Jill Wechsler is Pharmaceutical Technology's Washington Editor, jillwechsler7@gmail.com.

Jill Wechsler

	Health and Human Services (HHS) Secretary Alex Azar opened an important new chapter in the accelerating campaign to alter marketing and pricing policies for prescription drugs in the United States. In a landmark proposed rule change, Azar announced on Jan. 31, 2019 that the Trump Administration would seek to end current rebate practices by making it illegal for manufacturers to provide special discounts to health plans and insurers serving Medicare, Medicaid, and other government health programs.

 is to remove the current safe harbor protection from the federal Anti-Kickback Statute for rebates or discounts provided to Medicare Part D drug plans and certain state Medicaid programs. Manufacturers traditionally offer sizeable rebates and discounts to insurers in return for favorable placement on formularies that encourage prescribing of the firm’s products over competitors. Instead, the new rule calls for plans to pass on such rebates directly to beneficiaries at the pharmacy counter.

	The broader rationale for this policy change is to discourage manufacturers from raising list prices regularly and frequently, a strategy that pharma companies claim is necessary to offset ever-rising demands for higher rebates from payers and plans. This practice may be beneficial to patients with broad drug coverage that permits them to share in the savings gained by the plan. But beneficiaries who face high out-of-pocket costs for drugs-either because they use many expensive brand drugs, lack adequate coverage, or carry high-deductible plans-often feel the impact of the higher list prices.

	Pharmacy benefit managers (PBMs) and insurers claim, and even HHS agrees, that the policy change would lead to higher premiums for Medicare Part D plans due to the loss of these discounts and rebates. But while secretary Azar predicts that premiums would rise just a few dollars a month, others anticipate much higher costs for all beneficiaries.

	Biopharma companies applaud the proposal as a way to avoid frequent price increases, which could deflect cost-cutting demands. The Biotechnology Innovation Organization (BIO) said the new policy would reduce the “perverse incentives” driving the current affordability crisis by limiting the use of rebates to “pad the profits of middlemen.” The Pharmaceutical Research and Manufacturers of America (PhRMA) similarly applauded changes in the rebate system to “ensure that the $150 billion in negotiated rebates and discounts are used to lower costs for patients at the pharmacy.” A main benefit for manufacturers is that the change would reduce the number of patients pushed into the Medicare coverage gap, or “donut hole,” where pharma companies have to cover more of drug costs.

	Generic-drug makers back the new policy for a different reason:  the proposal would prevent brand drug companies to use “rebate traps” to block patient access to more affordable generic or biosimilar medicines. The problem referred to here is the practice of plans to offer incentives for patients to utilize more expensive brand therapies that offer high rebates, instead of shifting them to cheaper generics that would reduce costs for the healthcare system more broadly.

	While the rule would only change regulations affecting government-funded health programs, secretary Azar also called on Congress to enact legislation that makes this change for commercial health plans. It may be, moreover, that Congressional approval is needed to alter current policy for Medicare and Medicaid, a position suggested by PBMs and insurers. Congressional support may be difficult, though. Sen. Ron Wyden (D-Ore) backed the plan as a way to impose accountability on PBMs but complained that more was needed to reduce drug prices. House Democratic leaders were more critical, claiming that the change would increase government spending by $200 billion and would raise premiums considerably on drug plans for seniors. Republicans were more supportive but called for in-depth analysis of the broader impact of the policy change.

	The HHS proposal, moreover, permits PBMs to charge manufacturers fees for services related to formulary and plan management, which observers fear would merely encourage companies to continue current practices under new terminology. PBMs claim they pass rebates on to clients that provide health coverage to employees or beneficiaries, and don’t retain the fees as profits. But the impact on current practices would be much greater if rebate practices were altered for the larger commercial market.

	HHS wants the new policy to be implemented in January 2020, providing a year for public comment and final rulemaking. But the anticipated legal and policy battle is expected to extend the debate much longer and could end up killing the plan. Meanwhile, states are weighing in on rebate limits and may take further action to implement policies similar to that proposed by HHS. The only area of agreement in the rebate debate is that no one knows how the proposed change will impact PBMs and insurers, drug costs and pricing, and government spending, and that it’s impossible to predict the outcome as all parties devise responses to the rule change.

Articles

New HHS proposal would remove the current safe harbor protection from the federal Anti-Kickback Statute for rebates or discounts provided to Medicare Part D drug plans and certain state Medicaid programs.

