InsideHealthPolicy.com’s
FDA Week
an exclusive weekly report on Food and Drug Administration policy, regulation and enforcement
Vol. 20, No. 41 — October 10, 2014
Amid compounding coverage debate…
GAO To TRICARE: Align Regulations With Compounded Drug Pay Policy
The Government Accountability Office last week said the Department of Defense’s coverage of some compounded
drugs containing bulk ingredients under the Tricare program sways from DOD’s regulatory policy and called for the
department to better align its regulations with its payment practices — possibly by allowing payments for some bulk
drug ingredients. The recommendation comes as compounders are fending off coverage restrictions stemming from the
increasing cost of bulk ingredients, with some stakeholders viewing the report as favorable to the compounders’ effort
continued on page 4
Industry Lauds FDA, CMS Openness As Future Of Parallel Review Weighed
CHICAGO — Interaction between device makers and federal agencies is flourishing as FDA and CMS mark the
success of their first parallel review product approval, device company representatives said at the Advanced Medical
Technology Association’s medtech conference this week. But they expressed concern about the resources available to
keep an open dialogue with the agencies and Exact Sciences Corporation — the one company that saw success with the
program — is now trying to build support for parallel review on Capitol Hill.
The FDA-CMS parallel review pilot is slated to run until 2015. While several stakeholders lauded FDA during the
continued on page 5
FDA : Most Antibiotics Sold For Animals Are Medically Important To Humans
A detailed FDA report on antimicrobials sold or distributed for use in food-producing animals shows that 61
percent of antibiotics sold in 2012 were medically important for humans, most were administered through the animals’
feed and water, and most were sold over the counter, lending to a 16 percent increase in antibiotic use since 2009.
Antibiotic conservation stakeholders said FDA’s distinction between medically important antibiotics and other
antimicrobials is an improvement over the original format of the report, which they said was not nearly as detailed.
“This is a world of improvement over reports in the past,” said Laura Rogers, director of Pew Charitable Trusts’
continued on page 7
Generic Complex Drug Equivalence, Abuse Deterrence In FY 2015 Priorities
Postmarket evaluation of generic drugs, and the equivalence of complex and long-acting generics to innovator
drugs will be scientific priorities for FDA’s generic drug office in fiscal year 2015, the agency said Oct. 3. FDA also
indicated it will evaluate quality standards used to ensure equivalence across dosage forms and routes of delivery,
including for abuse-deterrent formulations — for which FDA’s generic drug office is still developing guidance.
Additionally, the agency plans to investigate computational and analytical tools to help modernize the generic drug
review process.
continued on page 8
FDA To Monitor Impact Of DEA Rule Rescheduling Hydrocodone Combinations
The potential for a recent rule rescheduling hydrocodone combination products that prohibits refills to negatively
impact patient access to the drugs will depend on how payers, prescribers and professional groups react to the change,
according to FDA, which plans to monitor the rule’s implementation in a bid to minimize unintended negative impacts.
FDA recommended the rescheduling change included in the August DEA rule that went into effect Monday (Oct. 6).
But pharmacy and drug industry stakeholders, as well as patient advocacy groups, allege that the DEA rule could
block access for “legitimate” pain patients, particularly those with cancer, living in rural areas and in long-term care
continued on next page
facilities. Both House and Senate lawmakers also have raised concerns about the potential negative impact of rescheduling. FDA, in a Sept. 9 response to questions posed by the House Energy and Commerce health panel, said the full impact
of the rule likely will be driven by “reimbursements by payers, guidelines promulgated by societies, patterns of prescription, and laws enacted at various government levels.”
The National Association of Chain Drug Stores also recently told Inside Health Policy that state laws and insurance
prescription claims policies prohibiting refills for Schedule II drugs could become an issue even for patients who received
prescriptions prior to the implementation date. But Doug Throckmorton, deputy director of regulatory programs at FDA’s
drug center, said the agency is planning several actions to maximize the public health benefits of rescheduling
hydrocodone combination products.
HHS has identified the need to work with prescribers and patients to ensure patients are prescribed the right
number of doses and do not have unused hydrocodone available for abuse, he said. Secondly, FDA is calling for continuous monitoring to assess the impact of rescheduling.
“Based on the results of this monitoring, we may need to take additional actions to support the appropriate use of
hydrocodone combination products while reducing their tragic abuse,” Throckmorton wrote in an FDA blog post Monday
(Oct. 6).
The American Cancer Society Cancer Action Network also has urged Congress to mandate another agency
like HHS or the Government Accountability Office to conduct a follow-up investigation, noting that DEA, as an
enforcement agency, will not monitor the impact of the rule.
Under the final rescheduling rule, pharmacists will no longer be allowed to accept HCP prescriptions via telephone,
fax or electronic orders except in emergency cases. And during emergencies only small supplies will allowed to be
authorized until a written or printed prescription is provided to the patient. Phone-in refills are banned.
Schedule II drugs are limited to a 90-day supply. Patients will generally be provided a 30-day supply of HCPs per
prescription, although DEA said prescribers can also write triplicate prescriptions allowing patients to bypass monthly
physician visits. — Stephanie Beasley
Group Urges FDA To Treat Other Experimental Drugs Like Ebola Drugs
The Goldwater Institute, the group driving “Right to Try” state laws, said if FDA is willing to forgo its own process
when authorizing use for experimental Ebola drugs then it should do so for everyone.
The institute is behind “Right to Try” state laws, which have passed in Colorado, Louisiana and Missouri, that would
provide patients with experimental drugs earlier than is the case under FDA’s expanded access program. The group in the
past has described FDA’s expanded access program as “time-consuming and extremely difficult to navigate,” according to
a February 2014 report on its website.
“If these doctors were allowed access to experimental medication without following the FDA’s normal process, we
want to know why and how other sick or dying Americans can also get an exception,” said Jon Riches, an attorney at the
Goldwater Institute, in a press release.
