CMS Attacks Supplemental NDAs and Authorized Generics but Leaves the Door Open to Creative Thinking and 505(b)(2)’s
By Ed Allera - Chairman of The 505(b)(2) Platform
Our recent article on CMS’s attacks on 505(b)(2)’s has led to requests for a discussion on the status of CMS’s views on supplemental NDA’s. A recent court action upholding CMS’s attack on supplemental NDAs actions shows the need for increased long-term planning of product development because CMS is intent on increasing the rebates holders of NDA approvals pay. When an NDA is initially approved, the CMS rebate agreement applies using the Average Manufacturing Price as the basis for the best price and rebate calculation CMS has now restricted the ability of certain supplement NDA approvals from serving as the basis for a new, higher AMP and lower rebates to the government. Strategic planning of value by design has always been an essential element of product life cycle management. But the recent judicial and CMS action require more strategic planning, earlier in the life cycle management and utilizing the FDA review and approval process as an ally to increase the value of a drug. Like all other insurers and PBM’s CMS’s voracious appetite to the minimize costs that it pays for drugs and maximize the rebate payments by the pharma industry, no matter the impact on public health will continue. Long term thought and new, clever planning are required to increase the value of your drug product. Increased value can continue to be created, but one must really be diligent, creative, and aggressive.
Expanding the labeling of a new drug product is an essential part of improving healthcare. As more is learned about a new drug, e.g. its mechanism of action, its pharmacokinetics, the greater opportunity for increased and safer use of the drug. Labeling has normally been expanded by the holder of the initial NDA through supplemental NDAs (SNDAs) for new indications. An SNDA for a new indication that contains clinical data, results in 3 years of market exclusivity for that new claim. New patents can be involved, and the intricacies of patent litigation and labeling carve outs become involved. If a new indication for use is sought, a new CDER reviewing division can be involved, depending on the indication. And in such cases, the agency has permitted new NDAs to be filed. Also, if a new technology or method of delivery is involved, a new NDA may also be utilized.
Historically, the line between a SNDA and a new NDA is gray and often determined by the reviewing division, regardless of the need for clinical data. If the new claim is for an indication that is outside of the original reviewing division the opportunity for a separate application increases. The same is true if a new or different technology for the delivery of the drug in the initial NDA is involved. But new user fees can be involved, and as well as new Chemistry, Manufacturing, and Controls (CMC) review in addition to the new clinical review. Therefore, most companies have opted for incorporating everything into the same, original NDA through an SNDA, to the NDA which is approved under Section 505(b)(1) of the Federal Food, Drug and Cosmetic Act (FFDCA). Limitations and downsides exist, however as the recent events with CMS have shown.
When the labeling of a drug product is expanded under an SNDA and marketed under the same NDA, a court has now upheld CMS’s aggressively argued position that the new labeling/product is stuck with the same rebate formula calculation as the original application when the route of administration and dosages are the same. Regardless of how much clinical data are necessary to obtain the approval and market exclusivity. CMS’s position that this congruity of such new uses remains single source or an innovator multi-source drug under the Medicaid Act’s definitions. Because the changes retain the same dosage, strengths, and route of administration, they cannot give rise to a new “covered outpatient drug.” Ipsen Biopharmaceuticals, Inc. v. Azar.. There can be no reset to another pricing number that permits the company to pay a lower rebate calculation. CMS was adamant, and the district court judge thoroughly assessed the position in his decision.
Thus, the use of SNDAs to expand a drug product’s use, now has clear limitations in the view of CMS and likely with product developers. In addition, as discussed in our earlier article on 505(b)(2)’s, utilizing the (b)(2) pathway to supplement where an SNDA would normally be used will not work as CMS is defining that as a line extension as well and not allowing a change in pricing and rebates. To have success with a line extension on an existing product, more inventive value by design and strategic planning are required. New routes of administration, new dose regimens, new NDAs, and even planning with independent 505(b)(2) developers must now be considered in the initial stages of product development as we discussed in our previous article on CMS’s attacks on 505(b)(2)’s. 
In addition to the limitation of the definition of covered drug in Ipsen, and the attacks on the line extension (b)(2)’s described in our earlier article, CMS has also launched an attack on authorized generics. In its interpretation of the Health Extenders Act of 2019, CMS has announced a change in the calculation of Average Manufacturing Price (AMP). It announced that the transfer price of the pioneer’s sale to the authorized generic (AG) or to a secondary manufacturer will no longer be included in the AMP calculation. CMS states that the exclusion of these transfer sales from the primary manufacturer’s brand drug AMP will likely result in higher AMPs for the brand drugs and a potential increase in the manufacturer’s Medicaid drug rebates to the states.
