Magazine Article | September 1, 2009

Help For Small Biotech/Pharma

Source: Life Science Leader

By Dan Schell, Editorial Director, Life Science Leader

We’ve all heard the disheartening stories about the throngs of small biotech/pharma firms that have folded due to the economy and how the outlook isn’t much better for the near future. However, last month the FDA released a new rule that could be the ray of hope some of these financially struggling companies have been looking for.

Actually, there were two related rules announced. The first makes investigational (i.e. unapproved) drugs more accessible to seriously ill patients who are not candidates for clinical trials (“Expanded Access to Investigational Drugs for Treatment Use”). The second rule explains how the sponsor companies can charge for those drugs (“Charging for Investigational Drugs Under an Investigational New Drug Application”), which is obviously where the “hope” comes in. Considering it often takes from 10-15 years to bring a drug to market, any financial return during those early years would be a welcome addition.

According to the FDA, to charge for these types of drugs, here’s what you need to do:

  • Comply with the applicable requirements for the type of use for which charging is requested (either in a clinical trial or for expanded access).
  • Provide justification that the amount to be charged reflects only those costs that are permitted to be recovered.
  • Obtain prior written authorization from the FDA.

The only costs recoverable when charging for these types of drugs are those deemed by the FDA as “direct costs.” For instance, direct costs include “costs per unit to manufacture the drug (e.g. raw materials, labor, and nonreusable supplies and equipment used to manufacture the quantity of drug needed for the use for which charging is authorized) or costs to acquire the drug from another manufacturing source, and direct costs to ship and handle (e.g. store) the drug.” Costs not covered include (but are not limited to) “expenditures for physical plant and equipment that are incurred primarily for the purpose of producing large quantities of the drug for commercial sale after approval, or for making the drug available for a variety of investigational uses.”

Obviously, I’m simplifying these rules; there are a lot of qualifiers and required documentation that could easily overwhelm small biotech/pharma companies. My suggestions — read the FDA rules document at www.fda.gov, and determine now if you need some help adhering to the guidelines.