A little more than ten years ago, on March 31, 2010, the Drug Enforcement Administration published its  Interim Final Rule (IFR) with request for comments, titled “Electronic Prescriptions for Controlled Substances” (Docket No. DEA-218, RIN 1117-AA61). The rule became effective June 1, 2010, and is codified at 21 CFR parts 1300, 1304, 1306, and 1311.

The IFR revised DEA regulations so that practitioners have the option to electronically prescribe  controlled substances. The regulations also permit pharmacies to receive, dispense, and archive these electronic prescriptions. Thus, the regulations give practitioners and pharmacies the ability to better utilize technology for prescribing and dispensing controlled substance prescriptions while maintaining DEA’s “closed system of controls on controlled substances.”  The IFR sets forth approaches to “identity proofing” (i.e., verifying that the user of an electronic prescription application is who he or she claims to be) and “logical access control” (i.e., verifying that the authenticated user has the authority to perform the requested action).

The 2020 Federal Register notice succinctly summarizes the many requirements listed in the IFR that are designed to minimize the potential for the diversion of controlled substances through misuse of electronic prescription applications:

• Identity proofing (verifying that the user is who he or she claims to be). This includes the  process for obtaining authentication credentials (after verification) for practitioners to sign and issue a prescription.  For individual practitioners, this is done by a federally approved third party credential service provider (CSP) or certification authority (CA).
• Two-factor authorization credentials (two “factors” are required for a practitioner to use their credential to use an EPCS). One factor must be knowledge-based (something only the practitioner knows) and the other factor can be biometric data, a hard token, a “hardware key” stored on a device, etc.  Both factors must be entered into the system containing the application before the system will allow the practitioner to issue the prescription.
• Logical access controls (i.e., verifying that the authenticated user has the authority to perform the action). This only allows DEA registrants or other authorized individuals under the CSA to electronically sign controlled substance prescriptions.  The approach to logical access controls is different for individual and institutional practitioners.
• Any electronic application used to prescribe controls must create and preserve an audit trail.
• The transmission of electronic prescriptions to the pharmacy, including mechanisms to ensure the prescription is not filled twice.

The 2020 Notice states that the 2018 SUPPORT Act requires that DEA – within one year of its  enactment (… oops!) – must update the biometric component of the multifactor authentication for EPCS.  This requirement is part the SUPPORT Act’s provision to require (with a few exceptions) the e-prescribing of drugs prescribed on or after January 1, 2021.  Note that many states already mandate EPCS independent of the SUPPORT Act’s 2021 deadline.  For example, New York’s EPCS law became effective in 2016, and over 25 other states now require EPCS.

Given the significant changes in technology since publishing the IFR, numerous public comments, and many questions posed to DEA over the last decade, the Agency is seeking public comment on nine specific issues, which are generally described below.  The Notice itself contains more details on the issues for which DEA is seeking comment.

1. Whether there are safe and secure alternatives to the current two-factor authentication process? Are practitioners using universal second factor authentication (U2F)? If so, how?  Are practitioners using cell phones as a hard token, or as part of the two-factor authentication? Is short messaging service (SMS) being used?
2. The current approach to identity proofing, and whether clarification of the IFR, especially concerning CSPs would be helpful.
3. The current approach concerning institutional practitioners and identity proofing. DEA is interested on how institutional practitioners conduct identity proofing on remote practitioners.
4. Logical access controls: The IFR requires that any setting of or change to logical access controls related to the issuance of controlled substance must be an auditable event. Is there a way make this less burdensome for practitioners?
5. The current requirements for how institutional practitioners must establish logical access controls for EPCS applications (focusing on the “two individuals” requirement).
6. Whether users have experienced a security incident and whether they have had difficulties reporting the same.
7. Any aspects of the IFR or other EPCS areas where further clarification would be helpful. Here, DEA is interested in issues with workflow and the adoption of EPCS, types of devices used, problems with two factor identification (and much more…).
8. Comments on biometric authentication for those entities that have utilized it, or any alternatives to biometric authentication.
9. Comments on failed transmissions of EPCS, alternative means used, and concerns, if any.

It will be interesting to observe how many comments are received, especially given the number of states that already require EPCS, and how widespread its use is nationwide.  Notwithstanding, are any of the specific issues of interest to you?  Are you considering submitting a comment?  Let us know! Comments must be received on or before June 22, 2020.  

Under the Public Readiness and Emergency Preparedness Act (“PREP Act”), manufacturers, distributors, and health care providers acting to address the COVID-19 crisis can be protected from products liability suits related to the use of certain products.  The Act provides immunity “from suit and liability under federal and state law with respect to all claims for loss caused by, arising out of, relating to, or resulting from the administration to or use by an individual of a covered countermeasure if a Declaration has been issued with respect to such countermeasure.”   In light of questions surrounding the scope of liability protections, the Department of Health and Human Services (HHS) issued an “omnibus” Advisory Opinion to address “most questions and concerns about the scope of PREP Act immunity.”  (This supplements the Advisory Opinion HHS issued specific to PREP Act immunity for licensed pharmacists who order and administer COVID-19 serology tests.)

It is evident throughout the 9-page Advisory Opinion that HHS views PREP Act immunity as broad.  Importantly, HHS reinforces that a “reasonable belief” standard confers immunity even if all the requirements are not met:

[A]n entity or individual who complies with all other requirements of the PREP Act and the conditions of the Secretary’s declaration will not lose PREP Act immunity – even if the medical product at issue is not a covered countermeasure – if that entity or individual reasonably could have believed that the product was a covered countermeasure.

Advisory Opinion, at 2 (emphasis added); see also id. at 4.  The opinion similarly advises that immunity results even if a person does not meet the definition of “covered person” as long as the person “reasonably could have believed” that she was a covered person.  This good faith/reasonable belief standard is extremely helpful given the constantly evolving requirements in the Emergency Use Authorizations FDA is issuing to address COVID-19.

Also helpful are the hypotheticals contained in the Advisory Opinion, many of which are only borderline hypothetical:

• If a covered person purchases 500,000 tests or respirators “that appear to be authorized under an EUA” and has taken reasonable steps to substantiate the authenticity of the products, but it turns out that the products are in fact counterfeit, PREP Act immunity still applies for losses arising out of the use of the counterfeit product.
• If a pharmacy allows its licensed pharmacists to order FDA-authorized COVID-19 tests and has taken reasonable compliance measures to ensure current licensure, but it turns out that one of the pharmacists is not currently licensed, the pharmacy would still be immune against a lawsuit relating to that pharmacist’s use of the COVID-19 test.
• If a distributor of Personal Protective Equipment (PPE) sources product from a new supplier in a “good-faith attempt” to deliver PPE, and the distributor takes “reasonable precautions” to assess the new supplier’s facility and compliance with quality control processes, HHS states that there can be no “willful misconduct” by the distributor.

To benefit from this broad coverage (and as a matter of best practices during this pandemic), it is important to have good documentation to support the reasonableness of a company’s decisions.  HHs also recommends that key information be made available to purchasers of these products so that they can make more informed decisions with better transparency.

While it seems like all of FDA is consumed with responding to the current COVID-19 crisis, the agency is still managing to continue its work in other areas.  Earlier this week, FDA issued a final guidance, titled Nonbinding Feedback After Certain FDA Inspections of Device Establishments, which outlines the process for obtaining FDA feedback on proposed remedial actions in response to observations issued on a Form 483, the Agency’s Inspectional Observations Form, following an inspection.  Notably, the final version of the guidance is essentially the same as the draft issued on February 19, 2019, which we blogged about here.