The group requested information on the process used by FDA to authorize use of the experimental Ebola drug, but
FDA said it could not release that information because doing so would violate the drug maker’s trade secrets. — Erin
Durkin
FDA Authorizes Experimental Ebola Drug For Use In Patients
FDA has authorized the use of an investigational new drug to treat patients with the Ebola virus, coming soon after
the agency said it was working with developers to review data for treatments in “real time.” The agency approved an
emergency IND application for Chimerix’s brincidofovir, an oral nucleotide analog, for patients who are confirmed to
have Ebola, the company announced Monday (Oct. 6).
The drug was given to an Ebola patient on Saturday (Oct. 4) at Texas Health Presbyterian Hospital, but the patient
died four days later.
Tests conducted by the Centers for Disease Control and Prevention and the National Institutes of Health revealed in
vitro activity of the drug against the Ebola virus that was similar to that seen in assessments of brincidofovir against other
diseases such as the adenovirus and smallpox, the company says. Other tests in animal models are currently underway,
according to a company press release.
“Data collected over years of clinical development of brincidofovir have allowed us to progress this compound into
Phase 3 programs for cytomegalovirus and adenovirus infections, and provided information on the safety and dosing of
brincidofovir to allow it to be explored as a potential therapy for Ebola Virus Disease,” said Chimerix President and CEO
M. Michelle Berrey. — Erin Durkin
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FDA Week - www.InsideHealthPolicy.com - October 10, 2014
FDA: Contaminant Risk Analysis Will Come After Food Safety Rules Out
FDA last week outlined it’s plan to determine the foodborne contaminants that have the most significant public health
impacts as required under the Food Safety Modernization Act (FSMA). These determinations could have an effect on
how inspectors approach certain facilities under the preventive controls rules, depending on the food and contaminant, the
agency said, but this won’t be apparent until after the seven proposed rules are finalized.
Under the food safety law, FDA is required every two years to evaluate relevant health data and information, including toxicological and epidemiological studies, to determine the most significant foodborne contaminants. The agency will
issue contaminant-specific guidance documents based on these evaluations when appropriate to reduce the risk of serious
illness or death to humans.
“Guiding principals that we’ve used in this activity is to utilize objective public health data when available to
make sure this is a science -based activity, to seek public input and to ensure that it’s a transparent process,” said
Mickey Parish, senior advisor for microbiology in the Center for Food Safety and Applied Nutrition’s Office of
Food Safety.
Parish said that these determinations could affect how an inspector of a food facility under the preventive controls
rule might approach a certain pathogen and food. In these cases the determination would be food-based, he said. Even if a
pathogen is highly ranked as a significant contaminate, it might not be a concern in a particular food type, he added.
The agency decided, in its approach to determine the most significant foodborne contaminants, to divide it’s evaluation between microbiological contaminants and chemicals, he said. FDA can utilize a database provided by the Centers
for Disease Control and Prevention, which “has a huge amount of objective numbers relating to illnesses from pathogens,” said Parish. He noted that a similar database does not exist for chemical contaminants.
Starting with the CDC database, Parish said, the goal of the analysis was to rank each pathogen in each food category
tracked by the CDC and regulated by FDA based on the economic costs of a pathogen-related illness.
There were 22 pathogens in the CDC database, including Salmonella, E.Coli, Norovirus, C. botulinum, and other
viruses. From the analysis the agency determined 107 pathogen-food pairs, Parish said.
“We believe the results show the financial impact due to each pathogen-food pair,” he said.
For animal food and feed, the agency’s approach includes determining whether a pathogen has the ability to cause
illness in animals consuming the contaminated commercial feed or in humans exposed either to the feed or to the animals,
the severity of the illness, the likelihood of exposure of the animal or human population to the contaminant through the
food supply, and the ability to mitigate contamination across the farm-to-fork continuum, he said.
However, Parish said not as much information is available on chemical contaminants in foods, and the agency has
had to take a different approach from the microbiological contaminants.
Chemical contaminants were divided into five categories to analyze: food allergins, toxic elements, mycotoxins,
pesticide residues and other chemicals. The contaminants were evaluated based on the likelihood or level of human or
animal exposure to the chemical contaminant via food, severity of illness or toxicity of the chemical contaminant, and
characteristics that can or cannot be controlled in the manufacturing or processing environment, said Parish.
The next step for the agency is to conduct a peer review of the contaminant analysis, hold public meeting and
workshops on the model, publish drafts for public comment and then finalize the model.
After the proposed food safety rules are finalized, the agency will be able to focus on this part of FSMA, said
Parish. — Erin Durkin
Study: Specialty Drugs Drive ACA Rx Costs, Clinical Management Needed
A new Express Scripts analysis of prescription drug costs in the ACA’s exchanges shows that specialty drug costs
represent 38 percent of total spending on prescriptions even though those drugs account for just 1.3 percent of pharmacy
claims volume, reflecting the high cost of treating the serious illnesses of many new enrollees. Express Scripts says the
findings back a need for exchanges to cover clinical drug management.
The study concludes that it’s “vitally important” given the increased prevalence of specialty conditions for the plans
to provide patients with clinical programs that ensure “appropriate management of complex, high-cost medications,”
leading to better outcomes and reduced costs.
By contrast just 28 percent of total pharmacy spending in traditional health plans can be attributed to specialty drugs,
according to the new report from Express Scripts.
Also Express Scripts found that exchange enrollees use more generics, and that silver plans — those with lower
premiums but higher out-of-pockets costs for brand-name drugs — have been the most popular among exchange consumers, particularly among those eligible for subsidies. “By preferring generic medications over more expensive brand-name
alternatives, these members are using their plans in the way they were designed.”
Another finding is that enrollees who signed up on or after March 1 are younger by an average of four years, use
fewer medications and have lower incomes than the earlier enrollees. — Christopher Cole
FDA Week - www.InsideHealthPolicy.com - October 10, 2014
3
GAO Floats Payments For Bulk Ingredients . . . begins on page one
and potentially giving DOD more leeway to pay for compounded drugs.
The report comes at a critical juncture, as the Defense Health Agency, with administers Tricare, is considering
changing its payment policy. DOD has already considered and delayed payment restrictions, and proposed legislative
language could shape the department’s approach to compounded drug coverage.