The government attack on the pharma industry is continuing. Vigilance and longer-term planning are required, even if you are developing new chemical entities to be approved under 505(b)(1) of the FFDCA. We are sailing in tumultuous seas, but new opportunities are arising. The time is now to push back from the industry on CMS not only within their challenging response time to the proposal, but also by engaging with FDA. FDA must understand that CMS is attacking FDA’s role in helping to improve health care through product improvements that financial rewards for those creative product developers. CMS’ approach is also undermining the PDUFA funding, which subsidizes much of the orphan drug development and review processes. At The 505(b)(2) Platform we are actively working to be engage regulators to address these issues. Remember if one is not at the table, one usually gets the bill.
 16-cv-2372 (DLF) 2020 BL 229194 (June 19, 2020)
 Allera E, CMS launches double torpedo attack on 505(b) (2) s and FDA is following, available at 505b2.org/publications
 85 Fed. Reg. 37287.
By Ed Allera - Chairman of The 505(b)(2) Platform
CMS has launched two under the radar attacks on 505(b)(2)s in the last 60 days. The attacks focused on smaller, non-big Pharma companies so that the Administration can argue that it is doing something to address the costs of pharmaceuticals. Unfortunately, the Administration is attacking the companies that, for decades, have created improved dosage form delivery, safer and more convenient delivery of pharmaceuticals, and better delivery of healthcare. When these attacks are coupled with the FDA proposed increased user fees for 505(b)(2) applications, these uncoordinated attacks could be fatal to some companies. We will explore these ill-conceived attacks in more detail below.
On June 19, 2020 CMS proposed a rule to disrupt certain (b)(2)s for Part D reimbursement purposes. CMS proposed to expand the definition of a line extension for a Part D covered outpatient innovator initial single source or innovator multisource drug beyond the historic definition of oral controlled release drug products. CMS’ stated concern for this attack is that manufacturers have a financial incentive to expand new and improved versions of the single source drugs. In this way they are able increase the price of the drugs and reduce their rebates. CMS’ proposal is to increase the rebates to the government and decrease the government’s drug spend.
To accomplish this goal, CMS is proposing to sweep new formulations, extended release formulations, changes in dosage forms, combinations, pharmacokinetic and pharmacodynamics properties, changes in indications, and changes in device delivery systems into the definition of line extension. These applications are filed by both originator companies and others as 505(b)(2) applications.
Unlike generic product development, a 505(b)(2) line extension is much more involved. Regulated as a new drug, a (b)(2) must prove efficacy and safety for its intended use. Of course some avenues exist in the 505(b)(2) regulatory pathway that enable benefit to the developer from previous scientific work done on the active pharmaceutical ingredient(s). However, meticulous care must be taken to structure development of (b)(2) drug products to ensure market value. In today’s market, companies must develop plans for life cycle extensions beyond patents, Orange Book listings and formulary access. Developers must consider how to deal with pricing and the need to structure (b)(2) development independently to optimize the value to the patient and the healthcare system. This issue must also be considered when doing due diligence to acquire asset acquisitions. Huge benefits can still exist. Without a corporate relationship with the reference drug, the holder of the (b)(2) approval is still free to set its own price and a new rebate calculation can be established.
In this proposal, FDA’s sister agency within the Department of Health and Human Services, CMS, is ignoring all the health care benefits provided to patients and the healthcare system by 505(b)(2)s and their sponsors, through improved dosing, compliance, safety, etc. The impact on patients will be even worse. Research shows that more than 60% of the applications approved annually by FDA are for 505(b)(2)s – a number that has been relatively constant for decades. PDUFA (user fee) funds from these applications subsidize the reviews of the orphan drug applications that are driving the increasing numbers of New Drug Application approvals. The Draconian CMS actions run the clear risk of strangling orphan drug development by decreasing (b)(2) development and the user fee revenues that FDA uses to subsidize the review, cooperation with the applicants, and processing of those applications. .