Specifically, the final guidance does nothing to address the concern we raised in our prior post: this program creates a lose-lose situation for industry.  While the admissions could be used in an enforcement action or a products liability lawsuit to demonstrate knowledge of a problem, a failure to request available feedback could be used to show negligence or willful ignorance of the same.  But even in requesting such feedback, FDA acknowledges that it “may not adequately address the cause of the problems that led to the inspectional observations, and additional action may be warranted.”  FDA, Guidance for Industry, Nonbinding Feedback After Certain FDA Inspections of Device Establishments, 8 (April 22, 2020).  Nor does FDA’s feedback prevent additional observations or regulatory action.  Ultimately this guidance does little to create an effective method of gaining feedback from FDA.

Last week FDA published a much needed guidance document addressing compounding by outsourcing facilities of shortage medications for patients confined to hospitals.  Yesterday FDA took an unprecedented step (see Section 503A guidance) and recognized, during the COVID emergency (or until FDA withdraws the policy), Section 503A compounders may compound certain identified shortage medications for patients in hospitals without a prescription for an individually identified patient.  Section 503A has always permitted compounders to compound copies of shortage medications (which are not, by definition, “essential copies” of commercially available drug products).  Never before has FDA permitted Section 503A pharmacies to compound such medications for so-called “office use.”  There are some important caveats, however, to what seems like a generous policy during this unprecedented and critical time.

FDA does not intend to take action against a Section 503A pharmacy for compounding a shortage medication, or for providing a drug to a hospital without obtaining a patient-specific prescription, if all of the circumstances in the guidance are present (and the other conditions of Section 503A are met).

Some important highlights: (1) The hospital must attempt to first obtain the product from an outsourcing facility; (2) if the hospital and pharmacy are not owned or controlled by the same entity, the pharmacy must note the COVID emergency on the order, and must request and obtain from the hospital within one month the “records” of the patients for whom the products are used (state law permitting); and (3) pharmacies must pay particular attention to some the very short beyond use dates set forth in the guidance (that are inclusive of any sterility tests) (Attachment B).

Thus, FDA is not “dispensing” altogether with the prescription/order requirement; instead, it is permitting pharmacies not affiliated with a hospital to obtain patient information “later.”  Although FDA has not permitted this in the past (although compounders have both requested and engaged in obtaining patient names “after the fact”), one does wonder whether this limitation is necessary to “protect” patients right now (given the other limitations such as short beyond use dating).

FDA’s conditions under this temporary policy include the following:

1. The compounded drug product must appear on the Appendix A list and contain only one of the active ingredients listed there.
2. The compounded drug is provided directly to a hospital, which informs the pharmacy that:
   • The hospital is treating patients with COVID-19; and
   • The hospital has made reasonable attempts and has not been able to obtain:
     • Adequate supplies of an FDA-approved drug product containing the same active ingredient for the same route of administration, and
     • Adequate supplies of a product made by an outsourcing facility containing the same active ingredient for the same route of administration.
3. The compounded drug product is labeled with a default beyond-use-date (BUD) in accordance with the table in Appendix B, except that the pharmacy uses a shorter BUD:
   • If literature/scientific information, or commercially available product labeling for a similar drug indicates that the drug product may not be physiochemically stable for the duration of the default BUD period, in which case the pharmacy uses such shorter BUD, or
   • If the pharmacy has been unable to obtain a sufficient supply of personal protective equipment (PPE) that it typically relies on to assure compliance with the insanitary condition provision in the FD&C Act (or PPE that is equivalent or better), in which case the pharmacy applies BUDs of 24 hours for products stored at room temperature and 3 days for products stored refrigerated. (See guidance for PPE and compounding here)
4. If the pharmacy and hospital are not owned/controlled by the same entity, the pharmacy: (1) marks the order with a notation indicating that the drug is provided to the hospital to treat patients during the COVID-19 public health emergency; and (2) requests that the hospital provide, to the extent allowed by applicable laws, the records that identify the patients to whom the drugs were administered and document such request within one month of sending the compounded drug to the hospital.
5. Before providing the drug product to the hospital, a State-licensed pharmacy notifies the following State authorities, and the State authorities inform the pharmacy that they do not object:
   • The State authority that regulates pharmacy compounding in the State where the pharmacy is located, and,
   • If different, the State authority that regulates pharmacy compounding in the State where the hospital is located.

The following substances – products that are aqueous solutions for injection (like the Section 503B limitation) – may be used in compounding (see Appendix A).  Compounders should check the list frequently for additions or subtractions to the list.

• Cisatracurium besylate
• Dexmedetomidine hydrochloride
• Etomidate
• Fentanyl citrate
• Furosemide
• Hydromorphone hydrochloride
• Ketamine hydrochloride
• Lorazepam
• Midazolam hydrochloride
• Norepinephrine bitartrate
• Rocuronium bromide
• Vancomycin hydrochloride
• Vecuronium bromide

Note that compounders (under Sections 503A and 503B) are always permitted per the relevant statutory sections to compound drug products on FDA’s published shortage list because those listed products are not “commercially available.”  The big difference here is FDA’s temporary waiver of the prescription requirement for Section 503A pharmacies, under the specific conditions listed in the guidance.

Given the broad deference afforded to federal agencies, it is rare when a court overturns an agency action challenged under the Administrative Procedure Act (APA).  In a recent decision, however, a court found that a regulation issued by the U.S. Department of Agriculture (USDA) violated the APA because it was not a “logical outgrowth” of the interim final rule that USDA had published for notice and comment.  The APA permits an agency to issue a revised final rule if the changes “are in character with the original scheme” of the proposed rule and the final rule is a “logical outgrowth” of the notice and comments from the proposed rule.   Because these conditions were not satisfied, the court held that the notice provided in the proposed rule was inadequate and that the final rule violated the APA.

In 2010, Congress enacted the Healthy, Hunger-Free Kids Act, revamping the nation’s school lunch program to increase servings of vegetables, fruits and whole grains, provide age-appropriate calories, remove trans fats, and limit levels of sodium. Schools were to gradually reduce the amount of sodium in school meals by meeting certain USDA targets over a period of ten years and to provide more whole grains. In 2017, however, the USDA proposed an Interim Final Rule to delay the sodium-reduction targets and maintain waivers from the whole grain requirement, but did not propose abandoning the whole grain requirements. Then in 2018, the USDA issued a Final Rule that eliminated the sodium-reduction targets for schools and removed the requirement that all grains be whole grain-rich. The Center for Science in the Public Interest brought this case against the USDA alleging several violations of the Administrative Procedure Act.

In its opinion, the U.S. District Court for the District of Maryland discussed each of the challenges Plaintiff raised to support vacating and remanding the Final Rule to USDA for further proceedings. Center for Science in the Public Interest v. Perdue, No. GJH-19-1004, 2020 U.S. Dist. LEXIS 64336 (Hazel, J.) (D. Md. Apr. 13, 2020).  Plaintiff made several arguments:

• that the Final Rule was inconsistent with federal law,
• that it reflected unexplained and arbitrary decisionmaking,
• that it represented an unacknowledged and unexplained change in position, and
• that USDA did not appropriately respond to public comments.

The Court sided with the USDA on all these allegations.  Of note, the Court applied Chevron analysis to determine whether the final rule is inconsistent with federal law.  The Court found that the relevant federal statutes do not unambiguously support either party’s suggested interpretation of the applicable Dietary Guidelines, so under step 2 of Chevron, the Court determine that the USDA’s action was based on a permissible construction of the statute, which is entitled to “substantial deference.”   Not surprisingly, the Court deferred to USDA’s interpretation of the federal laws governing school meals.

The Final Rule’s ultimate failing, however, was based on the Court’s determination that the Final Rule was not a “logical outgrowth” of the Interim Final Rule.