“DHA officials told us that they are considering denying payment for certain compounded drug prescriptions that
include bulk drug substances, and are waiting to review the lists of bulk drug substances that may be used to make
compounded drugs—and the lists of drugs that may not be compounded because they present demonstrable difficulties for
compounding—that FDA is required to develop under the (Drug Quality and Security Act),” according to the GAO report.
As FDA implements DQSA, the agency must develop lists of bulk ingredients that may or may not be used in
compounding. FDA officials told GAO that an ingredient’s inclusion on the list does not mean it is FDA-approved.
While current DOD regulations stipulate that Tricare only pay for FDA-approved drugs, the program pays
for compounded drugs containing bulk substances, according to the report. Although compounded drugs are a small
portion of the prescription drugs Tricare pays for — 0.3 percent or $259 million in fiscal 2013 — the cost of bulk
ingredients has increased and the payment practice is incurring additional cost on the program, GAO says. The average
cost of a compounded drug that contained at least one bulk ingredient was $557 per prescription versus $53 per prescription for compounded drugs containing only FDA-approved products, according to the report.
GAO recommends better alignment between policy and practice, according to the report. “This may include considering whether to amend TRICARE’s regulations to explicitly allow payment for some or all bulk drug substances in
compounded drugs,” GAO recommends.
GAO also notes that Tricare’s payment practices are more generous than Medicare and the Department of Veterans
Affairs (VA). Under Medicare Part D, payments are not available for non-FDA-approved products, including bulk
substances, according to the report. VA beneficiaries can receive a compounded drug if they have a specific medical
condition that cannot be met by available drugs and an alternative on the VA formulary has been considered.
Lawmakers mandated the study in the National Defense Authorization Act for fiscal 2014. In June 2013, DOD
told Tricare beneficiaries that it would no longer pay for drugs containing bulk ingredients, but delayed the change
because of complaints and the enactment of DQSA, which clarified FDA’s authority over drug compounding.
DOD, in its response to GAO, notes that the proposed National Defense Authorization Act for fiscal 2015 includes a
provision allowing coverage of health care products not demonstrated as safe and effective but that “‘have been demonstrated to the satisfaction of the Secretary to be likely safe and effective health care products or services,’” according to
the department response, citing the legislative language. “This new authority, if enacted, may also shape DOD’s approach
to compounded drugs. Accordingly, the Department will determine its policy as HHS and Congress shape the overarching
statutory and regulatory environment in the months ahead.”
Compounders have been working to fend off coverage limits. In July, Express Scripts, also the pharmacy benefit
manager for Tricare, started enacting a new policy to block the coverage of more than 1,000 bulk ingredients for its
clients. Since then, new organizations have sprung up and existing stakeholders, like the Professional Compounding
Centers of America, are pressing for a dialogue with PBMs.
PCCA expressed support for the proposed defense authorization legislative language. “We are supportive of this
provision as it allows the DOD to choose what it will reimburse for and not be limited to language in the current law,”
said John Voliva, PCCA’s director of legislative relations.
United Compounding Management, a new network of compounding pharmacies planning to work with payers on
reimbursement issues, “generally agrees with the issues identified by the GAO, and is actively working with industry
stakeholders to develop solutions to ensure that the prices that plan sponsors pay is rational and that patients who need
compounded medications can continue to access these therapies,” according to a statement. — Alaina Busch McBournie
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FDA Week - www.InsideHealthPolicy.com - October 10, 2014
Groups Lobby For Legislation Clarifying HIT Regulation By Year’s End
A coalition of 58 companies, patient groups and health information technology stakeholders this week called on
Congress to follow up on an FDA Safety and Innovation Act report and pass legislation that would clarify HIT oversight.
The groups contend that HIT could improve the efficiency and quality of health care delivery and regulatory uncertainty stifles innovation. They say there is consensus about the need for a risk-based HIT framework and it’s a bipartisan
issue.
FDASIA charged FDA and the Office of the National Coordinator for Health Information Technology (ONC) and the
Federal Communications Commission (FCC) to come up with a risk-based framework for regulating HIT. Those recommendations were released in April and the agencies held a public meeting in May.
The groups want Congress to act on the recommendations.
“Before the end of the year, we urge Congress to provide much needed statutory clarity and a stable foundation
for continued innovation in health IT,” according to the letter. “This overdue action will allow the Administration to
focus its limited resources, staff and expertise on ensuring the safety of new medical technologies that pose the
highest potential risk to patients, and will promote a new era of medical innovation that will improve care and lower
costs.”
Groups signing onto the letter include Health IT Now, IBM, U.S. Chamber of Commerce, athenahealth and Retire
Safe.
Final FDA guidance says the agency will regulate medical applications that function similar to medical devices while
exercising enforcement discretion on low-risk mhealth applications. — Alaina Busch McBournie
Parallel Review Resources Discussed . . . begins on page one
conference for increased interaction and transparency — an improvement in recent years — they cited coverage as a
market barrier that still looms.
A CMS official said experience with the parallel program has been positive, but it will have to be evaluated to
see if it should be modified or improved. She said CMS is still learning when it should become involved in the
process.
“If we’re too early, I’m not sure that’s best use of everybody’s time,” said Tamara Syrek Jensen, director of the
coverage and analysis group at CMS. “So what is the right time for us to get involved?” She noted if a company’s clinical
trial is complete, CMS’ involvement could come too late.
With Exact Sciences, CMS was in a listening mode for the early meetings with FDA, said the company’s chairman
and CEO, Kevin Conroy. Syrek Jensen agreed, saying CMS realizes FDA approval must come first, but CMS had
dialogue with the company outside meetings via email or in phone conversations.
FDA approved Exact Sciences’ Cologuard, a stool-based colorectal cancer screening test, in August. The same day
CMS issued a proposed national coverage determination that is expected to be finalized in early November. The approval
marked the first through the parallel review program and few other companies have publicly expressed interest in the
program.
Conroy said Exact Sciences is meeting with lawmakers to educate them about the program and ensure its survival.
