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. 
                 I. 
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.   
 
                 II. 
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. 

                 III.  
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.

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.

​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”:

• What data and outcome is considered clinically relevant?
• What new question is being answered for the first time, particularly when competition already exists?
• Who determines what qualifies as clinical benefit?  This is a particularly hot topic in the oncology and orphan drug areas, as evidenced by ongoing public dialogue about the scope of clinical benefit and expanded access, as well as Oncologic Drugs Advisory Committee (ODAC) discussions.
• As technology advancements are made and we gain more knowledge about cellular mechanisms of action, will clinical benefit look different in the future—and who will decide?

It is important to recognize that FDA is neither a hydra nor a monolith.  The Center for Drug Evaluation and Research (CDER) is composed of many divisions and offices, including the Oncology Center of Excellence; the Office of Combination Products; the Office of Orphan Products Development; the Office of Pediatric Therapeutics; and the Office of Women’s Health.  Each one of these divisions and offices takes a different approach in determining what constitutes clinical benefit.  Opinions vary, and some reviewing divisions are more open-minded than others.  It is important to recognize these differences, along with the fact that every division and office believes that it is the ultimate decision maker.  Although often true, sponsors must be aware that FDA may consult the CDER Exclusivity Board, while the Office of Chief Counsel will have the final say in the most competitive, contentious, and economically-significant situations.
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.

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.

​For decades, several basic concepts have driven drug development.  New drug sponsors first developed and received FDA approval for new chemical entities as immediate release tablets dosed two to three times per day.  These first-in-class drugs were seldom the best, and competitors continued to improve the molecules through basic concepts of organic medicinal chemistry, including beta-blockers, H2 receptor blockers, ACE inhibitors, calcium channel blockers, and statins.  Other companies added clinical benefits to improve patient compliance by extending release times to decrease the number of doses required per day, or by developing new topical patch technologies for easy administration of extended release products having lower toxicity.  Congress recognized the value of these improved clinical benefits when, in 1984, it enacted the Hatch-Waxman Amendments which provided sponsors with three-year exclusivity for such changes made to a new chemical entity that had been approved in a § 505(b)(1) NDA.  This three-year exclusivity applied whether the changes were approved in the form of a § 505(b)(2) NDA or a supplement to the original § 505(b)(1) NDA.
 
Although FDA has never specifically defined “conditions of use,” technologies providing improved clinical benefit have served as the foundation for the conditions of use that have been granted market exclusivity.  Learning about disease mechanisms of action has been the focus of research for decades and, more recently, genetic profiling has become increasingly vital for treating certain patients, such as oncology patients.  This information has, in turn, led to new approaches to treat chronic, severe, and life-threatening diseases.  Patient-specific therapies and dosing has led to improved clinical benefit by improving the technologies, tests, and delivery systems associated with patient care.  The competition among drug sponsors and drug developers has become increasingly fierce.
 
In July 2019, the U.S. District Court for the District of Columbia remanded a case to FDA for clarity on the definition of “conditions of use” with respect to the grant of three-year exclusivity.  The issues in this case (Braeburn Inc. v. FDA) go to the heart of § 505(b)(2) NDA development.  Both FDA and the court struggled to develop a standard for “conditions of use” that was not arbitrary and capricious.  The Center for Drug Evaluation and Research’s Exclusivity Committee argued that it has used an “innovation” standard for determining exclusivity eligibility, after struggling with a number of approaches that focused on product labeling.
 
As part of a continuing trend of skepticism over FDA’s scientific and legal decisions, the court was unwilling to grant extensive deference to the Agency’s decision.  Instead, the court has demanded that FDA establish boundaries for what constitutes a drug product’s “innovation.”  Significantly, FDA has concluded now that, at least in this case, the patient population has no bearing on “innovation.”
 
FDA’s decisions in light of this case are going to be critical to § 505(b)(2) NDAs and their sponsors.  These issues merit further industry discussion, and continued engagement with FDA.  What are your thoughts on the scope of exclusivity for § 505(b)(2) NDAs?  Please send us your comments to meetings@505b2.org or to our Linked In page.
The 505(b)(2) Platform™ is the only non-profit industry organization championing the cause of § 505(b)(2) products and their sponsors.  We are leading the way, actively working with the FDA to develop more appropriate guidelines and other issues.  Become a member of The 505(b)(2) Platform and help ensure the continued value of your development program and currently marketed products.