Under the APA, an agency is permitted to revise a final rule after initial notice of the proposed rule “if the changes in the original plan ‘are in character with the original scheme,’ and the final rule is a ‘logical outgrowth’ of the notice and comments already given.”   The proposed rule must enable the public “to discern what [is] at stake.”  But “if the final rule ‘substantially departs from the terms or substance of the proposed rule,’ the notice is inadequate.”  

2020 U.S. Dist. LEXIS 64336, at *9-10 (citations omitted).

On the issue of the sodium intake levels, the Interim Final Rule focused exclusively on delaying compliance requirements, not abandoning the compliance requirements altogether as the Final Rule did.  Similarly, the Interim Final Rule did not discuss eliminating the final sodium target, which the Final Rule did.  Thus the Court found that the Final Rule’s “elimination of the Final Sodium Target is not a logical outgrowth of the Interim Final Rule’s focus on delaying compliance requirements.”

Similarly with respect to whole grains, the Interim Final Rule specifically retained the requirement of one-hundred percent whole grains, while also extending the availability of an exemption to this requirement upon request.  In the Final Rule, the USDA changed what was a limited, case-by-case exemption into a new rule across the board abandoning the whole grains requirement altogether.

While extremely considerable deference is provided to federal agencies where a complex and highly technical regulatory program is concerned (and for those who spent time with the sodium intake guidelines, it certainly qualifies as that), that deference does not absolve the agency of the necessary requirements under the APA to provide sufficient notice of the Final Rule – especially, as here, when an agency completely changes its position between the Interim and Final Rules.

FDA issued a much needed guidance document addressing compounding by outsourcing facilities for hospitalized patients during the COVID-19 emergency.  Like its other recent guidance documents addressing the COVID-19 pandemic, this guidance sets forth FDA’s temporary policy — for compounding certain drug products for hospitalized patients by outsourcing facilities that have registered with FDA under FDCA section 503B (21 U.S.C. § 353b). It will remain in effect for the duration of the emergency or until withdrawn by the Agency.

FDA states that many hospitals are currently “experiencing difficulties accessing FDA-approved drug products used for patients with COVID-19.” Guidance at 3. Because a significant number of cases of individuals suffering from COVID-19 involve hospitalizations, certain FDA-approved drug products may become unavailable.  FDA typically addresses drug shortage situations through working with the global supply chain, but due to the “unprecedented disruptions to, and demands on” the supply chain, and in order to better respond to “evolving regional conditions,” FDA asserts that flexibility is needed, on a temporary basis, to ensure that patients received needed treatment when hospitals cannot obtain FDA-approved drugs. Thus,

[a]s a temporary measure during the public health emergency related to COVID-19, or until FDA otherwise withdraws or revises this guidance, FDA does not intend to take action against an outsourcing facility for compounding a drug product that is essentially a copy of an approved drug, for using a bulk drug substance that is not on FDA’s 503B Bulks List, or for not meeting CGMP requirements with regard to product stability testing and the establishment of an expiration date … when all of the [circumstances listed in the guidance] are present.

Guidance at 3-4 (emphasis added).

These circumstances include:

1. The compounded drug product appears on the list, attached as Appendix A to the Guidance, of drugs used for hospitalized patients with COVID-19 and contains only one of the active ingredients listed there.
2. The compounded drug product is provided directly to a hospital that informs the outsourcing facility it: (i) is treating patients with COVID-19, and (ii) has made reasonable attempts to obtain an FDA-approved drug product containing the same active ingredient for the same route of administration and has been unable to do so. (We recommend that the outsourcing facility maintain documentation of communications concerning the hospital’s “reasonable attempts” to obtain the FDA-approved drug product, although FDA’s guidance does not specifically require such documentation.)
3. The bulk drug substances that the outsourcing facility uses to compound the drug product must be in compliance with section 503B(a)(2)(B) through (D), regarding conformance with applicable USP monographs, sourcing from facilities registered with FDA under FDCA section 510, and must be accompanied by certificates of analysis (as is required for any bulk substance used by an outsourcing facility notwithstanding the COVID-19 emergency). For reference, the text of FDCA section 503B is attached here.
4. The outsourcing facility’s practices regarding stability testing and expiration dates must meet the conditions for enforcement discretion described in Appendix B to the guidance (Stability/Expiration Dating For Compounded Drug Products) and Appendix C (Conditions Under which FDA Generally Does Not Intend to Take Regulatory Action Regarding Stability Testing and Expiration Date Requirements).

Any outsourcing facility undertaking to compound drug products pursuant to this guidance should pay particular, careful attention not only to FDA’s list of permissible ingredients (Attachment A), but also to the guidance’s details concerning stability testing and expiration dating for products set forth in Attachments B and C.

Because the list of substances in Attachment A may be updated throughout the crisis period, those intending to rely on the guidance for compounding should frequently check Attachment A for additions or deletions to it.  As with other guidance, the Agency has published during the public health emergency, the guidance is being implemented immediately, but it remains subject to comment in accordance with the Agency’s good guidance practices. FDA provides the following email address to the extent there are questions concerning the guidance:  compounding@fda.hhs.gov.

In some news that is not about Emergency Use Authorizations, how to make a DIY face mask, or even about COVID-19, the Alcohol and Tobacco Tax and Trade Bureau (TTB) published a final rule amending its regulations governing the labeling and advertising of wine, distilled spirits, and malt beverages on April 2, 2020.  And yes, the new regulations eliminate the distinction between fruit wines and citrus wines and allow citrus wines to now be called “fruit wines.”

By way of quick background, the TTB is the primary federal agency that regulates alcohol, but it is part of a complex system of both federal and state regulation.  At the federal level, the TTB is joined by the FDA, USDA, FTC, and CBP in regulating beverage alcohol.  At the state level, each of the 50 states has the ability to regulate the distribution and sale of alcohol within their states, courtesy of the 21st Amendment to the Constitution.

The TTB first proposed modernizing the regulations in late 2018 and issued a proposed rule for comment (Notice No. 176: Modernization of the Labeling and Advertising Regulations for Wine, Distilled Spirits, and Malt Beverages, Nov. 26, 2018).  The final rule released on April 2, 2020 addresses the 1000+ comments TTB received.  The final rule does not address all the proposed changes.  Instead, it focuses on liberalizing and clarifying the regulations, and at the same time making the transition to the new regulations easier for manufacturers because the new regulations:

• do not require any current labels or advertisements to be changed
• were generally widely supported by commenters and stakeholders
• can be implemented relatively quickly, and
• will either give more flexibility to industry members or help industry members understand existing requirements

Specifically, the rule implements, among other things, the following proposed changes:

• an expanded alcohol content tolerance for distilled spirits to plus or minus 0.3 percentage points from between 0.15 and 0.25 depending on the product
• brand label placement flexibility for distilled spirits
• removing the current prohibition of age statements for most types of distilled spirits
• allowing vintage dates for wine imported in bulk, and
• removing the prohibition against the term “strong” for malt beverages

In addition, the rule identifies which proposals TTB did not adopt, including:

• the proposal to define an “oak barrel” for purposes of aging distilled spirits
• the proposal to require that statements of composition for distilled spirits specialty products list components in intermediate products
• the proposal to require that distilled spirits statements of composition (indicating the category of spirit) list distilled spirits and wines in order of predominance, and
• the proposal to adopt new policies on the use of cross-commodity terms (for example, imposing restrictions on the use of various types of distilled spirits terms, including homophones of distilled spirits classes, on wine or malt beverage labels)

In the category of an attempted clarification that did not work as drafted, TTB did not finalize its proposal to incorporate into the regulations the jurisdictional interaction between FDA determinations that a product is adulterated and TTB’s position that such products are mislabeled.  Commenters appeared to misunderstand this proposal and believed that TTB was proposing to take on a new role of interpreting FDA requirements.  This was not the case, and the TTB’s longstanding position that its review of labels and formulas does not relieve industry members from complying with FDA regulations regarding food additives, ingredient safety, and suitable container materials.  So, even if TTB approves a label, the company must still ensure that all ingredients in the product comply with FDA regulations. See our prior post here for more information.