“We don’t know if this program is going to continue to be funded and we want to build support from an industry standpoint,” he said.
He told FDA Week that the company has highlighted how the program helped the company get to market faster and
save money in the process. “I’m able to tell the story,” he said.
Covidien has put one technology forward to be considered for the program, said Michael Tarnoff, the
company’s corporate chief medical officer. He cited government resource constraints as one of the bigger limiting
factors for the program. However, companies are for-profit, want to get their products to market sooner and will prioritize
resources for the engagement.
“When FDA and CMS invited us to come with our technology, I got six or seven people together and we went in two
days,” he said. “So we will resource this and make it happen.” He noted the program has other limiting factors, such as
fear of engaging with the agencies.
However, he noted that collaboration with the agencies is at an “all-time high.”
“There’s a cultural shift underway and I think the times are forcing it but the companies are becoming more aware of
what they need to be and these government agencies are becoming more aware that they can’t be unapproachable and
adversarial,” Tarnoff said. “They have to be collaborative.” — Alaina Busch McBournie
FDA Week - www.InsideHealthPolicy.com - October 10, 2014
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CMS Gives Providers More Time To Apply For EHR Hardship Exemption
CMS on Tuesday (Oct. 7) reopened the period to request hardship exemptions from so-called meaningful use
requirements for electronic health records, giving some doctors and hospitals another opportunity to avoid penalties
in 2015. The move follows stakeholders’ calls earlier this year for more time to submit hardship requests and
lawmakers’ requests that some providers attesting to meaningful use for the first time in 2014 be allowed to avoid
penalties in 2015.
CMS told Inside Health Policy that there are still some issues surrounding availability and implementation of the 2014 certified EHRs, and the agency wanted to make sure that providers aren’t penalized because
of those problems.
American Hospital Association policy director Chantal Worzala said the move means some hospitals may be able to
recoup penalties, but added that it’s unclear exactly how this will be done. “For hospitals, this announcement opens up the
possibility that CMS might give some IPPS hospitals the opportunity to recoup meaningful use penalties that began on
Oct. 1. This benefit is limited to hospitals that could not meet the July 1 deadline to attest to meaningful use, but might
have been able to if the flexibility rule had been in place then. We’re unclear how this will be made official and
operationalized but appreciate CMS’s intent.”
The American Medical Association also commended CMS’ decision to accept more hardship exemption applications
and said the move will help physicians avoid an unfair penalty in 2015. Robert Tennant, senior advisor with the Medical
Group Management Association said the announcement is very welcome news and shows CMS is willing to be responsive
the providers’ concerns.
CMS and the Office of the National Coordinator for Health IT say the new deadline for submitting hardship exemptions for 2014 will be Nov. 30. More information about the application process will be shared soon, the agency says.
CMS says they will address the issue with hardship exemptions in an upcoming rule, though the application is already
available on the agency’s website. Previously, the hardship exception deadline was April 1 for hospitals and July 1 for
physicians.
The AMA and MGMA had asked CMS to push back that deadline for doctors, as the final rule providing flexibility
around attesting to meaningful use in 2014 wasn’t released until the end of August. The AMA and MGMA said that
without the final version of the rule, it was hard for doctors to know if they needed to request a hardship exemption.
However, CMS originally stuck with its deadlines.
The agency first said in February that it would allow hardship exemptions for providers who tried to upgrade
their EHRs but didn’t have time to fully implement them in 2014. The exemption originally allowed providers to
avoid an EHR penalty because the technology wasn’t available, current EHRs couldn’t be upgraded in time to attest
to meaningful use, and Stage 2 requirements couldn’t be incorporated into providers’ workflow in time to meet the
requirements.
CMS later finalized a rule that said providers wouldn’t have to use 2014 certified systems until 2015. For 2014, the
agency said providers could use the older 2011 version of EHRs or a combination of the older technology and the 2014
technology to attest to meaningful use.
But physicians attesting to meaningful use for the first time in 2014 who planned to take advantage of the rule and
use 2011 technology could not attest to meaningful use until after the effective date of the rule, Oct. 1, according to CMS.
Because of this, some physicians who may have avoided 2015 penalties by attesting to meaningful use for the first time
before Oct. 1 were left facing potential cuts — a prospect that did not sit well with some lawmakers.
CMS’ decision to re-open the hardship exemption applications gives these providers another chance to avoid
the meaningful use penalties — although providers who are not attesting for the first time may also apply for the
hardship exemption. CMS says that in order to apply for the latest round of hardship exemptions, providers must have
been unable to fully implement the 2014 EHR because the technology wasn’t available and doctors must have been
unable to attest by Oct. 1 using the flexibility provided in the final rule. Hospitals that were unable to attest by July 1
using that same flexibility will also be able to apply for the latest round of hardship exemptions.
AMA President Robert Wah says in a statement that “[g]iving physicians more time to file for a hardship exemption
provides necessary relief as many physicians are struggling to meet a number of reporting mandates to avoid multiple
penalties.”
Tennant said MGMA hopes this is the first of many announcements addressing remaining issues around the
2014 meaningful use reporting period, and signals a willingness on CMS’ part to be responsive to requests for increased
flexibility around the 2015 reporting period, as well. Stakeholders have repeatedly asked for CMS to allow providers to
attest for three months, rather than a full year, in 2015. — Michelle M. Stein
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FDA Week - www.InsideHealthPolicy.com - October 10, 2014
Report Reveals Antibiotics Sales Increase . . . begins on page one
campaign on human health and industrial farming.
The original format only included gross antimicrobial drug sales and distribution data by antimicrobial drug class
without further subdivision, according to FDA.
Rogers said the percentage of antibiotics being used that are medically important to humans is the data point that will
be useful for initiatives aimed at reducing use of antibiotics. She noted that manufacturers often claim most of their sales
are not of medically important antibiotics, but the report shows otherwise.
Steven Roach, director of the food safety program at the Food Animal Concern Trust, also said the report provides a
much better level of data, but said more animal antibiotic use data is needed.