The CMS proposal is focused on originator companies and their 5050(b)(2) “line extensions”. CMS is proposing that the regulation would only apply to those with a corporate relationship to the originator company. The term “corporate relationship” remains undefined by CMS in the proposal. Fortunately, many (b)(2)s are being developed by independent companies that have no corporate relationship with the original NDA holder. In addition, if one looks at various indicia provided by the FFDCA and FDA’s regulations, one sees that independence of management and control of the company are the primary criteria form e.g. the user fee provisions, and labeling provisions. For CMS to adopt a different definition of corporate relationship would be the ultimate in arbitrary and capricious agency action. Although the independent develop route could precipitate a potential avenue for “authorized line extensions,” it is still unfair and not something that will help advance the ability of the FDA to meet objectives and goals in orphan drug development and other growth areas e.g. cell and gene therapy.
Nevertheless, CMS’ assault on the industry is unnecessary and will likely cause more disruption than price stabilization. There was no need to propose a rule at this time. The administration gave a mere 30-day period for comments which some in the healthcare industry have termed criminally short. The proposal goes beyond therapeutic equivalence; it goes beyond pharmaceutical equivalence because it ignores dramatic differences in drug administration; it goes beyond pharmaceutical alternatives. The proposal is a crude effort that ignores the public health. It just wants to cut spending. To date, no formularies have been so unreasonable and blind to patient needs. With this proposal, CMS is ignoring decades of improving the patient experience, which improves compliance, and focuses only on cost. One would think we would have learned by now that cheapest is best approach leads to problems e.g. the debacle of off-shore supplying of 90% of the US drug supply caused by the race to the lowest price in generic medications.
The second shot came on Aug.17, 2020, when CMS proposed the Physician Payment Rule for 2021. CMS is attempting to reduce the drug spend under Part B by expanding the definition of multisource drugs to include certain 505(b)(2)s. In this way, certain 505(b)(2)’s will be included in the same code for the calculation for the volume weighted ASP calculation for the same active ingredients. Interrelatedly, CMS is proposing to minimize the instances in which (b)(2)s can qualify as single source drugs. The comment period is officially open until Oct.5, and traditionally the final rule is issued in mid- to late November.
Again CMS’ goal is to reduce the drug spend on non-big pharma products. CMS’ stated basis for the proposed rule is that certain (b)(2)s charge more that 10X the multisource calculation for the same active ingredient. CMS takes one cell from the Biopharma film and creates a distorted grand scenario. It ignores the fact that multisource drugs now can reduce the cost of the reference listed drug by well over 90% - at times 99% for oral drugs. To then argue that an increase in the price from 1cent to 10 cents or greater to provide improved clinical benefit is unreasonable is a biased argument that ignores decades of health care benefits. Do increasing patient and healthcare system benefits now have no or de minimus value?
To accomplish this expansion of the definition of multisource drugs, CMS has been expansive in its proposal to provide it with maximum flexibility. The definition of drug in this context is based on the active ingredient. The definition of drug product is based on the NDC package code.
Where two (2) therapeutically equivalent drug products with the same active ingredient exist, i.e. an NDA and one ANDA, a multisource drug exists, and as a Part B drug, it will have one HCPCS code.
In proposing to expand the definition of multisource drugs beyond these situations, subsequent (b)(2)s for the same active ingredient can be considered multisource drugs. Facts that CMS will consider include not only the bioequivalence data, but also labeling, summary bases of approvals and other review documents, including the potential prescribing information, pharmacokinetics, and other indications. This new effort constitutes a novel expansion of the long standing term and well recognized industry jargon “pharmaceutical equivalents, (active ingredients) and therapeutic equivalence. This expansion seeks to destroy drug product criteria that FDA has determined are clinically relevant and used for over 40 years Ostensibly, the rule will only apply to (b)(2)’s approved after the rule is finalized. But possible post-approval complications that can arise then too.
Multisource drugs and single source drugs are mutually exclusive by Social Security Act definitions. CMS defines (b)(2)’s as drug products that can have the same active ingredient but are non-generics that have different labels than the reference drug. But they share significant portions of the label.
Historically (b)(2)s are considered by CMS to be multisource if the active ingredient labeling especially prescribing information for the multisource drugs, drug description, dosage, administration, pharmacokinetics and indications for the (b)(2)s are the same as for other multisource drugs.
When new products can be used in a manner that is similar to an existing HCPCS code, therapeutic equivalence and under existing multisource code, CMS is proposing that it has the discretion to add the (b)(2)’s to the existing multiple source codes. Again, the agency, does not define similarity of labeling. Among drug products within the same route of administration. FDA has determined that a number of these drug products have unique or additional clinical benefit. They have separate FDA Orange Book listings. How they will fare in the future with CMS is unclear.
