Magazine Article | September 1, 2016

Rx Industry Vulnerable On Generic Delay In Fall

Source: Life Science Leader

By John McManus, president and founder, The McManus Group

After taking nearly two months off this summer, Congress reconvenes in September with a relatively short list of health priorities to complete this fall:

  • Funding to combat the spread of the Zika virus and treatment of opioid addiction
  • Completion of a CURES package of modest FDA reforms and increased funding for NIH
  • Possible “grandfathering in” of hospitals that were in the process of acquiring physician practices when Congress enacted the Bipartisan Budget Act last November, which capped Medicare reimbursement for services provided by those acquisitions

None of these issues materially impact the pharmaceutical industry. But there is growing chatter among congressional aides that the industry should ante up some resources to help address these yet-unresolved issues. Arrangements that delay market entry of generics appear to be the focus at this juncture.

Nearly 2,000 people in the U.S. and another 6,600 in its territories, including 300 pregnant women, have tested positive for the Zika virus. Most of the cases are in Puerto Rico; in the continental U.S., they are almost all travel-associated infections. But now some mosquito-borne cases are showing up in Florida.

The Zika virus is primarily spread through mosquito transmission. It can cause microcephaly in newborns or abnormally small heads and other severe brain defects.

The Obama administration requested $1.9 billion for mosquito abatement, vaccine development acceleration, and education. The House passed a bill providing about one-third of that amount by redirecting spending from other programs. Democrats objected to the amount and argued that it should be funded through “emergency appropriations,” thereby avoiding cutting other programs. The Senate bill provided substantially more funding — about $1.1 billion in all — but failed to garner enough Democrat support, in part, because they demanded money for Planned Parenthood, which was not even requested by the White House.

In August, the HHS secretary bowed to growing pressure by redirecting $81 million to Zika containment and vaccine research. Republicans argue that HHS can deploy hundreds of millions more in unobligated funds. But even this funding is seen as a stopgap measure. Let’s not forget that the private sector has already committed huge resources to develop a vaccine; there are dozens of early-stage clinical programs under way.

Despite the general gridlock in Washington, Congress achieved an important breakthrough when it enacted The Comprehensive Addiction and Recovery Act, which addresses the opioid epidemic and establishes a comprehensive approach to expand prevention, education, treatment, and recovery. The law also strengthens prescription-drug monitoring programs to help states monitor and track drug diversion and help at-risk individuals access services.

Every Democrat on the bicameral conference committee refused to sign the conference report, arguing that while it authorized funding, it failed to actually appropriate those funds. Nonetheless, in an unprecedented move, they all voted for the bill, along with most of Congress, and it was signed by the president on July 22.

The legislation authorizes $181 million a year largely for grants addressing the opioid-abuse crisis, but Republicans insist it must be funded through the appropriations process. Democrats would like a dedicated funding source. This disagreement should be worked out this fall.

Last year, the House passed the 21st Century Cures bill, a package of modest FDA reforms, a key priority for Energy & Commerce Committee Chairman Fred Upton (R-MI), and a whopping $8.75 billion of new funding for NIH, a key priority for Democrats. The Senate HELP (Health, Education, Labor and Pensions) Committee has moved components of its version of this legislation, but the Senate has not voted on the package yet, largely due to a reluctance to add funds to NIH at a similar level.

The House bill would promote personalized medicine in clinical trials as well as improve research collaboration through information sharing and use of statistical and data tools. However, key provisions of priority to the pharmaceutical industry, such as enhanced intellectual property protection, were dropped on Democratic objections. No substantial item was allowed.

Moreover, the offsets in the House-passed bill (e.g., selling oil from the Strategic Petroleum Reserve and other small items that did not hit the pharmaceutical industry) were vacuumed up for other legislation that has become law, leaving a nearly $9 billion funding hole for the minority-party-demanded increase of resources to the NIH. (By the way, there is no specific plan for these funds; it’s just “more.”)

Assuming a package is pulled together, the need for funds to offset the costs for an NIH windfall makes the pharma industry vulnerable in an end-of-year package, which while benign, does not fundamentally advance any major objectives. Over the August recess, the industry has heard that Congress is mulling inclusion of two provisions impacting the pharmaceutical industry to help fund these objectives:

  1. Prohibiting patent settlements, which delay generic entry
  2. Reducing the use of risk evaluation mitigation strategies (REMS), also which can delay generic entry for certain products

The Preserve Access to Affordable Generics Act (S. 2019) would effectively prohibit settlements between brand-name and generic companies that delay generic market entry when a brand-name product goes off patent. The FTC noted 145 such agreements in 2013 and many more since then, though they have dropped off recently. The legislation sponsored by Sens. Amy Klobuchar (D-MN) and Charles Grassley (R-IA) would empower the FTC to deem such agreements as presumptively anticompetitive and unlawful and enable it to levy civil penalties up to three times the gross revenue of the NDA holder during the period of violation and forfeit the ANDA (abbreviated new drug application) applicant’s 180-day exclusivity eligibility. The Congressional Budget Office scored this as saving $2.6 billion over 10 years, and because of the recent higher scrutiny by FTC on these arrangements, this seems like rather free money.

In June, Judiciary Chairman Grassley and ranking member Patrick Leahey (D-VT) introduced legislation, which is intended to prohibit the use of REMS in order to inappropriately delay generic entry. The bill addresses both the availability of a reference product sample when a product is either subject to a REMS with elements to assure safe use or is under a self-imposed restricted distribution system and shared REMS negotiations. The availability of product sample for reference products have been the subject of increasing litigation and also garnered the attention of the FTC.

Attorneys at Hyman Phelps explain, “The bill addresses both ends of the generic drug [and biological product] spectrum: the availability of reference product sample needed to conduct bioequivalence studies (or other testing) in order for a company to submit an ANDA and the negotiations that surround finalization of a REMS program needed to approve a generic drug application.”

Many in the pharmaceutical industry are poised to reject these two provisions, particularly since there is little to gain from enhanced funding to the NIH or public health objectives of addressing Zika proliferation and opioid abuse. But even the industry’s champions are growing weary of the pharmaceutical industry’s refusal to help finance congressional health priorities since enactment of the Affordable Care Act.

A clear solution would be to utilize the dedicated appropriations process to fund these initiatives. Of course, that will force Congress to make trade-offs with other pressing priorities and determine which items can be funded under current resources and which may need “emergency supplemental funding,” which is not subject to budget caps. Finally, Congress should assess whether pumping another $9 billion into a federal agency is the best use of taxpayer dollars, or if the same goals can be achieved through private sector research and development.