Roach said other particularly useful data in the report include how antibiotics were administered to the animals as
well as how many of the medically important antibiotics were sold over-the-counter (OTC).
Rogers pointed out the use of tetracyclines, which is used to treat respiratory bacterial infections among others, and
was included on the 2013 World Health Organization’s Model List of Essential Medicines. Close to 6 million kilograms
of tetracyclines were sold in 2012, marking a 13 percent increase from 2009.
While Rogers said the more-detailed data could help boost congressional initiatives to reduce the use of antibiotics in
agriculture, Roach said he was unsure of the short-term impact given the upcoming elections.
Most medically important antibiotics were either used in the animals’ feed or water, making up 57 percent of total
antibiotics sold. Of the medically important antibiotics, 68 percent had both indications for production and therapeutics.
Around 32 percent had therapeutic indications only.
Around 97 percent, or 8.6 million kilograms of the medically important antibiotics, were sold over-the-counter while
2 percent were prescribed.
FDA released the more detailed 2012 data a year after the agency issued a proposal that expanded the agency’s
annual summary report on antimicrobials sold or distributed for use in food-producing animals to include additional
information about medically important antibiotics (see FDA Week, Sept. 26, 2013).
The Animal Health Institute said the sales data report is a “small part of the story about the public health
impact of antibiotics used to keep food animals healthy.” The group said that national sales information is limited and
does not necessarily correlate to national resistance trends.
However, Sen. Dianne Feinstein (D-CA) applauded FDA for increasing the amount of data included in the report.
“We now have a more complete picture of how the agriculture industry uses antibiotics,” said Feinstein. “As we
feared, the data show that we have a lot of work to do to ensure antibiotics are used responsibly. I hope to continue to
work with the agriculture industry and FDA to ensure that the use of medically important antibiotics in agriculture
decreases under new judicious use policies.”
But Rep. Louise Slaughter (D-NY) blasted FDA for the 16 percent increase in use of medically important antibiotics
in animals. Slaughter is leading the Preservation of Antibiotics for Medical Treatment Act (PAMTA), which would
preserve eight classes of antibiotics for treatment of humans and sick animals only, and the Delivering Antimicrobial
Transparency in Animals (DATA) Act, which would require drug manufacturers to obtain and provide better information
to FDA on how their drugs are used in food-producing animals.
“We know that the overuse of antibiotics on the farm is leading to more antibiotic resistant pathogens that
threaten humans — and FDA’s own figures show that the agency’s inaction is making the problem worse,” said
Slaughter. — Erin Durkin
Brookings Scholars Suggest Coverage With Evidence For Specialty Rx
CMS could require that makers of specialty drugs collect evidence on those products in return for reimbursement, a
policy known as “coverage with evidence development,” Brookings Institution scholars said. CMS and commercial
insurers rarely use the policy, and when they do, it’s usually for medical devices, but experts noted that the cost of
analyzing data is dropping so the approach might be feasible for drugs.
Coverage with evidence development allows provisional coverage of unproven, but promising products.
CMS created the policy to get products to patients faster, but many argue it’s often used to slow access. Gregory
Daniel, managing director for evidence development & innovation at Brookings Institution’s Engelberg Center for Health
Care Reform, said if CMS and commercial plans were to apply the policy to drugs, it might be used for purposes other
than temporarily covering drugs to determine how well they work — the poster child for expensive specialty drugs is
Sovaldi, which cures 95 percent of people infected with the most common type of hepatitis C.
“The concept for specialty drugs is interesting,” Daniel said at a Brookings Institution event on Oct. 1. “It doesn’t
necessarily have to be provisional, but is there a way we can tie payment for a particular drug to ensure that providers and
the health care system as a whole are contributing to the development of better evidence on how to use these products?”
he asked.
Daniel said Sovaldi works well so there isn’t reason to show the product works, but coverage with evidence developFDA Week - www.InsideHealthPolicy.com - October 10, 2014
7
ment could be a way to identify the types of patients who should receive drugs first and to glean information on how
doctors use them. Public and commercial plans could require drug makers to collect data, typically with a registry, in
return for covering specialty drugs, he said.
“It’s only worthwhile if the evidence that that data brings outweighs the cost for doing the research and collecting the
data,” Daniel said.
Mark McClellan, director of the Health Care Innovation and Value Initiative at the Brookings Institution, made
similar comments while simultaneously speaking across town at an America’s Health Insurance Plans conference. He said
the cost of analyzing data is falling, which makes it more feasible to apply the coverage with evidence development
policy to specialty drugs.
McClellan and Daniel discussed policies for specialty drugs in general and did not speak about policies specific to
Sovaldi. The hepatitis C drug’s high cure rate is unique and that makes it difficult to handle the price because instead of
paying for treatments over decades, such as with HIV treatments, the cost is paid upfront.
McClellan said another approach might be to pay drug companies to cure people, instead of merely paying only for
the drug. This approach would give drug makers the responsibility of identifying the right patients to treat and getting
patients to stick to their drug regimens. Daniel said this approach could be used in either a bundled pay arrangement or in
an accountable care organization or medical home, although he noted that a criticism of bundled pay is that it discourages
the use of new, expensive products.
Others at the Brookings event also discussed ways to finance coverage of expensive drugs. The idea of spreading out the cost of drugs with mortgages or other financial instruments has been bandied about for a while, but McClellan
said he isn’t a fan of buying on credit. Likewise, Al Engelberg, of the Engelberg Foundation, said at the Brookings event
that financing the cost of drugs does not deal with the underlying question of whether they should be so expensive, and
there is at some point a “natural cap” on what states and taxpayers are willing to pay. Andrew Allison, of Allison Health
Care Consulting, said it isn’t clear that state constitutions even allow for long-term financing. He also said it would be
difficult to convince state health care officials and lawmakers to mortgage the cost of a cure because of concerns that
those same patients will get sick again.—John Wilkerson
FDA To Modernize Generics Review Process . . . begins on page one
FDA has pledged to issue guidance on abuse-deterrent formulations for generics and will host a public meeting later
this month with both generic and innovator stakeholders on abuse-deterrence. In a notice released Friday, the agency said
it will include abuse-deterrent formulations in broader research examining how to develop risk-based equivalence and
product quality standards for generics that would apply across dosage forms and routes of delivery. “Developing the
pathway for generic versions of abuse-deterrent formulations requires tools for evaluating antagonist/agonist combinations and technologies to deter nasal abuse,” the agency writes.