As indicated in the title of the post, we haven’t seen the last of the modernization, as TTB does plan to address the remaining issues in the 2018 proposal at a later date.

During the COVID-19 pandemic, there is widespread agreement that one of the most important steps the government can take is to enable widespread testing of patients.  Many experts have cited the lack of access to a sufficient number of tests as a fundamental flaw in the response to the unfolding pandemic.  Yet, FDA has announced a new policy that will exacerbate this problem.

In recent weeks, the FDA has taken multiple steps to facilitate access to COVID-19 testing.  For example, the agency has issued Emergency Use Authorizations (EUAs) to over 30 molecular tests.  On March 16, FDA issued a policy that also allowed laboratories to begin offering laboratory-developed tests (LDTs) for 15 days prior to submission of an EUA and during the pendency of FDA’s review of the EUA.  (As readers of the blog know, we have long been critical of FDA’s limitations on LDTs, but the topic of LDTs and COVID-19 is for another day.)

In that same document, FDA also allowed companies to begin offering point of care serological tests without prior FDA review, provided that the test is validated, the test report includes certain required disclaimers, and the company has submitted a notification to FDA.  The combined effect of these and other steps has been to increase access to COVID-19 tests.

The point of care serological test policy, in particular, allowed companies to proceed to market quickly with easy-to-use IgG and IgM antibody tests, which provide information about exposure to COVID-19.  However, FDA has started instructing companies that their review of the notification is required prior to commencing distribution, and that review is taking one to two weeks.  This will likely lead to a delay in the availability of additional point of care serological tests.

In addition, FDA recently issued a statement that significantly curbs the ability of serological tests to play a meaningful role in addressing the COVID-19 pandemic.

Given their ease of use, serological tests generally do not need to be used in labs.  Instead, they can be used at the point of care, including doctors’ offices, urgent care centers, and drive-through testing centers, providing rapid information about COVID-19 status to the health care provider and patient.  Allowing tests at the point of care greatly facilitates patient access, as compared to having samples sent to a laboratory and then awaiting test results.

While FDA’s policy on March 16 addressed the FDA status of serological tests, it was silent about the status of these tests under the Clinical Laboratory Improvement Amendments (CLIA).  CLIA is a separate law that governs laboratory testing.  Among other elements, CLIA requires that tests be performed in appropriately certified laboratories, unless the test is categorized as “waived.”  High-complexity tests can only be performed in those laboratories that are certified as high-complexity, which is a small minority of labs in the U.S.

FDA announced its new policy on serological tests as a response to a Frequently Asked Question (FAQ) on its website (see FAQ webpage here).  In the FAQ response, FDA states:

While FDA has indicated that [tests offered prior to or without an EUA] may be appropriate for use in clinical laboratories and by healthcare workers at the point of care, the policies in the Policy for Diagnostic Tests for Coronavirus Disease-2019 do not provide a CLIA categorization and do not override any CLIA requirements.  Therefore, in accordance with CLIA, tests offered under these policies are considered high complexity by default until or unless they are authorized and deemed to be appropriate, through an EUA authorization or general FDA review processes, to be performed as moderate or waived complexity tests.

This language may be opaque, but the impact is not: serological tests offered by manufacturers under the policy discussed above can only be performed in high-complexity laboratories.  In other words, these tests – which are designed to be used at the point of care – can only be run in facilities that hold high-complexity CLIA certifications.  Serological test samples could be collected at the point of care, but they would need to be transported to a high-complexity certified laboratory for testing, which defeats the purpose of a simple, rapid test.  The result is reduced access to most serological tests.

In a separate FAQ, FDA clarified that tests that have been authorized for point of care use via an EUA will be considered CLIA-waived and could be used in settings like doctors’ offices or drive-through testing sites (so long as these settings have CLIA certification to perform waived tests).  As of today, there are only three EUAs in which FDA has authorized point of care use (the Xpert Xpress SARS-CoV-2 Test, Accula SARS-CoV-2 Test, and ID NOW COVID-19 Test).

Bizarrely and inconsistently, yesterday the Department of Health and Human Services touted a new policy that ostensibly expanded testing by pharmacists.  The statement says, “In an effort to expand testing capabilities, we are authorizing licensed pharmacists to order and administer COVID-19 tests to their patients.  The accessibility and distribution of retail and independent community-based pharmacies make pharmacists the first point of contact with a healthcare professional for many Americans.  This will further expand testing for Americans, particularly our healthcare workers and first responders who are working around the clock to provide care, compassion and safety to others.”

The tests that pharmacists are most likely to offer, though, are point of care serological tests without EUAs, which means they are high-complexity tests under CLIA.  Unless local pharmacies and chain pharmacies are part of high-complexity CLIA-certified labs, under FDA’s FAQ, they will not be able “to order and administer COVID-19 tests to their patients.”  In other words, what HHS gave with one hand, FDA took away with the other.

We appreciate that FDA cannot simply ignore CLIA.  However, given that FDA and other parts of the government have waived multiple requirements during this National Emergency, it is striking that FDA’s current policy – and by extension HHS’ – is to block serological testing for COVID-19 in the locations where it is most needed and would be most helpful.

Ultimately, responsibility for this disjointed, uncoordinated policy rests with HHS, since FDA, CLIA, and the new policy on pharmacies all are under HHS’ purview.  In the past couple weeks, HHS has issued enforcement discretion policies for a number of issues in response to the COVID-19 pandemic, including the Federal Anti-Kickback Statute, telehealth, community-based testing sites, and HIPAA.  To avoid roadblocks to serological testing access, HHS should issue a similar enforcement discretion policy related to test complexity limitations under CLIA.

From the enactment of the Medicaid Drug Rebate Statute in 1990 until last year, a term appearing in the statute – “original new drug application” – caused  controversy and uncertainty.  The term was not defined in the statute and the legislative history shone no light on it.  Yet it had enormous fiscal implications for drug companies under the Medicaid Drug Rebate Program (MDRP).  Until April 2019, innovator drugs, which are subject to a substantially higher per-unit rebate than non-innovator drugs, were defined as drugs approved under an “original new drug application.”  This begged the question, what is an original NDA over and above an NDA?  The term obviously did not include an ANDA, but what about NDAs that are not original in that they rely on previously approved applications or data that are not original to the applicant, such as a section 505(b)(2) application or a literature based application?  In February 2016, CMS issued a final regulation construing an “original NDA” as simply an approved NDA,  “unless CMS determines that a narrow exception applies.”  42 CFR 447.502.  In subregulatory guidance, CMS advised that narrow exceptions would only be granted for drugs that were approved under FDA’s paper NDA policy prior to 1984 or under literature‑based 505(b)(2) applications, and that had no patent protection or statutory exclusivity.  For drugs on the market as of April 1, 2016, the regulation established a deadline of April 1, 2017 for requesting a narrow exception.  Manufacturers could also submit requests for up to one year after the launch of a new drug or after an acquisition of a drug.  Effective April 1, 2019, a statutory amendment codified CMS’s interpretation by deleting the word “original” and codifying the narrow exception process.

