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

Jill Wechsler

	Concerns that high and rising drug prices hinder patient treatment will continue to shape pharmaceutical markets in what promises to be a tumultuous year in Washington. Policy makers will weigh access to medicines with the desire to encourage biopharmaceutical R&D, which relies on regulatory efforts to streamline clinical research, ensure product quality, and achieve more efficient oversight. The November mid-term Congressional elections already are heating up, as Republicans seek to maintain control of the House and Senate amidst continuing debate over government funding and healthcare policies. These developments will affect resources and initiatives for FDA, the National Institutes of Health, and federal and state health programs. 

	Global regulatory issues will be important, as drug sourcing and production expands overseas and disease outbreaks threaten public health around the world. International harmonization of regulatory standards and mutual recognition agreements will advance as authorities look for efficiencies in ensuring drug quality, in managing product lifecycles, and in blocking illegal trafficking of counterfeit drugs. Drugmakers also face extensive changes under Brexit, including relocation of the European Medicines Agency to Amsterdam and the need to ensure appropriate marketing authorizations in Europe. 

	The heated, ongoing debate over revising the Affordable Care Act (ACA) and state Medicaid and children’s health programs will remain in the spotlight as manufacturers evaluate how policy changes may limit drug coverage and reimbursement. Pharma companies backed the ACA and agreed to pay millions in additional taxes to expand pharmacy benefits. Now consumers may face higher out-of-pocket costs that will squeeze drug utilization and ignite further efforts to rein in pharmaceutical prices. The Centers for Medicare and Medicaid Services (CMS) recently revised how Medicare Part B pays hospitals for administering certain drugs and seeks to facilitate coverage of newly approved biosimilars and generic drugs. A new proposal calls for Medicare Part D prescription drug plans to share with patients the rebates and discounts negotiated by manufacturers and pharmacy benefit managers (PBMs). This push for more transparency in drug prices and discounts could erode revenues for PBMs and further escalate the finger-pointing by manufacturers, insurers, and PBMs over who’s to blame for high-priced medicines. 

	These trends will build interest in value-based pricing strategies that link drug reimbursement to patient response to treatment. CMS and insurers also contemplate arrangements that spread reimbursement over several years for important one-time therapies. Manufacturers will need strong data to justify launch prices, especially for targeted therapies. And payers will look more to reports from the Institute for Clinical and Economic Review (ICER) and other third-party analysts on whether benefits of a new medicine justify costs. 

	A main concern for the biomedical research community is that any form of price controls would discourage private investment in biomedical innovation and limit development of new cures for critical diseases. Even though drug companies enjoy healthy profits, policy makers are reluctant to dampen the current boom in scientific discovery that has led to new gene and cellular therapies and robust R&D pipelines. FDA approved more than 40 novel medicines through early December 2017, heading for a record year. 

	US-patent policy and market exclusivity provisions are crucial to maintaining an inviting climate for investing in the biotech industry, but issues have emerged about innovator firms using patents to block competition. The development and marketing of new biosimilars face delays from intense patent battles, and a recent effort to extend protections by transferring patents to a Native American tribe has generated a strong backlash. These actions fuel questions about over-extended exclusivity periods for newly approved drugs and biologics, particularly for orphan drugs and reformulated products. The Supreme Court will weigh related issues as it considers an important case in 2018 that could revise the current US Patent Office process for reviewing patent challenges. 

	While FDA generally avoids involvement in pricing issues, commissioner Scott Gottlieb looks to enhance consumer access to medicines by promoting market competition. A main strategy is to speed the development and approval of generic drugs, particularly for complex therapies and combination products and in classes dominated by one or two brands. Gottlieb also wants to prevent brands from blocking generic-drug makers from obtaining supplies needed for bioequivalence testing and other tactics that delay market entry. 