By: Edward Allera
Chairman of The 505(b)(2) Platform 
The New Drug Landscape
FDA approves approximately 120 new drug applications (“NDAs”) annually.  Of these, applications submitted under § 505(b)(2) of the Federal Food, Drug, and Cosmetic Act (“FFDCA”) constitute the majority of NDAs filed (70%) and approved (60%) each year.  Although the sample size is not extensive, these data are important to both FDA and the individual companies that file or contemplate filing a § 505(b)(2) NDA.  These figures illustrate the fact that sponsors are increasingly developing drug products that are not new chemical entities (“NCEs”) but, rather, rely upon certain data and information that is already known about drugs that FDA previously approved.  These data also highlight the fact that FDA is increasingly  asking for “new” data that will be required to approve a § 505(b)(2) NDA.
In the case of § 505(b)(1) NDAs, the primary reason that these applications fail—both today and historically—is due to the sponsor’s failure to establish the correct dosage.  This is a well-known phenomenon that can cut an otherwise promising § 505(b)(1) development program short as the sponsor works to restart and recruit more patients to its clinical trial program.  The associated costs concurrently increase as does the lost opportunity cost.  Likewise, our research suggests that § 505(b)(2) NDAs face an analogous problem that accounts for many of the failures of these particular applications that arise even before an NDA is filed—namely, the Safety Paradox.
The Safety Paradox
In the case of § 505(b)(1) NDAs, FDA approves a particular drug containing a particular active moiety for a particular indication.  The NDA safety package for an NCE is centered on these and other characteristics.  All too often, however, a § 505(b)(2) sponsor concludes that FDA’s historical safety assessment of the NCE (i.e., the reference drug) will satisfy the safety requirements for the § 505(b)(2) NDA.
Sponsors are often enamored with the potential new use of the drug, often after studying the drug for a number of years.  The entity becomes like their child; they see only the positive side.
What § 505(b)(2) sponsors frequently fail to realize is that drug safety is not static.  The reference drug’s post-approval adverse event profile and pharmacovigilance data may reveal safety signals that require addressing in the § 505(b)(2) NDA.  Furthermore, the product or indication changes that a § 505(b)(2) sponsor introduces in its own drug development package means that the § 505(b)(2) NDA will need to include new safety data reflective of these changes despite the fact that the drug has already been shown to be safe by adequate tests by all methods reasonably applicable to show if the drug is safe.- hence the Safety Paradox.  
The Safety Paradox slows the road to § 505(b)(2) NDA approval, leading to unexpected delays.  Often these delays can be anticipated, and therefore minimized or eliminated, with careful planning during the § 505(b)(2) NDA drug development process.
Why the Safety Paradox?
The approval of a § 505(b)(1) NDA for an NCE does not provide a § 505(b)(2) sponsor with carte blanche to rely upon the reference drug’s safety package without it developing new safety data that reflects the change(s) introduced into the product or its use.  For example, a change in patient population, dosage form, dosage strength, route of administration, length of use, or indication which is the essence of a § 505(b)(2), creates different questions and may require §505(b)(2) sponsors to develop new safety data related to the change.
Moreover, § 505(b)(2) sponsors must be cognizant of what safety events may have arisen since FDA approved the reference drug:  Has the drug become a huge commercial success leading to vastly greater patient exposure than anticipated leading for greater patient exposure? Have new safety signals emerged in a given patient user subpopulation?  Has the concomitant use of certain medications led to a spike in adverse event reporting?  What labeling changes has the § 505(b)(1) sponsor introduced since approval that may offer insight into post-approval safety challenges?  As more data on drug usage becomes available after controlled clinical trials are completed and the product is marketed to a broader patient population, the safety profile of any drug will more than likely change.  Further, issues may arise with other drugs in the same therapeutic class.  FDA expects that a § 505(b)(2) sponsor will consider these changes during its own drug development program.
These considerations are particularly relevant if a sponsor anticipates filing a §505(b)(2) NDA for an active moiety that has been approved abroad but not in the U.S.  In this case, the sponsor may rely on studies conducted by others as well as published literature.  However, FDA is often reluctant to accept this type of real world data for drugs marketed outside of the U.S., even when there is a long history of use.  This also creates a potential hurdle to approval that may well result in the need to conduct additional safety studies.  Often applications for U.S. were filed, and a safety issue arose that precluded or discouraged additional clinical work for U.S approval.  Thus is one facing a biased FDA reviewing division? Knowing whether and how much additional safety data will be required can only be addressed by engaging with FDA during the drug development process.
A § 505(b)(1) sponsor faces an approval path that is relatively straightforward, albeit lengthy and expensive.  The amount of preclinical data and the timing of such studies as they relate to the start of clinical trials can vary, but the basic required elements of the safety package and the questions to ask FDA are well-understood.  FDA has issued numerous safety guidance documents for potential sponsors that take into account safety studies for the method of administration, drug-drug interactions, drug-food interactions, fetal exposure, or potential carcinogenicity.
In the case of § 505(b)(2) NDAs, the drug approval path is shorter when the sponsor critically evaluates the type of safety data that is needed well in advance of NDA submission.  Advance preparation, including a thorough safety analysis of the reference drug, is as critical to §505(b)(2) NDA success as is a freedom to operate opinion relative to an active moiety’s patent protection.
           