Rebate Challenge Alters Drug Pricing Debate

	With drug shortages on the rise-driving up prices of scarce medicines in the process-and data integrity transgressions increasingly visible in inspection reports, FDA officials are highlighting the importance of strategies for ensuring a reliable supply of critical pharmaceuticals that meet regulatory standards. The agency is issuing new guidance, cracking down on violative products, and emphasizing the need for greater vigilance and innovation to advance quality drug manufacturing.

	The recall of hundreds of batches of valsartan blood pressure medicines made with APIs from China containing a suspected carcinogen set off alarms in 2018 about tainted drugs and inadequate quality controls. As the crisis expanded, leading generics makers recalled multiple products, creating shortages and evidently leading to price increases by producers of untainted valsartan-containing therapies able to document quality.

	Such failings in production have prompted FDA Commissioner Scott Gottlieb and other agency officials to highlight the importance of industry efforts to maintain standards. FDA aims to foster “a culture of compliance” where companies follow best practices and requirements of the law not just to avoid liability, but to support a “shared commitment to serve as good stewards of the public health,” Gottlieb commented at the December 2018 Enforcement, Litigation and Compliance conference sponsored by the Food and Drug Law Institute (FDLI) (1).

	The commissioner highlighted the importance of high-quality data in submissions and manufacturing systems, noting that inaccurate information on manufacturing often masks production problems and failures. At the conference, Gottlieb announced an updated FDA guidance on data integrity and good manufacturing practices (GMPs) to prevent lapses in this area and help firms create “a quality culture” where employees understand the importance of ensuring that accurate information is developed and submitted to the agency (2). While inaccurate data and information may arise from deceptive practices, Gottlieb noted that more often such errors reflect inadequate processes and systems. The new advisory updates a draft from 2016 and provides advice to help manufacturers identify data integrity lapses, implement best practices, and ensure commitment to standards. Data integrity failures are cited in three-fourths of FDA warning letters, a trend that agency officials hope to address in the latest guidance.

	The emphasis on ensuring quality data has become a global issue. The Pharmaceutical Inspection Cooperation Scheme (PIC/S) released a draft guidance outlining recommended GMP inspection practices, with an emphasis on defining and detecting data integrity vulnerabilities and strategies to harmonize inspection practices (3).

	Donald Ashley, director of the Office of Compliance in FDA’s Center for Drug Evaluation and Research (CDER), reported at the FDLI conference a rise in warning letters involving cGMP issues. One factor, Ashley explained, is linking that trend to an increase in inspections of never-visited facilities, particularly firms producing over-the-counter products. FDA has updated its site-selection model to focus inspections on higher-risk facilities, part of the agency’s Program Alignment plan that aims to bring greater expertise and consistency to field operations. Warning letters continued to increase in 2018 for firms in India, China, and other nations.

	FDA also seeks to improve production methods and standards for sterile injectable products by launching the first New Inspection Protocol Project (NIPP) in this area. A pilot program aims to collect data in a structured manner to improve the consistency and efficiency of inspections for these products, with an eye to better detecting and preventing lapses in an area where quality manufacturing issues have led to shortages and closures (4).

	In addition to more targeted and efficient inspections, FDA aims to reduce duplicative site visits that waste resources and impose a burden on industry by fully implementing a Mutual Reliance Agreement (MRA) with the European Union. This program allows FDA to rely on information from drug inspections conducted within each other’s borders and thus avoid visiting operations that show strong compliance histories. FDA has completed assessments that enable it to recognize the inspection capabilities of 20 EU member states and aims to complete the task by July 2019. The parties also plan to extend the agreement to veterinary medicines this year and to certain vaccines by 2022.

	International collaboration also has been extended to GMP inspections of plants producing APIs to similarly avoid duplicative inspections. The program was useful in allowing information sharing regarding planned inspections of valsartan API facilities in order to target oversight to uninspected plants.

	Added resources, moreover, have enhanced FDA’s ability to expand its capacity to block the import of violative medical products. The agency has increased the number of inspectors at international mail facilities and plans to expand the number of packages it can review to better detect dangerous or counterfeit drugs.

	While FDA wants to assist industry in avoiding regulatory violations, Gottlieb emphasized that the agency will take action when it sees “willful disregard for the rights or even the safety of people” affected by substandard or adulterated products (1). He expressed optimism that these initiatives in FDA’s inspection program will better target oversight to products and processes that pose a greater risk to public health.