	More efficient and timely FDA review and approval of new medical products also will enhance competition, and the agency should gain added flexibility in this area from implementing the 21st Century Cures Act and reauthorized user fee programs. Further advances should emerge in the coming months as Gottlieb unveils more proposals for spurring efficient clinical research methods, particularly to broaden indications for cancer therapies, and wider use of digital technology and updated information systems. Janet Woodcock, director of the Center for Drug Evaluation and Research (CDER), is working to further automate and better manage the new drug development and application review system. And Peter Marks, director of the Center for Biologics Evaluation and Research (CBER), is implementing a framework for identifying and evaluating regenerative medicine advanced therapies (RMATs), including gene therapies. 

	To meet goals for the timely evaluation of applications for these cutting-edge medicines, including priority generics, FDA wants manufacturers to update facilities and processes to ensure more reliable production of high-quality medicines so that manufacturing issues will not delay the approval of new breakthrough drugs or biosimilars. To this end, FDA is requiring applications for new drugs, biologics, and generics to list all facilities involved in product testing and production in order to meet accelerated review goals. Ongoing shortages in sterile injectibles, biotech therapies, and even conventional drugs spotlight the need for industry to invest in modern facilities and quality operations able to detect and prevent distribution of adulterated and contaminated medicines. 

	The deadly opioid epidemic, which is taking thousands of lives and driving up healthcare costs on every level, presents serious challenges to pharmaceutical companies. Health authorities and medical practitioners recognize the need for pain medicines for patients with genuine need of treatment, while also struggling to curb excessive prescribing and distribution of drugs subject to abuse and misuse. Congress and the White House have rolled out policies and plans for limiting inappropriate opioid use and for expanding treatment for addicts and access to opioid overdose rescue drugs to lower the death rate from abuse and will look to implement new strategies more effectively. 

	FDA has ramped up its direct involvement in tackling opioid abuse by encouraging research on new non-opioid pain treatments and more effective medicines to prevent and treat addiction. A related goal is to help overcome hurdles in developing low-cost generic abuse deterrent formulations (ADFs) and overdose treatments and to devise more secure packaging and distribution strategies for pain medications. 

	On the international front, FDA is collaborating with other agencies to combat import of falsified/substandard medicines, including dangerous pain treatments from overseas. At home, opioid manufacturers face criminal investigations and lawsuits for excessive marketing and distribution of these products, and legal challenges are likely to escalate as overdose rates continue to rise.


	Vol. 42, Issue 1
	January 2018
	Pages: 20-21

	When referring to this article, please cite it as J. Wechsler, "Drug Pricing and Quality Are Top Issues for 2018," 

Articles

Policy makers look to boost generic drugs, curb opioid abuse, and maintain incentives for innovation.

Drug Pricing and Quality Are Top Issues for 2018

	Congress delivered a significant Christmas present to President Trump this week-and to industry-by enacting landmark tax reform legislation that makes major changes in the corporate tax structure. The result may be billions in savings for multi-national biopharma companies. In addition to lowering the overall corporate tax rate from 35% to 21%, the measure simplifies the rules for expensing new investment purchases and eliminates the alternative minimum tax for business-a change that will enable many firms to take advantage of the R&D tax credit, which was retained.

	A notable provision in the massive bill overhauls US taxation of multi-national companies. The measure creates a modified territorial system that taxes domestic profits, instead of taxing income earned abroad. It also will permit corporations to bring back to the United States profits earned overseas at a much lower tax rate, which could affect more than $2 trillion in offshore foreign income held by US-based companies, including some $100 billion held by pharma companies.

	This revision aims to stop the shift of profits by American firms to affiliates in lower-tax countries, which supporters claim will expand investment and create more jobs at home. Yet, the rules are complex, and US firms may continue to find it attractive to invest overseas. This and other related tax changes also could alter how foreign-based multinationals do business with US firms and could interrupt global supply chains and violate World Trade Organization rules and tax treaties.

	It also remains to be seen how much the new policy benefits the US economy. A “tax holiday” on repatriated funds in 2004 yielded few new jobs, and analysts expect a similar outcome this time. Pfizer recently said it would share newly gained funds with investors in the form of a dividend hike and stock buybacks. Pharma companies also indicate plans to use repatriated income to underwrite mergers and acquisitions, which would have a range of economic impacts.