In summary we see CMS ignoring the almost half century of FDA interpretation and implementation of the terms that are the cornerstones of pharmaceutical/health care delivery: therapeutic equivalence, pharmaceutical equivalence, and pharmaceutical alternatives. This action is not directed at the new chemical entities and biologics which constitute over 90% of today’s drug spend. It is directed at more innovative, product-development companies that are taking existing chemical entities and enhancing them for the patient or finding new ways to use them for other patients in need. CMS’ action is a charade.
The third shot has not been fired yet. It could come from FDA. Virtual discussions have begun for the renewal of prescription drug user fee legislation which expires in 2022. The demands for increasing fees are coming from all sides as ideas for more types of guidance are flooding in to FDA. Ideas and concepts are forming. Major participants are beginning their internal calculations and what they want or are willing to spend. FDA is calculating the amount of money that it needs to accomplish its proposed tasks during the next 5-year user fee period. The agency then allocates the costs among the sources of fees. Because 505(b)(2)’s comprise over half of all new drug applications filed annually and have done so for decades, it is safe to assume that FDA will continue to look to 505(b)(2)’s to shoulder the brunt of the user fee costs and subsidize other actions like orphan drug development. Given the CMS actions and the actual review time of a 505(b)(2), the risk that PDUFA may cease to be a benefit for the pharmaceutical industry in the next cycle increases on a daily basis.
The time is now to push back from the industry on CMS not only within their challenging response time to the proposal but also by engaging with FDA and helping them understand the PDUFA funding risk their sister organization is thrusting upon them. At The 5050(b)(2) Platform we are actively working to be involved with FDA in their PDFUA negotiations and need you to become a member so we can collectively push back on CMS. Remember if one is not at the table, one usually gets the bill.
By Matthew L. Fedowitz, IP Counsel to The 505(b)(2) Platform
Each year, the Food and Drug Administration (FDA) approves approximately 120 new drug applications (NDAs). But contrary to what many might believe, a majority of these NDAs are not, in fact, new chemical entities (NCEs).
Instead, many sponsors of these NDAs are leveraging data and information already known about existing FDA-approved drugs to develop new applications. These products make use of known active pharmaceutical ingredients (APIs) in order to develop new dosage formulations, strengths, API salts, dosing regimens, routes of administration, indications and combination products. These products are commonly known as Section 505(b)(2) NDAs.
The Section 505(b)(2) NDA is one of three FDA pathways for drug approval. The pathway was created by the Hatch-Waxman Amendments of 1984, with Section 505(b)(2) referring to a section of the Federal Food, Drug, and Cosmetic Act (FFDCA). The provisions of Section 505(b)(2) were created, in part, to help avoid unnecessary duplication of studies already performed on a previously approved and reference listed drug (RLD). As a result, the section gives the FDA express permission to rely on data not developed by the NDA applicant. It also represents an appealing regulatory strategy for many pharmaceutical manufacturers. For example, a Section 505(b)(2) NDA contains the full safety and effectiveness data but allows at least some of the information required for NDA approval, such as safety and efficacy information on the active ingredient, to come from studies not conducted by the applicant.
This likely results in a much less expensive and faster route to approval as compared to the traditional development path for Section 505(b)(2) NDAs.
These products offer some significant advantages over other more expensive, time-consuming and complex options – plus advantages over generics as well. While they may not offer the same kind of home run potential as NCEs, they can be a way for investors and manufacturers to get on base and make a strong return on their investment of time and money. But as always, Section 505(b)(2) NDAs will come with their own challenges and risks in obtaining and maneuvering through intellectual property (IP) hurdles.
With regard to IP, branded pharmaceutical manufacturers typically file patents covering their products, methods of use and formulations from the start of research and development in a particular area. These patents must be identified if they cover the approved product, and the FDA will publish these patents in the Orange Book. Generic drug manufacturers, on the other hand, may or may not seek patent protection for their proposed products. However, the ANDA applicant must provide certification for each patent that the NDA holder has submitted to the FDA for listing in the Orange Book in connection with the RLD.