Conclusions
Filing a § 505(b)(2) NDA is becoming an increasingly attractive option for introducing a drug to the market because of the ability to obtain regulatory exclusivity and to list patents in FDA’s Orange Book.  The Safety Paradox, however, remains an important issue for many § 505(b)(2) sponsors to consider.  To tackle the Safety Paradox, a sponsor must be willing to ask both itself and FDA difficult questions early in development.  Doing so will eliminate or reduce unexpected questions about the drug’s safety profile late in development, and will allow sponsors to proceed in the most timely and cost-efficient manner possible.
As a member of The 505(b)(2) Platform™ we can help you identify the need for a Safety Review and who can help you develop a multi-part analysis for your § 505(b)(2) NDA asset. A proper Safety Review helps minimize the risk of missing existing critical safety information about the reference drug, and develops the necessary additional safety data to support the proposed change to the reference drug. To become a member by registering at www.505b2.org/membership.  

By: Edward Allera
Chairman of The 505(b)(2) Platform
The other week a I had the opportunity to attend the Reagan-Udall-FDA Foundation (“RUF”) Annual Meeting in Washington.  It was a unique experience for me in my over 40+ years of working the Food and Drug Administration. Perhaps RUF’s Congressionally established relationship provided that special atmosphere. New Principal Deputy Commissioner, Dr. Amy Abernathy, led off with an impassioned introduction about the Agency and its desire to implement new technology to achieve its public health mission. As a physician with academic, medical and high-tech expertise, Dr. Abernathy set the stage for a candid and impassioned discussion by the Center Directors for the audience of patient advocates and regulated industry representatives.
A round-table informal conversation atmosphere existed among the Directors.  It was like a heart-to-heart discussion about therapeutic options you would have with your own physician.  Each Director spoke thoughtfully about the issues they face with providing better health care to the public.  They discussed how they consider issues and try to balance the needs of the patients with their concerns as healthcare practitioners.  It was a physician-patient dialogue about improving the public health where the leaders displayed their love for their jobs which is wrapped into the desire to listen to patients and to learn from their needs.
Because FDA has seen so many things go badly over its long history, it has often been seen as paternalistic and arrogant, but this forum revealed a different perspective. We are in a new regulatory era driven by new technologies, social media, and decades of investment that have produced enlightenment from the top down.  Bipartisan Congressional support for RUF has been invaluable in creating this environment.  Regardless of the genesis, the concluding dialogue between RUF Chairwoman Ellen Sigal and Acting Commissioner Ned Sharpless confirmed that the nurturing regulatory environment for patients will continue. The concerns for patients and the need to provide them with the best treatments as soon as safely possible was clearly communicated and profound.
This meeting showed me the singular relationship that Congress created between RUF and FDA has provided a unique forum for the Agency to articulate its procedures, passion for its mission and the public as well as its desire to improve its ability to help all. 
​As we move The 505(b)(2) Platform forward we will strive to assist the FDA in their understanding of the challenges for 505(b)(2) sponsors.  That is why our first initiative is to assist the FDA by helping to improve current guidance and identify the needs for new guidance.  You can help us by letting us know any guidance that you have difficulty with or areas where you think there could be more guidance. Send your comments and thoughts to us at meetings@505b2.org