	 1. FDA, “Remarks by Dr. Gottlieb to the FDLI Enforcement, Litigation, and Compliance Conference,” 

Data Integrity and Compliance with Drug CGMP, Questions and Answers, Guidance for Industry 

Guidance on Classification of GMP Deficiencies 

	4. FDA, “Statement from FDA Commissioner Scott Gottlieb, M.D., on New Steps to Strengthen and Modernize Agency’s Oversight and Reporting of Inspections for Sterile Injectable Drugs,” Nov. 9, 2018. 


	Vol. 43, No. 2
	February 2019
	Pages: 14–15

	When referring to this article, please cite it as J. Wechsler, “FDA Promotes Quality Standards to Reduce Shortages," 

Policies emphasize the importance of ensuring data integrity in the United States and abroad.

FDA Promotes Quality Standards to Reduce Shortages

	The longest government closure in history created havoc in Washington and beyond, creating months of work for agencies to regain efficient operations. Despite extensive user fee funding for FDA regulatory programs for drugs, biologics, and medical devices, many agency programs were halted or put on hold during the 35-day closure.

	FDA restarted full operations on January 28 following Congressional agreement on a continuing resolution to fund government operations for three weeks. However, the situation will get much worse if Congress and the White House fail to negotiate a longer-term budget for 2019 by February 15, when President Trump has threatened another closure unless the parties reach a deal on border security.

	FDA Centers for Drug Evaluation and Research (CDER) and for Biologics Evaluation and Research (CBER) were able to tap already-collected user fee accounts to support continued review of submitted applications for new drugs and supplements. User fees also could pay for field inspections and oversight related to active medical product applications and products. But the agency could not accept any new user fee payments and thus could not file new submissions. And review activities were halted for products not funded by user fees, such as blood and allergenic therapies and over-the-counter medicines. Already completed guidance documents and policy statements were issued, but others were put on hold.

	The end of the shutdown has brought a wave of new submissions to the agency, which staffers will be hard-pressed to process and review to meet pre-established timeframes for action. Medical device makers usually file some 300 submissions per month with the agency, and more than 35 new drug applications already face review deadlines in the first quarter of this year. Observers expect it to take months to process the large number of abbreviated applications for generic drugs that could not be filed during the shutdown.

	FDA also faces a backlog in inspections, regulatory decisions, meetings, and communications activities. During the shutdown, FDA commissioner Scott Gottlieb announced shifts in inspection staffs to cover high-risk medical devices, pharmaceutical, biologics and foods, and that the agency would continue to oversee certain drug compounding operations, even though fees had run out to cover those products. The agency basically halted inspections of most low-risk products, such as certain processed foods and producers of over-the-counter drugs and pet foods to be able to monitor situations that raised public health issues.

	FDA now is moving quickly to collect additional user fees for 2019 and to bolster funds available to support the agency through another possible shutdown. A top priority for Gottlieb has been to provide back pay for staff, including many who worked without pay during the shutdown.

	On a broader economic level, the government shutdown is expected to cost some $3 billion in lost productivity and revenue, and further disruption in government operations would compound the losses.

	The uncertainty, moreover, has created havoc in financial markets, where delays in initial public offerings by companies were put on hold due to the halt in Securities and Exchange Commission (SEC) operations. Many technology and biotech start-ups were anticipating initial public offerings (IPOs) this year, and SEC vetting of such deals is important to establishing confidence in the financing plan. Gossamer Bio attracted attention in January by considering an IPO with language that would set the share price 20 days before trading, a strategy that is considered risky but avoids SEC review.

	A long-term impact on FDA and other federal agencies may be seen in difficulties in building and maintaining a capable government workforce. FDA has been struggling in recent years to compete with the private sector in attracting skilled experts to support its highly technical and specialized regulatory and review operations. The agency has had hundreds of open positions for such specialists, but efforts to fill those slots were put on hold during the closure. Observers expect that the shutdown could have a lasting effect by undermining FDA efforts to retain and recruit scientists and technicians needed to deal with cutting edge therapies and new research methods.

	Even if there is a budget deal that keeps the government operating this year, there remains uncertainty about the level of funding Congress will provide for FDA. There are differences between earlier appropriations measures approved by the House and Senate, and it’s not clear how much of an increase will be in a final budget bill. 

FDA staffers will be hard-pressed to process and review the wave of new drug application submissions in pre-established timeframes for action.

Government Shutdown to Have Repercussions for Months to Come

	It was a banner year for the new drug approval business, and now FDA has made it official: The Center for Drug Evaluation and Research (CDER) approved 59 novel drugs and biologics in 2018, surpassing previous high marks and improving on recent gains (a complete list can be found at 

.). Additional new products approved by the Center for Biologics Evaluation and Research (CBER) further boost the total.