FDA also will focus on narrow therapeutic index drugs and the equivalence of modified release solid or oral dosage
forms as part of that research.
FDA’s Office of Generic Drugs will evaluate how to make generic versions of complex drugs available in
all product categories, according to the notice. Teva Pharmaceuticals Industries recently raised concerns about
FDA’s equivalence evaluation for complex drugs and pressed for rigorous testing of generic versions of its
Copaxone — a complex drug for multiple sclerosis. FDA said it is developing guidance and regulations that will
clarify the development pathway for complex generics, including drug-device combinations and products with
complex mixtures and peptides.
Further, the agency plans to conduct postmarket studies on extended-release formulations, like those for deficit
hyperactivity disorder drugs. FDA’s postmarket evaluation of generic drugs includes “researching monitoring methods,
understanding patient perceptions of generic drug quality and effectiveness, and verifying therapeutic equivalence via
patient brand-to-generic switching studies.” Postmarket evaluation will allow FDA to determine whether the drugs are
fully interchangeable and as safe and effective as reference drugs.
FDA also will investigate modeling and simulation tools that could help modernize the generic drug review process,
including: physiologically-based pharmacokinetic or absorption models; pharmacodynamic models or clinical trial
simulation; systems biology; and quantitative risk modeling. Developing methods to characterize peptides and other
complex mixtures and that also evaluate particle size, surface chemistry, and gene expression for impurities or immunogenicity, will be among the research priorities in this area, the agency said.
FDA said its research priorities list was based on comments from a May 16 public meeting, comments submitted to the public docket, scientific issues raised in citizen petitions, and tracked safety issues, among other
sources.— Stephanie Beasley
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FDA Week - www.InsideHealthPolicy.com - October 10, 2014
Industry, PTO Look To Federal Appeals Court For Myriad Clarification
A case challenging Myriad Genetic’s patent claims for synthetic DNA used to conduct its breast cancer diagnostic
test, heard by a Federal Circuit court this week, could clarify lingering questions about how a Supreme Court ruling that
invalidated the company’s patents on certain breast cancer mutations will be applied, an industry attorney said. The case
will illuminate what Myriad can patent in relation to its breast cancer susceptibility testing now that the isolated gene
patents have been invalidated and direct industry’s intellectual property patent activities, she said.
The attorney added that the case — centered on whether synthetic DNA strands called primers are patent eligible —
could call into question recently released guidance from the U.S. Patent and Trademark Office that categorized combinations of primers as patent eligible.
Biotechnology industry stakeholders have been seeking clarification in the wake of last year’s Association for
Molecular Pathology v. Myriad Genetics ruling in which the high court invalidated Myriad’s patents on isolated breast
cancer susceptibility genes, but made the distinction that synthetic DNA would remain patent-eligible. Ambry Genetics
Corp. began offering its less expensive breast cancer testing the same day the decision landed, but Myriad said Ambry
infringed upon patented primers used to conduct the testing.
In March, the U.S. District Court for the District of Utah denied Myriad’s motion for a preliminary injunction against
Ambry and questioned the validity of method claims for primer pairs and methods for analyzing the BRCA1 and BRCA 2
breast cancer gene sequences included in Myriad’s diagnostic testing. It is unclear if the claims are patent-eligible in
accordance to the “inventive step” test laid out in Mayo Collaborative Services v. Prometheus Labs,which invalidated a
diagnostic method patent, the court said.
But Myriad challenged the decision, saying the court erred by not reviewing the claims as a whole but instead
splitting the claims and evaluating them as independent pieces. An examination of the primers’ function in combination
would show they are patent-eligible applications of the BRCA sequences, the company said.
U.S. Court of Appeals for the Federal Circuit Chief Judge Sharon Prost made it clear during oral arguments
Monday (Oct. 6) for University of Utah v. Ambry Genetics Corp. that the appeals court will consider not whether the
patents are valid but whether there is substantial enough question of their patentability to incur a preliminary injunction.
But the preliminary injunction from the district court would likely come too late to protect the method claim in question,
which expires Jan. 20, 2015.
“For the purposes of preliminary injunction, unless you’ve got a final judgment in your favor out of the district court
by the date then the issue is moot on that patent,” said Judge Raymond Clevenger. “You’re not going to get a preliminary
injunction before the patent expires.”
But Jonathan Singer, an attorney representing Myriad, warned that if the underlying question of which claims for
products derived from naturally occurring materials are patent-eligible is not clarified by the court, similar cases would
continue to emerge. This is an issue of how to apply the Supreme Court decision, he said, adding that biotech community
has been “at sea” as to how to interpret the decision. Singer called Myriad v. Ambry case is a good opportunity to illuminate the extent of that decision.
“The (federal court’s) decision will impact Myriad and others in the industry,” said Antoinette Konski, a
partner at Foley & Lardner. “Although the patents under consideration may expire in the near term, they likely have
other patents with more patent life remaining. Others in the industry are watching as it will assist in determining what
patents remain valid and what technology may remain patent-eligible in the U.S. going forward.”
Groups like the Biotechnology Industry Organization criticized the Supreme Court’s decision to invalidate isolated
DNA patents, saying the court split from decades of judicial and PTO precedent. But industry has also expressed optimism about the high court’s determination that synthetic DNA patents should be upheld (see FDA Week, June 14, 2013).
However, there have been questions about how to distinguish between isolated and synthetic genes.
Konski also noted the decision will impact PTO guidance since the agency must defer to the Federal Circuit and its
interpretation of the Supreme Court rulings. PTO must certainly be watching the case closely, Konski said.