Section 505(b)(2) manufacturers reside in an even more unique position. Since the products they are pursuing use new dosage formulations, strengths, API salts, dosing regimens, routes of administration, new indications and/or new combinations, there is plenty of patentable subject matter. Recognizing this, Section 505(b)(2) NDA applicants should be motivated to seek patent protection to maintain their market share and halt competitors from using their technologies. As a result, any patents that claim a Section 505(b)(2) product must be listed in the Orange Book.
However, not only must Section 505(b)(2) manufacturers list any patents that claim their product, they must also file a Paragraph I, II, III or IV certification against any Orange Book patents that cover the listed drug. If a Paragraph IV certification is made, the company holding the application for the listed drug product can file a patent infringement suit within 45-days’ notification, and a 30-month stay of FDA approval will issue on the Section 505(b)(2) NDA’s approval unless the applicant is successful in litigation prior to the stay expiring. If not, the FDA will only tentatively approve the Section 505(b)(2) application. Therefore, based on this potential delay, it is best to understand the patent landscape as early as possible in product development.
§ 505(b)(2) products may also receive marketing exclusivity; however, because they do not represent the same scientific and medical innovation as a § 505(b)(1) NDA for an NCE, they are eligible for less time. In this case, the applicant may be entitled to a three-year period of exclusivity when the application contains reports of new clinical investigations (other than bioavailability studies) conducted by the applicant and that were essential to approval of the application and that supported the particular change(s) from the listed drug. These applications may also be eligible for seven-year Orphan Drug Exclusivity and/or six months of pediatric exclusivity.
There are a number of factors to consider when it comes to entering the market with a Section 505(b)(2) product.
With regard to business factors, the evolution of the generic industry has led to a deflationary market where the profits and incentives for first-to-file ANDAs have decreased immensely over the past decade. This has led sophisticated generic manufacturers to look to new markets for profitable products. Similarly, branded pharmaceutical manufacturers are experiencing a loss in revenue with their profitable products going off-patent and facing generic competition. Ongoing prescription drug price scrutiny by regulatory bodies and insurers is also causing sponsors to adapt their business strategies, as competition for formulary placement and reimbursement amounts is increasing. Interestingly, Section 505(b)(2) products may solve many of these dilemmas.
Furthermore, Section 505(b)(2) sponsors have the ability to differentiate their products from competitors and develop specific niches that may be critical to certain patient populations.
In the case of developmental factors, sponsors must identify and leverage existing data to demonstrate the safety, efficacy, viability and utility of a potential product. Because Section 505(b)(2) NDAs require fewer new studies than traditional Section 505(b)(1) NDAs, and different studies than Section 505(j) ANDAs, Section 505(b)(2) manufacturers must have a keen understanding of the safety issues and the bridging studies required for FDA approval.
In light of the fact that Section 505(b)(2) NDAs occupy the developmental and regulatory space between traditional branded Section 505(b)(1) products and generic Section 505(j) products, there are numerous opportunities to develop new products that leverage known data. For example, an underserved patient population may benefit immensely from new dosage formulations and strengths, as well as new dosing regimens, routes of administration and uses. Similarly, if an alternative salt, ester or enantiomer of a known API yields greater formulation or drug delivery compatibility, this represents a tremendous opportunity as well. Additional opportunities may exist if an API in a combination product is changed, such that the change provides a benefit for a particular patient population. For example, if a product contains two APIs, then it may be possible to modify the combination to include a different combination of APIs. Finally, based on historical post-marketing surveillance and a favorable regulatory history, it may be possible to switch a prescription drug product to an over-the-counter product using a Section 505(b)(2) NDA.
Here are four things to look out for in the year ahead. First, expect more investors and manufacturers to get into Section 505(b)(2) NDA development. As costs and complexities for development of NCEs continue to rise and the generic space gets even more crowded, it’s safe to say that more players will likely get into the Section 505(b)(2) NDA space in 2020. Many investors see an untapped opportunity to jump into the Section 505(b)(2) NDA space. With its higher likelihood of success relative to Section 505(b)(1), Section 505(b)(2) NDAs are a good bet for investors looking to make a somewhat lower-risk investment.
Second, accelerating evolution with artificial intelligence (AI). In many instances, AI often gets conflated with advanced robots or smart automation. In reality, AI in the pharmaceutical industry is most often used to mean predictive data. Using decades of data and information about past pharmaceutical performance and, increasingly, patient diagnosis, manufacturers are getting better at being able to predict a potential NDA’s success and market value. While not a perfect science (at least not yet), the more information manufacturers and investors have at their disposal, the better they’ll be able to anticipate whether a drug is worth the investment in time, IP and marketing. AI is going to become an even bigger part of pharma and Section 505(b)(2) NDA development in 2020.