	While there’s some variation in the final numbers because analysts define innovative new products differently, it’s clear that industry investment and regulatory support combined to move many important new medicines to market efficiently to provide more treatments for a range of critical conditions. The “class of 2018” has 16 new cancer drugs, including several indicated for genetically defined conditions. There also was a number of new treatments for rare diseases, along with the first cannabidiol-based medicine and the first drug to treat smallpox. Nearly all of the new drugs were approved in one review cycle, and three-fourths were approved first in the United States.

	Many of the new approvals benefited from one or more expedited development or review pathway, a trend that has prompted some observers to question whether FDA may be moving some experimental products too quickly to market. However, only 24% of the new drugs were designated as breakthrough therapies, and fast-track review applied to less than half.

	To continue the emphasis on advancing innovation in drug development, FDA Commissioner Scott Gottlieb recently announced plans to establish a new office of drug development science at the agency. The aim is to develop and authorize new tools and methods able to reduce the cost and uncertainty in testing and reviewing new medicines. This Office of Drug Evaluation Science will be part of CDER’s Office of New Drugs and will work to implement new methods for clinical outcome assessments, biomedical informatics, and biomarker development. Additional efforts will aim to devise more standardized tools for capturing and formatting safety data to achieve more consistent review of this information.

Industry investment and regulatory support combined to move many important new medicines to market.

FDA Sets Records in Approving More New Drugs

	It will be a challenge for FDA to match or exceed its success this past year in approving record numbers of innovative and generic drugs. These achievements reflect the ability of biopharma companies to capitalize on important advances in science, as well as strong support from regulators in clarifying requirements and R&D policies. While the Center for Drug Evaluation and Research (CDER) will strive to further enhance its operations, it also will support initiatives to ensure that all medicines are safe, effective, and of high quality.

	Amidst these advances, CDER Director Janet Woodcock cites the importance of addressing the nation’s deadly opioid epidemic as FDA’s top priority for the coming year. The immediate need is to reduce the more than 200 million outpatient prescriptions for these drugs each year. Recently 

 (1) instructs FDA to develop evidence-based prescribing guidelines and to explore how manufacturers can provide pain medicines in more secure packaging, Woodcock pointed out at the FDA/CMS Summit in December 2018. At the same time, FDA will develop guidelines on developing non-opioid medications for acute and chronic pain to improve treatment for patients.

	Woodcock also aims to advance the safety and quality of medicines. CDER has launched a two-year program to improve oversight of drug safety, featuring new methods to evaluate the more than two million adverse event reports received this year on marketed drugs. The agency is pressing drug companies to comply more fully with good manufacturing practices (GMPs) through more targeted inspections and recalls for those failing to meet standards. Drug compounding pharmacies and outsourcing facilities will remain in the spotlight in 2019, as FDA inspectors continue to find violations at these operations. A related initiative is to continue to implement requirements for tracking drugs through the supply chain to detect unauthorized medicines, an effort designed to have “a big impact on the gray market,” Woodcock commented. CDER’s Office of Pharmaceutical Quality (OPQ) will continue to seek more timely inspections of manufacturing facilities, a process that should be facilitated by a new inspection protocol for drugs, beginning with sterile drug manufacturing facilities.

	These efforts may be enhanced by visible progress in industry implementing advanced manufacturing systems. Woodcock noted at the Summit that five firms have filed applications with continuous manufacturing components, and that generic-drug makers are moving in this direction. Other federal agencies support such efforts as a way to enhance surge capacity when additional treatments are needed to manage infectious disease outbreaks or bioterrorism attacks. OPQ also aims to launch a structured approach to the manufacturing supplement review process to better manage product changes through the drug lifecycle.

	An important goal for Woodcock is to complete the overhaul of the new drug review process to better manage CDER’s growing volume of applications. She recently named Peter Stein director of the Office of New Drugs (OND), and long-time CDER guru Bob Temple will become OND senior advisor, positioned to address the more controversial and difficult drug development and review issues. Woodcock hopes to finalize the OND reorganization by next summer, but it has been delayed by difficulties in gaining Congressional approval of a new user fee program for improving the regulation of over-the-counter drugs.