PTO issued a highly controversial guidance this year interpreting the high court’s decision. Industry has blasted
the guidance for extending the high court’s reasoning to claims not addressed in the original Myriad decision and called
for its withdrawal. PTO recently announced plans to revise the language that states combinations of primers would be
considered patent-eligible.
Konski noted that determinations of patent infringement are usually based on the commercial use of the patented
technology. A combination of gene fragments, like primers, are used in combination, not independently.
In an amicus brief the American Civil Liberties Union, Association for Molecular Pathology, Breast Cancer Action,
Public Patent Foundation and AARP urged the federal appeals court to determine whether the claimed method constituted
an inventive concept, highlighting the absence of a marked difference between the primers in question and the genetic
sequences of BRCA 1. The court should also examine whether the patents would block further use of the underlying
natural phenomena, the groups said. — Stephanie Beasley
FDA Week - www.InsideHealthPolicy.com - October 10, 2014
9
Legal fight over 340B orphan drug rule continues
PhRMA Files New Lawsuit Challenging HRSA’s 340B Orphan Drug Rule
The Pharmaceutical Research and Manufacturers of America filed a new lawsuit Thursday (Oct. 9) challenging the
Health Resources and Services Administration’s interpretive rule on the 340B orphan drug exclusion, as the group was
advised to do by a federal judge in late August if it wanted to challenge the agency’s policy. At issue is HRSA’s stance
that the ACA’s exemption of orphan drugs from the 340B program’s drug discounts for safety net hospitals doesn’t apply
when the drugs are used to treat conditions not part of their orphan indication.
In his Aug. 27 ruling federal District Court Judge Rudolph Contreras said while his court had vacated HRSA’s 2013
legislative rule that said the 340B orphan drug exclusion only applied when a drug was used specifically for its orphaned
designation because HRSA didn’t have the authority to issue legislative rules, the agency’s July 2014 interpretive rule in
response to the court action was not a part of PhRMA’s original lawsuit. Contreras said PhRMA was well within its rights
to initiate a new legal action challenging the July 2014 interpretive rule.
The industry group argues in its new legal action that HRSA’s interpretive rule — which is the same policy as the
vacated legislative rule — goes against congressional intent and should be vacated.
“While we value the hard work and efforts of all agencies, it is important federal agencies recognize and work within
the bounds set by Congress. PhRMA is therefore filing suit against the U.S. Department of Health and Human Services to
challenge its second attempt to issue a rule conflicting with the plain language of the statute,” PhRMA executive vice
president and and general counsel Mit Spears said in a press release.
PhRMA sued HHS last fall over HRSA’s regulation that implemented the health law’s orphan drug policy in the
340B drug discount provision which offers discounted pharmaceuticals to safety net hospitals. The Affordable Care Act
expanded the 340B discount program to cancer centers, critical access hospitals, rural referral centers and sole community hospitals for outpatient drugs, but the law excluded orphan drugs — drugs used to treat rare diseases or conditions
affecting fewer than 200,000 people nationally - from the discount program.
In July 2013 HRSA issued a legislative rule that stated facilities with the 340B designation could still get orphan
drugs at a discount if they planned to use the drugs to treat conditions that are not part of the orphan indication. Some
orphan drugs may have multiple indications or they may be used off label.
The court ruled in May that HRSA did not have the authority to issue a legislative rule and vacated the 2013 final
rule, but asked PhRMA and HHS to submit supplemental briefs as to whether the legislative rule could survive as an
interpretive rule.
HHS declined to submit additional briefs, but continued to apply the rule, saying on its website: “The court did not
invalidate HRSA’s interpretation of the statute. HHS/HRSA continues to stand by the interpretation described in its
published final rule, which allows the 340B covered entities affected by the orphan drug exclusion to purchase orphan
drugs at 340B prices when orphan drugs are used for any indication other than treating the rare disease or condition for
which the drug received the orphan designation.”
HRSA says on its website that the interpretive rule does not create binding norms and requirements; rather it is just
the agency’s interpretation of the statute. The agency explains this means that if HRSA takes action against a drug
manufacturer or covered entity based on this interpretation, a drug manufacturer or covered entity can legally challenge
HRSA’s interpretation of the statute as a defense against the enforcement action.
An drug industry lawyer who has been following the 340B orphan drug exclusion legal battles said PhRMA’s new
lawsuit will focus on HRSA’s specific interpretation of the statute. The lawyer said however the case is decided it won’t
impact HRSA’s overall rulemaking authority as the previous PhRMA lawsuit against HRSA’s 2013 legislative rule did.
In Thursday’s filing PhRMA argues that if Congress wanted the 340B orphan drug exclusion to be use-based
the lawmakers would have written the statute that way. The exclusion statute specifically states the 340B pricing
“shall not include a drug designated by the Secretary under section 526 of the Federal Food, Drug and Cosmetic Act for a
rare disease or condition.”
PhRMA points out that FDA has said the orphan drug designation applies to the drug itself, “that is to the drug’s
specific ‘active moiety’ or molecule.”
“Thus, the designation that triggers exclusion under § 256b(e) is not limited to only orphan uses of the orphandesignated drug, as HHS contends. If the drug has an orphan designation, newly eligible entities are not entitled to
purchase it at 340B prices regardless of how the drug is used, and must instead purchase the drug at the same price as all
other, non-covered entity buyers,” PhRMA writes in its court filing.
PhRMA also argues that if Congress had intended the 340B orphan drug exclusion to be “use-based” as opposed to
“designation-based” it would have made that clear in the statute as it has done in other instances. PhRMA goes on in the
filing to list a number of specific instances when lawmakers have said “only when used for a rare disease or condition;”
and “a prescription drug that has been designated as a drug used for a rare disease or condition … unless the human drug
application includes an indication for other than a rare disease or condition.”
“Any final agency action restricting the scope of that statutory provision, no matter how HHS classifies its action,
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FDA Week - www.InsideHealthPolicy.com - October 10, 2014
would be inconsistent with the plain language of the statute and impermissibly create new legal effects on regulated
parties that Congress did not enact into law,” PhRMA writes in its court filing.