	A main loss for biopharma companies involves a cut in tax benefits for developing new treatments for rare diseases. The legislation reduces the orphan drug tax credit from 50% to 25% of qualified research and clinical testing activities-not as damaging as an initial proposal to eliminate the credit altogether, but still a hard blow that was strongly opposed by biotech companies and rare disease patient advocates.

	The tax gains for pharmaceutical companies, moreover, may be offset by provisions likely to reduce health insurance coverage for millions through the insurance exchanges established by the Affordable Care Act (ACA). The legislation eliminates the ACA mandate that individuals purchase health insurance, which is predicted to lead more healthy people to opt out. Those consumers retaining coverage may see prescription drug benefits squeezed as plans gain more leeway to limit formularies. The result may be a notable reduction in prescription drug utilization and reimbursement and further pressure on drug costs and prices. 

New tax legislation may result in savings for biopharma companies.

Tax Overhaul a Plus for Pharma

	FDA officials continue to be alarmed about violative production practices and inadquate quality control at drug outsourcers, as seen in a rise in warning letters and citations to contractors and their pharma clients. Contract manufacturing has gone “from bad to worse,” in the pharmaceutical compliance area, said Donald Ashley, director of the Office of Compliance (OC) in the Center for Drug Evaluation and Research (CDER), at the Enforcement, Litigation and Compliance conference sponsored by the Food & Drug Law Institute (FDLI) in December 2017 in Washington, DC. Ashley noted that FDA has issued approximately five warning letters to contract manufacturing organizations (CMOs) in the past year and to the product “owners” or license holders for drugs made at facilities that fail to meet standards.

 issued in July 2017 to Sage Products, Inc., Ashley noted, cites the product owner for lax oversight of a contractor that produced oral solutions using the same equipment in which it made toxic car washes and waxes.  “Contractors are extensions of the manufacturer,” the letter states, and manufacturers are required to ensure that their drugs are made in accordance with FDA regulations to ensure product safety, identify, strength, quality, and purity. FDA sent a 

 to the CMO, ChemRite CoPac in Wisconsin, emphasizing its responsibility for the quality of drugs it producers for clients.

	Letters to manufacturers citing contractor failures emphasize that the license holder remains ultimately responsible for ensuring that all products meet standards for good manufacturing practices (GMPs).  “You can’t contract around” cGMPs, commented Paula Katz, director of the manufacturing quality and policy staff in OC’s Office of Manufacturing Quality (OMQ). She noted that FDA encourages pharma companies to define expectations and responsibilities upfront in quality agreements with contractors. Even though FDA regulations do not require such agreements, the agency considers clear statements by manufacturers and contractors critical to understanding which party is responsible for rejecting unsuitable products and for responding to complaints.

	Continued problems related to contract manufacturing reflect a steady expansion in drug outsourcing arrangements. More contracting with overseas producers and a related increase in FDA inspections of foreign manufacturing facilities, moreover, is uncovering more violative operations. And the rise in “virtual” biopharma operations increases reliance on contractors for manufacturing, as well as research, distribution, and other operations. 

 its recommendations for product owners and contractors to negotiate and agree on contract manufacturing agreements for drugs that define expectations and responsibilities for all parties. The guidance applies to producers of a broad range of drug and biotech products, but not ingredient suppliers and distributors through the supply chain, Katz explained at the FDLI conference. Quality agreements require clear language defining key roles and responsibilities and identify products and services covered. The document should provide points of contact for approving various activities and how disagreements will be resolved. Management of lifecycle changes is important, and agreements should specify what changes implemented by the contractor warrant notification to the product owner and which require prior approval from FDA, Katz added. Contractors and owners need to understand the risks that changes may affect product quality and agree on procedures for conducting validation activities to implement such changes.

	In addition to FDA’s guidance, the need for clear agreements on contract manufacturing is cited in multiple quality standards established by the International Council for Harmonization (ICH). These similarly emphasize that the pharmaceutical company is ultimately responsible for ensuring that outsourcers adhere to quality systems, purchase quality materials, and comply with cGMPs.