Originally published in IAM Market 
By Matthew L Fedowitz
Buchanan Ingersoll & Rooney
​​The pharmaceutical industry in the United States is in a constant state of evolution, not only with regard to technological innovation, but also in terms of patent and regulatory strategies covering those products in development and on the market. This is particularly true with respect to what has been occurring between branded and generic pharmaceutical manufacturers since the introduction of the Drug Price Competition and Patent Term Restoration Act 1984, also known as the ‘Hatch-Waxman Act’. The Hatch-Waxman Act created a structure by which branded pharmaceutical companies identify those patents covering their products and generic pharmaceutical companies can address those patents while seeking approval for their products.
The basis for this evolution is grounded in the US Food and Drug Administration’s (FDA) drug approval process. This process is guided by the Federal Food, Drug and Cosmetic Act, as amended by the Hatch-Waxman Act, that sets forth the rules that the FDA follows when considering whether to approve both brand-name and generic drugs. Under the act, an applicant seeking to market a new brand-name drug must prepare a new drug application (NDA) for review and approval by the FDA. With respect to intellectual property, an NDA must include, among other things, the number of any patent that allegedly claims the drug or a method of using the drug for which the NDA was submitted and for which a claim of patent infringement could reasonably be asserted against a party. On approval of the NDA, the FDA publishes patent information for the approved drug in its list, Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book.
Under the Hatch-Waxman Act, a generic manufacturer submits to the FDA an abbreviated new drug application (ANDA). Among other things, an ANDA must also contain a certification for each patent that the NDA holder has submitted to the FDA for listing in the Orange Book in connection with the reference listed drug. There are four possible certifications:

• Paragraph I – no patents cover the listed drug;
• Paragraph II – patents covering the listed drug have expired;
• Paragraph III – the ANDA applicant will delay seeking approval until after the listed patents have expired; and
• Paragraph IV – the listed patent is invalid, unenforceable and/or will not be infringed and, on that basis, the applicant seeks FDA approval of the generic product prior to patent expiration.