Safety Net Hospitals for Pharmaceutical Access steadfastly disagrees with PhRMA’s interpretation of the
statute, saying HRSA’s interpretive rule is well-reasoned and legally valid. SNHPA points out that, according to
Magellan Rx Management’s 2013 Medically Pharmacy Trend Report, the drugs Alimta, Gammagard, Herceptin, Orencia
and Procirt all have orphan drug designations but are prescribed for non-orphan uses more than 95 percent of the time.
“Once again, Big Pharma is trying to increase its prices at the expense of rural and cancer hospitals and their patients,” said SNHPA president and CEO Ted Slafsky. “These providers depend on 340B savings to serve needy patients
and, in many cases, to keep their doors open.”
The American Hospital Association echoed SNHPA’ comments, saying if the court throw’s out HRSA’s interpretive
rule safety net hospitals will suffer.
“PhRMA’s unrelenting efforts to argue a narrow interpretation of the Affordable Care Acts (ACA) Orphan Drug
Exclusion would nullify the benefits of the 340B program for critical access and sole community hospitals, and
rural referral centers supported by the very same law. The 340B program has made it possible for eligible hospitals
to give patients better access to the drugs they need. The AHA supports HHS’s effort to extend the benefits of the
340B program to rural communities and the AHA will continue to defend the purpose of the program,” AHA vice
president for coverage policy Jeffrey Goldman said in a statement sent to Inside Health Policy. — Todd Allen
Wilson
Bayh: Chances of Device Tax Repeal ‘Very Good’ If GOP Wins Senate
CHICAGO — There is a “better than 50/50” chance the ACA’s device tax will be repealed if Republicans win the
Senate in November, Evan Bayh, former Democratic Indiana senator and governor, said Tuesday (Oct. 7) at the Advanced
Medical Technology Association’s medtech conference. A Republican-controlled Congress likely would first vote to
repeal the Affordable Care Act, and after that measure is vetoed would settle on other changes to the law, such as a repeal
of the industry-opposed excise tax, said Bayh, now a partner at McGuireWoods.
The 2.3 percent excise tax was levied on medical device firms starting in January 2013. Device company CEOs said
they have held off on new hires, and scaled back capital projects and research and development budgets, but those
restrictions could be reversed with a repeal of the tax. Key lawmakers view repealing the tax as a priority and the president is not tied to the policy, Bayh said.
If Democrats maintain a slim majority in the Senate a device tax repeal is still possible, he added. Under that scenario, many moderate senators could press for a device tax repeal in exchange for support of other measures in the final
years of the Obama presidency. However, the chances of a repeal would be “very good” if Republicans win the majority,
Bayh added.
“If the Republicans don’t overreach on other things, I think this is doable,” he said.
GOP members would likely try to fully repeal the ACA but the president would veto such a bill. Other changes, such
as eliminating the employer mandate or repealing the device tax could be considered, and the president is not likely to
issue a veto solely based on the medical device tax, he said.
Finding an offset for the tax has been a challenge in advancing its repeal. But Bayh described the tax as a “rounding
error” in terms of the federal budget. He noted there are “half of a dozen” items that could be looked at for savings.
With political alignment, the issue of finding an offset could be resolved, he said.
“If there’s the political will, they’ll find the fiscal way,” he said. “So generally you get asked this question now
by people who really don’t want to do it; they’re just trying to put up an obstacle that could be overcome.” —
Alaina Busch McBournie
FDA Week - www.InsideHealthPolicy.com - October 10, 2014
11
Guide: States Can Enforce Drug Distributor Licensing Until FDA Issues Regs
FDA indicated Tuesday (Oct. 7) that states can continue to enforce their drug wholesale distributor standards as
they wait for yet-to-be issued federal regulations required by the Drug Supply Chain Security Act, according to a
new guidance document. A drug supply chain expert said the clarification helps clear up confusion over states’ role
in overseeing distributors as FDA works on regulations, which won’t be effective until two years after they are
finalized.
The guidance notes that DSCSA, enacted last year, preempts states from establishing or continuing standards
that are inconsistent, less stringent, directly related to or covered by the federal law. But the document goes on to
say that states can continue to license wholesale drug distributors until the forthcoming FDA regulations go into
effect. Once the regulations go into effect two years after they are finalized, states will be preempted from continuing or establishing licensure in a way that falls below the minimum standards established by the federal requirements.
Under DSCSA, by 2015 FDA must establish through regulation standards for licensing, including storage and
handling requirements, maintenance of records and qualifications for key personnel.
Sources monitoring the new drug tracing requirements said there may be a lack of clarity in the states as to what the
enactment of the DSCSA means for them, and this guidance document is meant to clarify this. Gabrielle Cosel, manager
of Pew Charitable Trusts’ drug safety project, said FDA’s clarification of the current effects of the law on states’ wholesale drug distributor standards and licensing is particularly helpful to stakeholders, considering that the agency is still
drafting the regulations.
The Healthcare Distribution Management Association (HDMA) lauded the additional clarity. “HDMA believes that
further explanation of state product tracing requirements and standards, requirements and regulations related to wholesale
distributor licensing (as intended by this draft guidance) will benefit the regulatory authorities, the industry, the safety and
security of the affected products and ultimately the patients who use them,” said John Parker, HDMA’s senior vice
president of communications.
The guidance, written in question-and-answer format, addresses confusion among stakeholders regarding the law’s
preemption requirements. DSCSA established a timeline for creating a federal system for tracing prescription drug
products, and requires FDA to establish federal standards for licensing of wholesale drug distributors and third-party
logistics providers.
Sen. Michael Bennet (D-CO) said he was glad FDA is moving forward and clarifying requirements and standards
under Drug Quality and Security Act.
“We’re glad the FDA is moving forward to restore confidence in our drug supply chain and protect our families from
potential health risks,” said Bennet. “We will carefully review the FDA’s guidance to ensure it works for everyone along
the supply chain. Coloradans deserve to know that their prescription drugs are safe and effective, and this new track and
trace system will help us accomplish that.” — Erin Durkin
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