Why then are we posting an article about a term that no longer exists in the U.S. Code?  The reason is that a recent decision of the D.C. District Court construed the former term in a manner that may offer rebate relief to companies marketing drugs approved under FDA’s pre-Hatch Waxman paper NDA policy, and those approved under literature based applications submitted under FDC Act section 505(b)(2).  The case, STI Pharma v. Azar, No. 18-cv-1231 RDM, 2020 U.S. Dist. LEXIS 49618 (D.D.C. Mar. 23, 2020), concerned STI’s Sulfatrim, an antibiotic suspension with pediatric indications.  The drug was originally approved in January 1983 as a paper NDA.  Its approval was based on its chemical equivalence and bioequivalence to Bactrim Suspension, which had been approved a decade earlier.  STI purchased Sulfatrim from an intervening owner in 2011 and began marketing it two years later.  Because the drug was approved under an NDA, STI categorized the drug as an innovator multiple source drug, which subjected it to higher rebates than noninnovator multiple source drugs.

After CMS published its 2016 Final Rule adopting the narrow exception approach, STI timely requested a narrow exception to classify Sulfatrim as a noninnovator multiple source drug despite its approval under an NDA, and CMS granted the request effective from April 1, 2016, when the CMS “narrow exception” rule took effect.  However, STI requested CMS’s permission to treat Sulfatrim as a noninnovator multiple source drug status retroactively to the fourth quarter of 2013, when STI first began marketing Sulfatrim.  CMS denied STI’s request, explaining that “[a] drug category change pursuant to a narrow exception request approval does not apply to reporting periods prior to the effective date of the Final Rule because the narrow exception did not exist before that date.”  STI Pharma, 2020 U.S. Dist. LEXIS at *19.

STI challenged CMS’s reading of the statute, arguing that Sulfatrim was a “noninnovator multiple source drug” because FDA approved the drug based on its equivalence to the previously approved Bactrim Suspension.  In other words, Sulfatrim and Bactrim Suspension are equivalent drugs, and the “original” NDA was granted for Bactrim Suspension — not Sulfatrim. CMS agreed that this is a permissible reading of the MDRP statute, and, indeed, that is the interpretation CMS itself adopted in the 2016 Final Rule.

Contrary to both parties’ briefs, the Court did not believe that it had to weigh in on the reasonableness of CMS’s interpretation of the MDRP statute.  Rather, according to the Court, “the case can and must be decided at Chevron step one.”  Id. at *23.  Under Chevron Step One, the Court used the same analysis it would have applied “in the absence of an administrative interpretation of the statute” to determine whether Congress has unambiguously expressed an intention on the precise question at issue.  Id. at *24.

According to the Court, the ordinary meaning of “original NDA” and “innovator drug” cannot include duplicate drugs, like Sulfatrim, that were approved under the pre-1984 paper NDA process.  Sulfatrim could not be the “original NDA” because “Sulfatrim was not the source, beginning, or the product or model from which copies are made. Rather, Bactrim was.”  Id. at *29.  Sulfatrim’s approval documents repeatedly refer to Sulfatrim as a “generic version of the Bactrim product,” and a “duplicate NDA for [Bactrim].” The Court also noted that “innovate,” the verb form of the term “innovator,” in its ordinary meaning, is “to introduce as or as if new.”  Id. at *34. Courts have used innovator interchangeably with pioneer, novel, non-generic drugs.  The Court agreed with STI that this “common understanding of the word ‘innovator’ shows ‘that Congress did not intend to classify duplicate generic drugs as innovator multiple source drugs.’”  Id. at *35 (emphasis in original).

The Court concluded that the traditional tools of statutory interpretation “reveal[ed] a ‘single right answer’ to the meaning of the statute.”  Id. at *40.  Accordingly, the Court held that “CMS’s decision declining to reclassify Sulfatrim as a noninnovator multiple source drug for the period from 2013 through 2016 must be set aside as not in accordance with law.”  Id.

This case has obvious relevance to companies that, like STI, were granted a narrow exception by CMS but told that it would not be applied retroactively before April 1, 2016.  Such companies now have grounds for requesting a retroactive reclassification for periods prior to that date.  However, the case also has relevance to companies that market drugs that might have been candidates for a narrow exception, but the company for one reason or another failed to meet CMS’ April 1, 2017 regulatory deadline for requesting one.  Under the court’s reasoning, such a drug – for example a duplicate drug approved under FDA’s paper NDA policy – was not an innovator drug according to the plain meaning of the statue until the 2019 amendment.

It’s no secret that FDA’s review and approval metrics are closely watched.  In fact, these metrics are integral to evaluating whether FDA has met the commitment to industry it made during Prescription Drug User Fee Act (“PDUFA”) negotiations.  As explained in our summary of the 2017 reauthorization of PDUFA, for fiscal years 2018-2022, FDA has committed to reviewing 90 percent of new molecular entity (“NME”) NDAs in 10 months and 90 percent of new priority NDAs in 6 months of the filing date (60 days after actual submission); for non-NMEs, the review goals are 10 months and 6 months after submission, respectively.  At the direction of Congress, the GAO just released a new report evaluating exactly how FDA is doing in meeting these goals.

The bottom line: Application review times largely reflect agency goals.  The GAO reached this conclusion based on its analysis of 637 NDAs and BLAs submitted to the Center for Drug Evaluation and Research throughout fiscal years 2014 and 2018.  Oddly, the GAO Report does not explain much about its conclusion that “review times largely reflect agency goals,” mentioning only in a footnote that “FDA completed its initial review of 97 percent of NDAs within the time frames established under its PDUFA goals—a greater percentage than the 90 percent goal stated in its PDUFA V and VI commitment letters.”  There are, however, some exceptions – though fewer than one might think.  The GAO identified only 5 NDAs for which the review time was exceptionally long in comparison to the PDUFA goal date.  GAO excluded these NDAs from its some of its analyses based on FDA’s explanation that “these reviews were substantially delayed because of complicated manufacturing site issues, complicated legal and regulatory issues, or emerging public health issues requiring last minute advisory committee meetings” – conditions that GAO “deemed sufficiently unusual to exclude these five NDAs from further statistical analyses of review times.”

Much of the GAO Report’s focus is on the differences between applications that may impact goal dates.  The Report explains that goal dates are directly related to four key features of NDAs: whether the NDA receives priority review designation; whether the NDA involves an NME; whether the applicant submitted a major amendment; and whether the NDA qualifies for one of FDA’s expedited programs (such as Accelerated approval, Breakthrough designation, or Fast track designation, all of which are available for NDAs for drugs intended to treat serious or life-threatening conditions).  Thirty-two percent of the 637 NDAs included in the GAO review had a priority review designation; 36 percent involved a new molecular entity; 12 percent involved a major amendment; and 18 percent qualified for one expedited program while 9 percent qualified for two or three.   These key features, the Report explains, directly affect the timing of review because they dictate the PDUFA goal date.

The GAO Report also explains that the features that affect goal dates impact some review divisions more than others.  As such, the Report examines the distribution of NDAs with these key features across review divisions and analyzes the differences in time taken to complete initial reviews between divisions.  The analysis found that each division differed in the average number of days to complete an initial review of an NDA, but these differences reflected the differences in the key features of the NDAs (i.e. priority review, expedited programs, major amendments, and NME status) submitted to each division.  Unsurprisingly given the goal date commitments, NDAs with key features that resulted in shorter goal dates had shorter review times.  Controlling for these differences in goal dates, the GAO Report found that most of the divisions’ average review times were similar to (within 2 weeks of) each other.  However, the Hematology and Oncology divisions reviewed about 2 or 3 weeks faster than other divisions.