	Modernizing the review process will involve implementing new automation tools for managing drug applications, study data, and review documents under a “multi-disciplinary, issue-based review document” system. CDER also will continue to carry out provisions of the 21st Century Cures Act and reauthorized user fee programs to further advance patient-focused drug development, expanded use of real-world evidence, novel clinical trial design, and added authorities to hire more experts needed to carry out these multiple drug regulatory programs.

	1. US Congress, HR 6, Substance Use–Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act, Oct. 24, 2018, 

www.congress.gov/bill/115th-congress/house-bill/6/all-info


	Volume 43, No. 1
	January 2019
	Page: 14-15

	When referring to this article, please cite it as J. Wechsler, "CDER Priorities for 2019: Opioids, Quality, Safety, and Innovation," 

FDA plans to support initiatives to ensure that all medicines are safe, effective, and of high quality.

CDER Priorities for 2019: Opioids, Quality, Safety, and Innovation

	Patients, providers, and policy makers are up in arms over persistent and more prevalent shortages of important medicines, primarily generic sterile injectables needed to treat critical diseases and infections, provide emergency care, and enable surgery and multiple aspects of medical care. Despite ongoing efforts to address the problem, FDA now sees a rise in active shortages and in the duration of supply problems. Some shortages have lasted more than eight years, according to 

 in November sponsored by FDA and the Duke Margolis Center for Health Policy, and solutions remain elusive.

	Stakeholders participating in the FDA public meeting look to address the systemic root causes of shortages, with a focus on the economic incentives likely to drive product quality, supply chain resiliency, and appropriate reimbursement for drugs. In some cases, said 

, “the prices reimbursed on these drugs have been driven down to such low levels, that it makes it hard to manufacture them profitably and have enough margin left over to invest in modern manufacturing upgrades." Adam Kroetsch, deputy director of the office of program and strategic analysis in the Center for Drug Evaluation and Research (CDER), linked shortages to older generic drugs where the market fails to reward product quality and reliability.

	Consolidation throughout the supply chain was cited as a key factor in aggravating shortages. Mergers in the generic-drug industry can limit production of a drug to one firm and minimize sources of key ingredients. A handful of hospital buying groups and large distributors, moreover, limit competitive bidding opportunities and overall reimbursement for common, but important, injectables.

	A full range of issues and proposals will be weighed by an FDA 

, formed in July 2018 in response to rising concerns from members of Congress. The panel includes representatives from the Centers for Medicare and Medicaid Services, the Federal Trade Commission, and other federal agencies, as well as senior leaders from FDA. The group has been meeting with manufacturers and other stakeholders leading up to the public meeting with the goal of developing a report to Congress outlining a policy framework to resolve the problems underlying persistent drug shortages.

	Manufacturers at the meeting cited unclear or changing FDA product development standards and noted that efforts to scale up production to address a shortage can be stymied by FDA’s complex post-approval changes requirements. Several speakers urged greater transparency in agency warning letters and inspection reports to provide information earlier on where quality problems at one manufacturer may lead to limited production and create an opening for added competition. To avoid delays in gaining FDA approval of new or upgraded facilities to produce alternative products, the agency noted its adoption of a more efficient inspection program for sterile drug facilities, with more transparent quality standards that will make the oversight process more predictable.

	There was disagreement among participants on some issues, with certain manufacturers seeking incentives to produce drug components in the United States to shorten supply chains, while others maintained that high-quality products can be obtained reliably overseas. Generic-drug makers urged flexibility in meeting product standards that FDA revises after drug development and testing is underway. David Gaugh of the Association for Accessible Medicines (AAM) 

 or other assistance to help manufacturers upgrade or build new manufacturing facilities to provide excess capacity for when shortages occur and to establish a national contingency plan to stockpile critical medicines.

	FDA officials continue to urge industry to adopt more reliable, high-quality manufacturing systems to avoid production breakdowns, but gains have been elusive. A CDER quality metrics initiative has been mired in dispute for months over what and how to measure quality operations and a firm’s “quality culture.” CDER’s emerging technology program offers advice and support to companies looking to adopt continuous manufacturing and other advanced production technologies, but uptake has been limited. Efforts to streamline the post-approval changes process also have fallen short in modifying agency oversight of manufacturing revisions. At the same time, newer just-in-time manufacturing systems that reduce vendor inventories may increase vulnerability to unexpected shortages. All these issues are before the FDA taskforce and will be considered in its report on the multiple challenges for all supply chain parties in preventing drug shortages to ensure public health.

Despite ongoing efforts to address drug shortages, FDA now sees a rise in active shortages and in the duration of supply problems.