An increasing number of warning letters shows that FDA is observing more problems with pharmaceutical contract manufacturing.

Contract Manufacturing Raises Regulatory Concerns

	Advances in biomedical science transformed medicine in 2017, as seen in FDA approval of the first gene therapy that modifies human cells to treat and possibly cure a deadly disorder. Recent months have witnessed the emergence of truly breakthrough therapies, led by Novartis’ CAR-T therapy Kymriah (tisagenlecleucel) for patients with relapsed acute lymphoblastic leukemia; this approval was followed by Yescarta (axicabtagene ciloleucel) from Gilead Sciences and Kite Pharma for broader treatment of a similar lethal condition. Spark Therapeutics’ Luxturna (voretigene neparvovec) promises to cure a rare genetic eye disorder that causes blindness. FDA reports that some 40 companies are developing CAR-T technologies for multiple indications and that it is monitoring more than 600 active investigational new drug applications (INDs) related to gene and cellular therapies.

	Biopharma researchers also are achieving success in developing oligonucleotide therapies, including antisense drugs and short interfering RNA treatments (siRNAs) that can modulate immune pathways. Safety issues derailed advances in this area some 20 years ago, but now better understanding of oligo chemistry and product characterization are driving research programs. FDA set the pace in approving Biogen’s Spinraza (nusinersen) in December 2016, a first treatment for spinal muscular atrophy, which is often fatal for infants. More controversial was FDA’s approval of Sarepta Therapeutics’ Exondys 51 (eteplirsen) to treat Duchenne muscular dystrophy, due to its reliance on an uncertain surrogate endpoint to demonstrate efficacy. 

	Scientific advances in genome editing technology, such as CRISPR-Cas9, also expand possibilities for using gene editing techniques to correct disease-causing mutations. While systems that edit DNA are hard to reverse, changes from RNA-editing procedures disappear over time, which can be a plus, or a liability, depending on the situation. Although the long-term effects of these drugs are unknown, these initial successes have spurred optimism about further development of treatments for both rare and more prevalent serious conditions, particularly neurological diseases such as ALS, Alzheimer’s disease, and Huntington’s disease. 

	Better understanding of manufacturing, formulation, and pharmacology of these emerging products is important in advancing development beyond early testing stages. At a conference in October 2017 on oligonucleotide-based therapeutics sponsored by FDA and the Drug Information Association (DIA), experts explored strategies for tackling quality risk management, setting specifications, and assuring compliance with chemistry, manufacturing, and control (CMC) standards for experimental treatments. Presentations covered the importance of control strategies and the need to characterize and qualify impurities, including the use of platform data in assessing oligo impurities. 

	Firoz Antia, director of technical development at Biogen, described the complexities of addressing CMC issues in developing Spinraza, citing challenges in establishing impurity controls for starting materials, achieving process consistency, and classifying critical vs. non-critical limits. Specifications for clinical batches had to be negotiated, along with strategies for gaining waivers from in-country testing requirements for limited clinical supplies. FDA approved Spinraza with a number of post-approval study and quality assessment commitments, including programs to re-evaluate drug substance method validation data and acceptance criteria, to re-examine impurity acceptance criteria based on data from commercial batches, and to conduct stability testing on drug product process validation batches. The company also may find it appropriate to tighten specification limits and may explore room temperature storage possibilities and a continuous manufacturing system for future production. 

	These challenges were echoed by Vidhya Gopalakrishnan, senior vice-president at Quark Pharmaceuticals, which has several oligo compounds in clinical trials. Development involves controlling for impurities in clinical supplies and establishing CMC strategies for global product development, he observed. And process scale-up further requires identification and qualification of thresholds and specifications.  

	The process of developing and delivering cutting-edge gene therapies also involves ensuring reliable and accurate delivery and dosing for patients, objectives that increasingly involve devising combination products that utilize prefilled syringes and autoinjectors for safe and accurate patient treatments. Biopharma manufacturers thus face additional challenges in working with device makers to devise, test, and produce reliable and efficient combination products, commented Bret Coldren, director of pharmaceutical development at Ionis Pharmaceuticals at the oligo conference. He emphasized the importance of establishing and evaluating device design controls early in drug development and of ensuring compatibility of the components, as drug viscosity may affect syringe design, and inhalation devices need to efficiently target a lung treatment. 