The Report includes a breakdown of the applications submitted to each division with details about the number of applications with each key feature.  FDA’s Oncology and Hematology divisions reviewed the greatest number of NDAs—while still reviewing faster than other divisions—closely followed by the Antiviral Division, the Anti-infective Division, the Metabolism and Endocrinology Division, and the Anesthesia, Analgesia, and Addiction Division.  The distribution of NDAs with key features varied significantly across divisions, which led to differences in the review time for each division as well.  For example, fifty-six percent of the Anti-Infective Division’s NDAs had priority designation, mandating a faster review time, while thirty-seven percent of the Gastroenterology and Inborn Errors Division’s NDA were priority.  With this difference in priority workload, the median time taken to complete an initial review of an NDA by the Anti-infective division was about two months faster than the Gastroenterology and Inborn Errors division.

Finally, in response to a request from Congress, the Report also details actions FDA has recently taken to evaluate and facilitate the use of different sources of evidence to support NDAs.  As a result of the 2016 Cures Act, FDA started implementing initiatives, including the Real-World Evidence Program, Patient-Focused Drug Development, Complex Innovative Trial Designs, Drug Development Tool Qualification Programs, and Model-Informed Drug Development.  Because the amount and nature of the evidence needed can be an important determinant of when and whether new therapies become available to the public, these programs can impact review times.  While implementation is still in progress for all of the initiatives—meaning only minimal data was available for GAO review—the GAO did note that there has been an increase in discussions with the Agency relating to these new initiatives.

The GAO Report included four appendices of interesting data.  For those of you that have the time while social distancing, it could make for some noteworthy quarantine reading.

Amidst the onslaught of regulatory and legislative announcements and changes occurring daily during this unprecedented time, a long-awaited (in some quarters) legislative change quietly and finally became law.   On March 27, 2020, President Trump signed into law the CARES Act which includes an array of COVID-related provisions.  CARES Act, Pub. L. 116-136 (2020).  Buried in its many hundreds of pages are the OTC monograph reform provisions of the CARES Act which appear in Subtitle F.  Congress did not name the law.  Part I provisions address the reform of the review process and are added to the Food, Drug, and Cosmetic Act (FDC Act) in new section 505G.  Subtitle F Part II covers the new OTC monograph user fee provisions adding sections 744L and 744M to the FDC Act.

Highlights of the amendment are a change from the much-maligned archaic rulemaking framework to an administrative order process, the abandonment of the concept of the unresolved regulatory status of drugs marketed under a tentative final monograph, or TFM, in favor of making a wholesale determination of active ingredients in categories I, II, and III, a mechanism for the issuance of an interim final order to address imminent safety issues, and  provisions allowing innovation with a possibility of 18 months of marketing exclusivity.  Finally, the legislation includes a user fee provision that allows for certain fees for OTC monograph drug manufacturing facilities and certain requests for changes to the monograph.

As has been the case with other user fee laws, industry and FDA agreed upon a Goals Letter that, among other things, describes how this vast overhaul will be implemented over the course of the first several years and timeline goals for many FDA actions.

Hyman, Phelps & McNamara, PC has prepared a summary memorandum that details these and other aspects of the OTC Monograph Reform and User Fees.  It’s a whole new OTC monograph world out there!

State regulators across the healthcare professions continue to issue a number of guidances and waivers as part of the larger COVID-19 response.  We have previously blogged on a number of waivers issued by state pharmacy regulators in connection with COVID-19 response related to pharmacy staffing and facility licensure and inventory and distribution of controlled substances.  Today, we are blogging on an entirely different set of state COVID-19 guidance and waivers related to telemedicine and medical marijuana.  The regulatory landscape in light of the ongoing COVID-19 pandemic is constantly evolving and this is merely an overview of a few recent actions.

Minnesota

On March 31, Minnesota Governor Tim Walz signed an Executive Order Ensuring Continuing Operations of the Medical Cannabis Program during the COVID-19 Peacetime Emergency.  The Executive Order allows the Commissioner of Health to permit a healthcare practitioner to certify a patient’s qualifying medical condition after a visit through videoconference, telephone, or other remote means, and temporarily waives the requirement that the certification be made only after an in-person visit.  The certifying healthcare practitioner must still meet the applicable professional standards of care when certifying a patient’s qualifying medical condition.  This Executive Order remains in place for the duration of the state of emergency.

District of Columbia

On March 25, DC Health issued a letter stating that medical marijuana recommenders will temporarily be permitted to utilize telehealth to make medical marijuana recommendations, subject to certain requirements.  In order to provide telehealth recommendations for medical marijuana, the provider must be licensed and in good standing as a medical doctor, osteopath, advanced practice registered nurse, dentist, naturopath, or physician assistant in DC, and have a bona fide relationship with the “qualifying patient.”  A qualifying patient is a resident of the District who has a qualifying medical condition or is undergoing a qualifying medical treatment.

The provider must have completed a full assessment of the qualifying patient’s medical/dental history and current condition no more than 90 days before making the recommendation.  The medical marijuana recommendation must be based on the practitioner’s assessment of the patient’s medical/dental history, current medical/dental condition, and a review of other approved medications and treatments that might provide relief to the patient.  Providers who are owners, employees, or otherwise hold an interest in a dispensary, cultivation center, or testing lab cannot perform a telemedicine recommendation for medical marijuana under this policy.

The policy announced in this letter is intended to allow patients and providers to responsibly practice social distancing and ensure adequate availability of healthcare providers for COVID-19 response.  Providers must still comply with all other DC medical marijuana regulations.

Massachusetts

On March 20, the Massachusetts Cannabis Control Commission issued a bulletin on Telehealth Consultations for New Patients During COVID-19.  Under this Bulletin, the Commission will consider waivers from providers who wish to certify new patients via telehealth for the Medical Use of Marijuana Program in Massachusetts.  The certification is a document stating that in the healthcare professional’s professional opinion, the potential benefits of the medical use of marijuana would likely outweigh the health risks for the qualifying patient.  Typically, Massachusetts law requires that the potential patient be physically present for the clinical visit, prior to issuing a certification.  If a waiver to conduct a clinical visit via telehealth is granted, providers must first ensure that the same standard of care can be met.  The policy set forth in the bulletin remains in effect for the duration of the state of emergency.

Ohio

The State Medical Board of Ohio voted on March 18 to allow providers to use telemedicine in place of in-person visits, without risk of enforcement from the Medical Board.  Providers are permitted to use telemedicine in lieu of the in-person visits that are typically required by Ohio law for certain services, including medical marijuana recommendations and renewals, prescribing controlled substances, and prescribing to patients not previously seen by the provider.  Providers must document the use of telemedicine and meet the applicable standard of care.  The Medical Board policy is set to expire once the Executive Order declaring a state of emergency expires and the Medical Board will provide advance notice before resuming enforcement of the in-person visit requirements.

***

In addition to the measures outlined above, many state regulators have specifically identified medical marijuana businesses as “essential businesses” that will remain open during the state of emergency.  For example, the Maryland Medical Cannabis Commission stated that medical cannabis licensees (growers, processors, dispensaries and independent testing labs) are state-licensed healthcare providers and are designated as essential businesses that may remain open.   However, medical cannabis licensees are still required to follow social distancing practices and clean and disinfect frequently touched surfaces.  New Hampshire’s Therapeutic Cannabis Program has similarly categorized Alternative Treatment Centers as essential businesses.

As readers of this blog may recall, the Food Safety Inspection Service of the USDA (FSIS) received two Petitions regarding the Product of USA Labeling for Meat Products. (See here and here for our blog posts).