There are significant incentives available for one or more ANDA applicants to challenge patents listed in the Orange Book because the first applicants to do so and who are also successful in patent litigation will be entitled to 180 days of market exclusivity for their generic product.
Given the incentives for market exclusivity against potential competitors, the straightforward legal nature of this process and available FDA guidance for performing bio-equivalence studies, many generic companies flocked to this business model. At the same time, branded pharmaceutical manufacturers began to experience the effects of the patent expiration cliff for those products that enjoyed blockbuster status (ie, no generic competition) for many years due to their patent protection. Because of these changes and the ever-increasing number of generic competitors in this space, there is a need for new business and IP strategies to be considered by both branded and generic pharmaceutical manufacturers.
What has emerged as the common point of interest for both branded and generic pharmaceutical manufacturers are those drugs that can be approved in a Section 505(b)(2) NDA. 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. As a result, these products require unique IP strategies. For example, generic manufacturers must develop patent portfolios similar to branded pharmaceutical companies, and branded pharmaceutical companies must consider issues unique to generic manufacturers. In either case, the companies will target potential opportunities that may require a specific patent certification in their Section 505(b)(2) NDA.
Pharmaceutical landscape
In the pharmaceutical industry, there are two distinct ends of the product spectrum. At one end, branded and innovator pharmaceutical manufacturers seek approval for NDAs under Section 505(b)(1) of the Federal Food, Drug and Cosmetic Act, while at the other end, generic manufacturers seek approval for ANDAs under Section 505(j). However, the business opportunities that are emerging for both branded and generic manufacturers lie in the middle of this spectrum with those products that require approval under Section 505(b)(2) of the act and necessitate unique IP strategies.
In order to grasp how these strategies come into play for Section 505(b)(2) products, it is important to contrast the FDA’s approval standards, timelines and potential market exclusivities for each of these types of application.
Among other requirements, traditional brand pharmaceutical manufacturers must demonstrate that their products are safe and effective through pre-clinical and clinical studies to obtain approval. In most cases, approval will require at least two adequate and well-controlled clinical trials that can exceed $100 million. The magnitude of financial resources necessary to enter such an industry prevents many companies from getting off the ground.
At the opposite end of the spectrum, generic manufacturers rely on a reference listed drug that has already been approved as a Section 505(b)(1) or 505(b)(2) NDA to demonstrate safety and efficacy for their proposed Section 505(j) product. While generic manufacturers can rely on these previous studies, they are, however, required to run clinical studies to demonstrate bio-availability and bio-equivalence to the reference listed drug. The cost for these studies is typically less than $5 million. The proposed generic product must have the same APIs, conditions of use, route of administration, dosage form, strength and labelling, although some labelling differences are permitted (eg, to name a different manufacturer).
On the other hand, Section 505(b)(2) products rely on both existing and new data. The extent of the new data required depends on which product (known as the ‘listed drug’) is selected, as well as the particular changes that the company proposes to make to the listed drug. The data required will include bridging studies between the proposed new product and the listed drug to support the changes being made.
Patents and intellectual property
With regard to intellectual property, 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. Regardless of their patent strategy, generic drug manufacturers are not required to list any patent that they may obtain in the Orange Book. 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 reference listed drug.
Section 505(b)(2) manufacturers reside in a unique position based on the fact that the products they are pursuing use known APIs in products with new dosage formulations, strengths, API salts, dosing regimens, routes of administration, new indications and new combinations. Each of these changes presents an opportunity to obtain patentable subject matter. Thus, Section 505(b)(2) NDA applicants will be motivated to seek patent protection for their product in order to halt competitors from using their technologies and to maintain their market share. As a result, any patents that claim a Section 505(b)(2) product must be listed in the FDA’s Orange Book.
In addition, 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 in the US Federal District Court 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.
Market exclusivity
While patent-related strategies are significant to the success of Sections 505(b)(1), 505(b)(2) and 505(j) applicants, so too are the marketing exclusivity rights that they may be eligible to obtain. For example, Section 505(b)(1) NDAs may be entitled to five-year new chemical entity (NCE) exclusivity. If the application is for an orphan drug, then the Section 505(b)(1) application may be entitled to seven-year orphan drug exclusivity (ODE). Finally, if one or more indication is for pediatric patients (and other requirements are met), then either the five-year NCE or seven-year ODE may be extended by an additional six months of pediatric exclusivity.
Section 505(b)(2) products may also receive marketing exclusivity; however, because they do not represent the same scientific and medical innovation as a Section 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 bio-availability studies) conducted by the applicant and that were essential to approval of the application and that supported the particular changes from the listed drug. These applications may also be eligible for seven-year ODE and/or six months of pediatric exclusivity.
For ANDAs, market exclusivity is limited. These applications may be entitled to 180 days of exclusivity only if the applicant is deemed to be a first filer (ie, if the applicant filed a substantially complete application on the first day that such an application could be received by the FDA).
User fees 
Finally, all three of these types of application are associated with different FDA user fees. For Section 505(b)(1) and 505(b)(2) NDAs, fees are required under the Prescription Drug User Fee Act. For fiscal year 2019, the Prescription Drug User Fee Act application fees are approximately $2.6 million for NDAs containing clinical data, and approximately $1.3 million for NDAs with no clinical data. If either NDA is for an orphan drug, then the application fee is waived. For Section 505(j) applications, sponsors are required to pay fees under the Generic Drug User Fee Amendments. These fees are significantly less than for either type of NDA. In fiscal year 2019, the Generic Drug User Fee Amendments application fee is approximately $180,000. While sponsors of both types of NDA may be eligible for waivers of application fees under the Prescription Drug User Fee Act if they qualify as a small business, there are no small business waivers for ANDA sponsors under the Generic Drug User Fee Amendments.
Why consider a Section 505(b)(2) product and when are they feasible?
Considerations for entering the market with a Section 505(b)(2) product include business and development factors, among others.
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 due to profitable products going off patent and being faced with generic competition. This has led these manufacturers to consider developing Section 505(b)(2) products that represent innovation for an existing product (eg, offering a controlled-release formulation in addition to an immediate-release formulation). 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.
Section 505(b)(2) products may solve many of these dilemmas. For example, compared to traditional ANDA products, Section 505(b)(2) products can enjoy a longer exclusivity period than traditional first-to-file generic products. Further, Section 505(b)(2) sponsors – whether branded or generic – have the ability to differentiate their products from their 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 key opportunity. 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 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.
Comment
With these opportunities in mind, as well as an understanding that the costs for developing branded products is rising while generic competition is growing and profit margins are decreasing, the Section 505(b)(2) NDA presents a possible path forwards for all pharmaceutical manufacturers. The regulatory and IP nuances and strategies involved with these products require an understanding of both the branded and generic pharmaceutical industries from the very early stages of product identification, through development, approval and marketing. Sophisticated pharmaceutical manufacturers – whether branded or generic – can take advantage of these opportunities and use their market experience for this next generation of pharmaceutical products in the United States.