Third, the user fee issue needs to be addressed. In fiscal year (FY) 2019, fees required under the Prescription Drug User Fee Act (PDUFA) for Section 505(b)(1) and Section 505(b)(2) NDAs were identical. For NDAs containing clinical data for FY 2019, application fees were approximately $2.6 million. With no clinical data, the fee was approximately $1.3 million. That means the fee is the same whether you’re a brand name drug company that develops a new chemical/molecule or if you use an old chemical/molecule and simply create a new dosage formulation, strength, API salt, dosing regimen, route of administration, indication or combination product. These fees have risen (again) in FY 2020 (beginning October 1, 2019), and stand at approximately $2.9 million for NDAs with clinical data and approximately $1.5 million for NDAs with no clinical data. Although that may seem rather unfair, the fact that Section 505(b)(2) NDA manufacturers haven’t had a seat at the table with lawmakers means there’s been little movement to change this result.
In 2020, there needs to be a greater sense of urgency from the industry to address this fee disparity and level the playing field for NDA development. PDUFA will be reauthorized in 2022, so the time is right for Section 505(b)(2) NDA sponsors to organize and act in 2020.
Fourth, Section 505(b)(2) NDA manufacturers haven’t put the same value in IP as some of their peers, especially those who spend hundreds of millions of dollars in research to develop an NCE. In most cases, this is a mistake. As big pharmaceutical companies know, there is incredible value in developing an ownable IP portfolio and creating a market where competitors can be excluded from developing their own NDA. It’s easier to make the case to investors when they can clearly see the marketing opportunity of exclusivity and potential rates of return by owning the IP on a specific NDA. Too often, Section 505(b)(2) NDA manufacturers have been in the business of avoiding patents while missing patent opportunities of their own. In 2020, these businesses need to place a higher priority on IP and owning what they create.
By Ed Allera - Chairman of The 505(b)(2) Platform
In our “Exclusivity Under Attack” article published in August 2019, we discussed the U.S. District Court for the District of Columbia’s opinion in Braeburn Inc. v. FDA, holding that FDA’s use of “innovation” in determining exclusivity under §505(b)(2) of the Federal Food, Drug, and Cosmetic Act (FFDCA) was too broad. The court remanded the matter to the Agency to more clearly frame the definition. This issue arose because multiple §505(b)(2) new drug applications (NDAs) were filed for variations of buprenorphine delivery, and some applications were blocked by market exclusivity granted by FDA to previously-approved competing products.
In late November 2019, FDA quietly responded to the plaintiff, Braeburn, Inc., in a decision that was not highly publicized but that nonetheless has significant ramifications for exclusivity decisions not only for §505(b)(2) NDAs, but also for orphan drugs and other novel products such as combination products and gene therapies. In its response to Braeburn, FDA defined “exclusivity” in terms of clinical benefit to a patient population that is studied in a clinical trial. Based upon FDA’s response to Braeburn, the central question becomes: What unique clinical question about the safety and effectiveness of the active moiety is answered, for the first time, by the clinical trials that were conducted for—and are essential to—the application’s approval?
FDA’s conclusion is that exclusivity is available when there is no other data available to support the application; in other words, exclusivity does not apply to aspects of the drug product for which the clinical investigations that were conducted were not essential. According to FDA, as the number of applications for therapeutic improvements in the active moiety increases, the exclusivity that is available to sponsors of these incremental advances becomes more limited and usually narrower in scope.
In its decision, the Agency emphasized the fact-specific nature of exclusivity determinations. Clinical trials must address clinically meaningful differences that are unique (i.e., previously unanswered questions of clinical relevance). Thus, clinical safety benefits must be unique to the product that is the subject of the §505(b)(2) NDA. Accordingly, there is a relationship between the scope of exclusivity awarded and the changes to the product that required new clinical investigations which were essential for approval.
However, FDA also noted that the context-specific nature of exclusivity decisions may create divergent results across different therapeutic areas. A product change may be considered an innovation in one therapeutic area, but not in another therapeutic area if clinical trials would be unnecessary to approve the change. Moreover, sponsors must recognize that changes to warnings or other risk information on a drug label must be included in generic drug labeling as well; therefore, such changes do not qualify for exclusivity.
