” at § 201(ii) to mean a drug that “(A) exhibits spontaneous disintegration of unstable nuclei by the emission of positrons and is used for the purpose of providing dual photon positron emission tomographic diagnostic images; and (B) has been compounded by or on the order of a practitioner who is licensed by a State to compound or order compounding for a drug described in subparagraph (A), and is compounded in accordance with that State’s law, for a patient or for research, teaching, or quality control.”  The term includes “any nonradioactive reagent, reagent kit, ingredient, nuclide generator, accelerator, target material, electronic synthesizer, or other apparatus or computer program to be used in the preparation of such a drug.” 

A more practical description is provided in the CORAR petition:

PET drugs are produced by tagging (i.e., “labeling”) a substrate compound with a positron emitting isotope, which is produced in cyclotrons (i.e., devices that accelerate protons or deuterons to the high energies needed for a nuclear reaction to occur).  Once injected, the isotope travels through a patient’s bloodstream and is distributed in certain tissues.  Using a PET camera, nuclear physicians measure the different rates at which the isotope emits positrons, based, for example, on the different ways in which different types of tissue metabolize the drug’s substrate, and thereby produce computerized images of biochemical processes and tissue structures within the body.  Physicians use the resulting images to diagnose, stage, and monitor diseases (e.g., focal epilepsy, certain cardiac diseases, dementias, and lung, breast, prostate, and colorectal cancer).

The FDA Modernization Act of 1997 placed a moratorium on FDA’s regulation of PET products as “new drugs” until the Agency establishes procedures by which PET drugs are to be approved under the FDC Act’s new drug approval process, and establishes appropriate PET drug current Good Manufacturing Practices (“cGMPs”).  During this moratorium, FDA has encouraged PET centers to voluntarily submit marketing applications for approval, and issued proposed regulations in September 2005 to establish PET drug cGMPs. 

CORAR has been concerned that, because of the unique characteristics and properties of PET drugs, FDA will assess multiple establishment user fees for each approved PET drug.  The CORAR petition states that:

Because of the unusual characteristics of PET drugs, and once all PET drugs are regulated as “new drugs,” the assessment of establishment user fees, in particular, will significantly and unfairly burden commercial PET drug manufacturers.  Due to the short half-lives of PET drugs, a commercial manufacturer that supplies PET drugs nationally, or even regionally, requires multiple manufacturing establishments located throughout the U.S. or the region (as the case may be).  Each of these establishments must be identified in any marketing application submitted to FDA.  Because establishment fees are assessed annually for “each prescription drug [manufacturing] establishment listed in [an] approved human drug application,” PET drug applicants would be assessed multiple establishment fees.  Such multiple fee assessments would be patently unfair, particularly for an industry that will soon be saddled with numerous new and expensive legal and regulatory burdens. 

At a recent public meeting on PDUFA IV, CORAR provided the following example: “[O]ne PET drug manufacturer operates 44 cyclotron facilities nationwide.  If these were used to manufacturer and supply a particular PET drug under an NDA, this company would have to pay over $13 million annually in establishment fees (based on FY 2007 user fee rates).”

FDARA would amend FDC Act § 736(a) to create special establishment user fee rules for PET drugs.  Under the Senate-passed version of FDARA:

[E]ach person who is named as the applicant in an approved human drug application for a compounded [PET] drug shall be subject . . . to one-fifth of an annual establishment fee with respect to each such establishment identified in the application as producing compounded [PET] drugs under the approved application.

FDARA would also exempt from all annual establishment user fees those PET drug sponsors who certify to FDA that they are not-for-profit medical centers with only a single PET drug manufacturing establishment, and provided at least 95% percent of the total number of doses of each PET drug produced by that establishment will be used within the medical center itself.

Although FDARA does not place all PET drug sponsors on equal footing with therapeutic drug sponsors (in the example above, the PET drug sponsor would still have to pay the equivalent of almost 6 full establishment fees for its 44 establishments), it would, if enacted, provide significant relief for multi-establishment PET producers.