In 2018, the Organization for Competitive Markets and the American Grassfed Association requested that FSIS revise its policy on “Product of USA” claims so that only U.S. domestic meat and meat products under FSIS jurisdiction can be labeled “Product of U.S.A.”  More than a year later, the U.S. Cattlemen Association (USCA) submitted its own Petition, requesting that FSIS limit the Product of USA claims to products made from beef from cattle born, raised, and harvested in the United States.

On March 27, 2020, FSIS posted responses to both Petitions, here and here.

FSIS received more than 2500 comments to the 2018 Petition and more than 100 comments to USCA’s Petition. FSIS concluded that its current labeling policy permitting meat and poultry products that are derived from animals that may have been born, raised, and slaughtered in another country but processed in the United States to be labeled as “Product of USA,” may be causing confusion in the marketplace.  Nevertheless, FSIS denied the Petitions’ requests to amend the policy. Instead, FSIS decided that, considering the significant public interest, it needs an “open and transparent process,” and the more appropriate way to accomplish that would be through rulemaking.

The USCA requested that FSIS limit the Product of USA claim to beef from animals born, raised, and slaughtered in the USA.  However, based on concerns expressed that such policy change could potentially affect the integrated livestock supply chains between the United States and Canada, as well as the integrated cattle supply chain between the United States and Mexico, FSIS concluded that the better approach would be to allow the claim on products from animals that were slaughtered and processed in the United States without regard to where the source animals were born (and grown).  FSIS intends to propose a rule consistent with that conclusion.

FSIS did not provide a timeline for the rulemaking.

In a March 13, 2020 opinion, the United States Court of Appeals for the District of Columbia Circuit handed Eagle Pharmaceuticals, Inc. (Eagle) a significant win in FDA’s appeal from a District Court order requiring FDA to grant Orphan Drug Exclusivity to Eagle’s Bendeka (bendamustine) drug product.  The legal issue at the heart of this case has been the subject of posts several times before (here, here, here, and here), but bears repeating.

FDA’s Orphan Drug Regulations

FDA’s orphan drug regulations define a “clinically superior” drug as “a drug . . . shown to provide a significant therapeutic advantage over and above that provided by an approved orphan drug (that is otherwise the same drug)” in one of three ways:

(1) greater effectiveness as assessed by effect on a clinically meaningful endpoint in adequate and well controlled trials;

(2) greater safety in a substantial portion of the target population; or

(3) demonstration that the drug makes a major contribution to patient care.

21 C.F.R. § 316.3(b)(3).  FDA has explained in its response granting in part and denying in part a citizen petition (Docket No. FDA-2011-P-0213) that the standard for obtaining designation as a clinically superior drug is different from the standard for obtaining exclusivity:

Though the sponsor of a subsequent orphan drug must set forth a plausible hypothesis of clinical superiority over the previously approved drug at the designation stage, such a sponsor faces a higher standard at the time of approval. At approval, the sponsor of a drug which was designated on the basis of a plausible hypothesis of clinical superiority must demonstrate that its drug is clinically superior to the previously approved drug.

This heightened standard for demonstrating clinical superiority to obtain orphan drug exclusivity is the subject of the dispute in the Eagle case.

Depomed Files First Challenge to FDA’s Clinical Superiority Standard

Notably, Eagle was not the first company to question FDA’s clinical superiority standard.  In September of 2012, Depomed filed a lawsuit against FDA (see our previous post here) seeking Orphan Drug Exclusivity for its drug, Gralise (gabapentin).  Depomed prevailed and, instead of appealing the district court decision, FDA published in the December 23, 2014 Federal Register a “clarification of policy” notice in which the Agency addressed the effects of the Depomed court decision (see our previous post here).  In that notice, FDA set forth its position that the Depomed decision was limited to the specific drug at issue in that case.  FDA reiterated its intent continue applying its clinical superiority regulatory standard in evaluating orphan drug exclusivity.

Eagle Files Second Challenge to FDA’s Clinical Superiority Standard

Unsurprisingly, after the publication of this notice by FDA, the same issue arose with respect to another drug, Eagle’s Bendeka (bendamustine HCL).  After the parties filed their respective cross motions, two other drug manufacturers with pending applications for generic versions of Bendeka, Apotex, Inc. and Fresenius Kabi USA, LLC intervened as defendants.  As in Depomed, the district court ruled in favor of the company, granting Eagle’s motion for summary judgment and denying FDA’s cross-motion.  Applying Chevron step one, the district court concluded that the Orphan Drug Act “unambiguously require[d] the FDA to afford Bendeka the benefit of orphan-drug exclusivity.”  Eagle Pharms., Inc. v. Azar, 16-790, 16 (D.D.C. 2018).  As a result, no Chevron deference was due FDA’s interpretation.  FDA and the Intervenors appealed.

FDA Appeals District Court Ruling in Favor of Eagle

Judge Henderson, Judge Rao and Judge Williams considered the appeal.  Judge Henderson and Rao ruled in favor of Eagle, with Judge Williams dissenting.  The opinion, written by Judge Henderson, closely tracked the arguments and legal conclusions set forth in Depomed:

The district court in Depomed said it well when it described this provision as “employ[ing] the familiar and readily diagrammable formula, ‘if x and y, then z’”—if designation and approval, then exclusivity.  66 F. Supp. 3d at 230.  Under the plain language of this provision, the FDA is barred from approving another application for “such drug” for the same disease for seven years once it approves an orphan drug for marketing.

Eagle Pharms., Inc. v. Azar, 18-5207, 15 (D.C. Cir. 2020).

As the court explained, by withdrawing its appeal following Depomed, FDA opted “instead to nonacquiesce to the decision in future cases.”  Id. at 9.  The majority went on to analyze the text, structure or purpose, and legislative history of the exclusivity provision, finding nothing to support the benefit is limited to only the drug manufacturer.  First, with respect to the text, the majority presumed the legislature says in a statute what it means.  Repeating the often-cited analogy describing the orphan drug exclusivity questions as one of, if x and y, then z; the majority concluded the statutory text leaves no room for FDA to place additional requirements on exclusivity.

Next, in analyzing the structure and purpose of the Orphan Drug Act, the majority explained FDA’s argument as saying a literal interpretation of the Federal Food, Drug, and Cosmetic Act (FDCA) § 360cc(a)’s text would lead to such absurd results that we should consider evidence beyond it.  The majority responded that, as judges, it is not their “role . . . to ‘correct’ the text so that it better serves the statute’s purpose, for it is the function of the political branches not only to define the goals but also to choose the means for reaching them.”  Id. at 19.

The majority also addressed the repeated argument regarding self-evergreening, or serial exclusivity, where either the same manufacturer or several manufacturers obtain multiple periods of sequential exclusivity for the same drug to treat the same disease.  In response to this assertion, the majority concluded that such a problem does not result purely from a literal reading of the statute, but from the way FDA has decided to regulate designation and the scope of exclusivity.  As a result, to the extent serial exclusivity is a problem, it is within FDA’s power to manage.

Lastly, the majority asserted that statutory interpretation does not require a review of the legislative history when the statutory text is clear, which is the case with FDCA § 360cc(a).

The majority briefly addressed the arguments from the Intervenor Appellants, which are two companies with generic versions of Eagle’s drug currently being excluded from the market.  The intervenors argued that the district court’s decision should have been controlled by the 2017 amendment to FDCA § 360cc(a), which requires a showing of clinical superiority to obtain exclusivity.  The majority noted this argument was raised for the first time on appeal, and is therefore, waived.  In a footnote, however, the majority described this argument as “dubious at best.”  The majority asserted that the district court order requires that FDA give Eagle what Eagle was entitled to at the time its application for Bendeka was approved—prior to the enactment of the 2017 amendments.