Because FDA’s exclusivity decisions are fact-specific, it is difficult to rely upon a previous FDA exclusivity decision in a new situation—particularly as the industry continues to develop new technologies, combination products, and digital products. FDA’s evaluation of what is known about a previously-approved drug product, combined with new clinical evidence generated by clinical investigations of another drug product containing the same active moiety, presents what we call “the clinical benefit dilemma”:
Because of the economic ramifications involved in many of these decisions, the courts often become entangled in these legal decisions. However, the courts do not realistically appreciate the scientific nuances or practical aspects involved in drug development. Courts look for FDA to make reasonable decisions, and they are becoming more cautious about providing FDA with unfettered discretion. To this end, at least two current U.S. Supreme Court Justices have discussed revisiting the Chevron standard of review, which for decades has given great deference to Agency decisions.
Where do these recent developments leave industry? While congressional groundwork has started on “21st Century Cures 2.0” and the 2022 user fee re-authorization bill, we are entering a new era of patient activism. In this new era, the concepts of clinical benefit and clinical relevance are quickly becoming the 21st century equivalent to the 20th century standard of adequate and well-controlled clinical investigations. Drug development no longer is only about showing efficacy and safety of a product. It now requires that sponsors demonstrate product value. Sponsors would be wise to take all of these facts into account when developing their drug products and when seeking exclusivity for their §505(b)(2) NDA.
Demystifying 505(b)(2) Development: Navigating the Scientific, Regulatory, Legal, and Business Complexities
By Ed Allera - Chairman of The 5059B)(2) Platform
The conference was thorough and sobering because it looked at the interaction of the science, law, regulatory issues, and financing. To rework Tolstoy’s adage about families: each §505(b)(2) can make its sponsor happy, but only in its own way. The pathway cannot be viewed as a cheap fast way to get a product to market that payers will obviously adopt and result in a financial bounty.
A vast number of excellent product ideas, concepts, technologies, and patient needs exist that can fit into the (b)(2) category. Almost all require financing, either from the developer, the parent company, a trade partner, or outside investors.
Financing is the foundation for the (b)(2)’s. Investors want solid returns on their investments. Some are looking for as much as 10X. How do they achieve this return? For a start, the product must have solid intellectual property. Robust patent protection of the technology, drug product, and use is the minimal starting position. Delivery systems and combination product patents are important.
For some 3 years of market exclusivity alone is not enough. Orphan exclusivity is a huge plus. Mere bioequivalence studies or emphasis on bioequivalence are a negative. Alone they are not a value driver. The possibility of generic substitution by payers becomes an obstacle that must be overcome to attract investors. Investors are seeking sustainable value addition.
Nothing directly comparable exists abroad. A coalition has been formed in Europe to begin the process of creating something akin to the (b)(2)’s in order to obtain favorable reimbursement.
FDA is not a monolith. Each FDA reviewing division is unique. But in most cases, the reviewers does not view (b)(2)’s as deviations from the norm of product. They view them as novel or unique products for which they expect a comprehensive development plan and approach. Many (b)(2) sponsors fail recognize the importance of the first meeting and to prepare comprehensively for their initial FDA meeting. They operate on the faulty assumption that they are developing glorified generics and that the Office of New Drug Evaluation will cut them breaks to get a cheaper product on the market. Nothing can be further from the truth. A mistake by a reviewing division can have adverse consequences to the Agency. The biggest mistakes companies make involve the failure to understand the potential for safety issues to arise from the new product’s uniqueness- the safety paradox. ONDE is a high stakes poker game, and you are expected to be ready to play in that league when you make your initial approach. Thus extensive preparation is necessary, often in conjunction with a consultant who understands FDA’s language.
Payers are becoming more demanding of data proving that your product adds value and actually saves money. Theories are interesting, but “show me the money” is the mantra. Developing a reimbursement strategy as soon as possible in the product development plan is advisable to attract investors.
The distribution system has a significant number of players. Multiple options exist but properly pricing the product is vital.
There is a significant market for these products. But you must plan ahead. You must have a comprehensive story that sets out the development plan for the drug product, its path through FDA, and the value that it adds to the healthcare system. What clinical benefit is the product providing. The use of data gathered from all reliable sources, including artificial intelligence, can facilitate creative clinical trial designs that can make development and approval more efficient are on the horizon.
Navigating the Meaning of Conditions of Use, Innovation, and Clinical Benefit under Braeburn
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