Judge Williams’ Dissent responded that the text, structure, and purpose of FDCA § 360cc(a) show that Congress intended the exclusivity period afforded by that provision to be limited to the first manufacturer to secure designation and approval of its orphan drug.  FDA’s additional clinical superiority requirement, therefore, merely flows from the statute.  Indeed, Judge Williams characterized the majority’s interpretation as running counter to the best reading of the congressional language and upsetting the basic economic bargain Congress carefully constructed.

In explaining FDA’s regulations implementing the orphan drug exclusivity statute, the dissent asserted that such regulations incentivize firms to continue innovating for the benefit of patients even after a particular active moiety has been approved for use in an orphan drug.  He then proceeded to question the majority’s interpretation of the “if x and y, then z” analogy.

My view is that Congress meant to imply that this if-then statement—if designation and approval, then exclusivity—would cease to apply to that “same drug” at “the expiration of seven years.” This is a natural reading of an if-then statement, no different from myriad other everyday uses. “If you paint my house, I will pay you $1,000” would in the usual context imply an offer for a single painting and a single reward of $1,000—not as many house paintings and as many thousands of dollars as an industrious painter might want to exchange.

Eagle Pharms., Inc. v. Azar, 18-5207, 52 (D.C. Cir. 2020).  According to Judge Williams, the drafters of FDCA § 360cc(a) failed to expressly close the infinite loop.  He then criticized the majority for basing their analysis on how the statute might look if the drafters had.  Judge William asserted that, because congress could have drafted the statute in a number of ways to close this loop, there was clear ambiguity.  Judge Williams described the majority’s analysis as reducing the role of judges “to nothing more than executing Congress’s script like a computer . . . unguided by contextual common sense.”  Instead, Judge Williams asserted that judges must “calculate[e] the probably meaning of the congressional language based on the information before [them].”  Id.  at 55-56.

Parting Thoughts

It is unclear why FDA insists on holding so tightly to an interpretation that continues to be refuted by the judiciary.  This is especially questionable given that the language of the statute was amended in 2017, after FDA’s decisions on Depomed’s Gralise (gabapentin) and Eagle’s Bendeka.  The 2017 amendment added a clinical superiority requirement to FDA’s determination of orphan drug exclusivity.  Yet the Agency continues to seek validation of its prior actions, to no avail.

It remains to be seen whether FDA will file a writ of certiorari in the Supreme Court.  Notably, the result in Eagle has implications for a third case challenging the clinical superiority standard, United Therapeutics v. FDA, which has been stayed pending this ruling (and in which litigation Hyman, Phelps & McNamara, P.C. represents United Therapeutics).  Days after the decision in Eagle, the judge in United Therapeutics requested the parties file a joint status report indicating whether there is any objection to granting summary judgment in plaintiff’s favor based on the recent holding in Eagle.  On March 26, 2020, the parties in United Therapeutics filed a Joint Notice to the court, requesting “the Court continue to stay further proceedings until the time for rehearing in Eagle has expired, or until the D.C. Circuit has disposed of any petition for rehearing, whichever is later.”  Joint Status Report, United Therapeutics Corp. v. United States Department of Health and Human Services et al., 1:17-cv-01577 (D.D.C. Mar. 26, 2020).  The parties agreed to update the court by April 30, 2020 with their views on summary judgment, if no petition for rehearing has been filed in Eagle.  Id.  We will keep our readers apprised of any updates as they happen.

We previously blogged on a number of pharmacy law waivers issued by state pharmacy regulators in response to COVID-19.  Waivers are being updated and added to state pharmacy websites daily to address the constantly changing public health and regulatory landscape.  This blog post addresses a few recent waivers related to the controlled substances distribution and inventory requirements and a waiver related to non-resident facility licensing similar to those covered in the last post.

Controlled Substances: Distribution

Michigan

On March 30, Michigan Governor Gretchen Whitmer issued Executive Order 2020-30 (COVID-19), which provides temporary relief from certain restrictions and requirements pertaining to the provision of medical services in connection with COVID-19 response.  The Executive Order authorizes any drug manufacturer or wholesale distributor licensed in good standing in another state to temporarily distribute controlled substances in Michigan to a hospital, manufacturer, or wholesale distributor.  However, to be considered licensed in good standing, the manufacturer/wholesale distributor must not have any pending disciplinary action or a suspended or revoked license in any other state.  The “licensed in good standing” requirement is not limited to the facility’s home state license.  The Executive Order will remain in effect until the end of the declared emergency.

Ohio

On March 31, the State of Ohio Board of Pharmacy also issued a guidance on the temporary off-site storage of dangerous drugs by a terminal distributor of dangerous drugs (TDDD).   Ohio regulations define “dangerous drug” as any drug or drug product whose commercial package bears a label containing the symbol “Rx only”, the legend “Caution: Federal Law Prohibits Dispensing Without Prescription” or “Caution: Federal Law Restricts This Drug To Use By Or On The Order Of A Licensed Veterinarian,” or any similar restrictive statement and, thus, includes both drugs that are controlled substances and non-controlled substances.  OAC Ann. 4729-9-01(A).

Under the new guidance, Ohio facilities licensed as a TDDD may maintain possession, custody, or control of dangerous drugs for the treatment of COVID-19 patients at a satellite location other than or in addition to its actual licensed location, subject to certain requirements.  The TDDD using an off-site satellite location is responsible for implementing policies and procedures to ensure that drugs stored at the off-site location are kept under supervision and control of licensed healthcare personnel.  For non-controlled substances, this may be a “licensed, registered, or certified healthcare provider.”  However, supervision of controlled substances is limited to prescribers, pharmacists, physician assistants, and nurses (including APRN, RN, LPN).  If supervision is not provided, the drugs must be physically secured in a manner to prevent unauthorized access.  TDDDs must also take reasonable efforts to ensure the drugs are properly stored, and must maintain all required records (e.g., receipt, dispensation, disposal).

Off-site storage does not need to be approved by the Board, but the TDDD must submit a COVID-19 Satellite Registration Form prior to engaging in off-site storage.

Controlled Substances: Inventory

Ohio

On March 31, the State of Ohio Board of Pharmacy announced a temporary extension of the annual controlled substance inventory requirement.  The Board extends the inventory date to August 1, 2020 for any annual controlled substance inventory that is required between March 2, 2020 and June 30, 2020.  However, the inventory must incorporate the additional months included as part of the extension period.

California

The California State Board of Pharmacy had previously issued a similar waiver related to controlled substance inventories.  California is allowing pharmacies to complete inventory reconciliation reports at least once every six months, rather than every three months, if determined to be necessary by the pharmacist-in-charge to ensure continuity of direct patient care activities that would otherwise be impacted.

Massachusetts

Massachusetts requires that pharmacies maintain a perpetual inventory of schedule II controlled substances that must be reconciled at least once every ten days.  247 CMR 9.01(14).  However, as of April 1, the Massachusetts Board of Pharmacy has stated that it “does not intend to take any enforcement action against pharmacies that perform and reconcile perpetual inventory counts as least every 30 days” for the duration of the declared emergency.

Facility Licensing

South Carolina

The South Carolina Board of Pharmacy issued an Order Regarding Temporary Non-Resident Permits that directs Board staff to issue 90-day temporary permits to non-resident facilities that are permitted in good standing in with states.  The order applies to out-of-state pharmacies, manufacturers, wholesale distributors, 3PLs, and FDCA Section 503B outsourcing facilities.  Typically, applicants must personally appear before the Non-Resident Application Review Committee, but this Order allows for a remote interview of the applicant by Board staff.  Temporary permits are to be issued within 24 hours of receipt of a completed application.

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We intend to regularly update our blog readers with other Board of Pharmacy COVID-19 related changes, so please check back often.