	Provisions in the 21st Century Cures Act and in the FDA Reauthorization Act (FDARA) approved in August 2017 bolster FDA’s Office of Combination Products (OCP) and its role in advising on whether a new combination therapy should be designated as a drug, biologic, or device, key to determining which FDA center serves as the regulatory lead. OCP officials and other FDA staffers outlined the latest developments in this area at a DIA conference on combination products, also in October in Bethesda, MD, highlighting efforts to update existing guidances and to prepare additional advisories on labeling issues and bridging studies. 

	A main OCP initiative is to provide more assistance to manufacturers, particularly those developing more complex cellular and gene therapies that seek to utilize auto injectors, metered dose inhalers, and nasal sprays. OCP receives hundreds of inquiries on issues related to product classification, many seeking early advice on the regulatory designation process. FDA officials emphasize the importance of achieving consistency throughout the agency in making timely decisions on combination product oversight to support the development and approval of innovative drug delivery approaches. 

	Strategies for complying with good manufacturing practices (GMPs) are important in developing combination products, which face different rules on quality manufacturing for drug and device components. FDA has been working to explain and streamline the process for meeting manufacturing standards for both components, as seen in 

 that was finalized in January 2017 (1); further clarification of the process is due next year. FDA officials say they are open to considering alternative proposals from manufacturers for GMP compliance and advise firms to indicate clearly in submissions how multiple facilities aim to achieve standards. 

	Another key issue for combination products is to understand and comply with human factor study requirements. Guynh Nhu Nguyes, associate director for human factors in the Division of Medication Error Prevention and Analysis in the Center for Drug Evaluation and Research (CDER), outlined at the oligonucleotides conference how human factors testing can ensure appropriate dosing and drug delivery and avoid medication errors and patient harm. FDA published a 

 in February 2016 on human factors studies for combination products (2) and is reviewing comments to finalize the policy. 

	As FDA and industry continue to scope out regulatory pathways to bring critical new therapies to patients, they will be looking for strategies to address the high cost of gene and other breakthrough products that threaten to limit patient access to treatment. Current processes for developing and delivering complex new drugs are expensive and contribute to higher prices for these vital therapies. The situation puts a premium on efforts by FDA and biopharma companies to identify efficiencies and improved methods for testing and producing cutting-edge medical technologies. It also highlights the importance of strategies that encourage coverage and reimbursement for life-saving therapies by both public and private payers. 

Guidance for Industry and FDA Staff: Current Good Manufacturing Practice Requirements for Combination Products, Final Guidance

Human Factors Studies and Related Clinical Study Considerations in Combination Product Design and Development, Draft Guidance for Industry and FDA Staff


	Volume 41, Number 12
	December 2017
	Page: 12–13

	When referring to this article, please cite it as J. Wechsler, “Transformative Medicines Challenge FDA and Manufacturers," 

New gene therapies and combination products require innovative regulatory approaches. 

Transformative Medicines Challenge FDA and Manufacturers

	The high and increasing costs of prescription drugs are “unsustainable” and can impede patient access to quality care, according to a 

 on “Making Medicines Affordable: A National Imperative” from the National Academies of Sciences, Engineering, and Medicine. Although the report acknowledges great success in recent years in the development and delivery of important new drugs by biopharmaceutical companies, and the possibility that curbs on drug prices could limit R&D, the health policy experts conclude that the greater imperative today is to make prescription medicines more affordable for everyone.

	To this end, the panel chaired by Norman Augustine, former CEO of Lockheed Martin, urges the federal government to use its considerable purchasing power to directly negotiate prices of medicines. It also advises Congress to expand flexibility in formulary design to minimize consumer costs. Such negotiations would gain from greater transparency in prices, profit margins, and financial flows through the biopharmaceutical supply chain. Insurers, moreover, should disclose average net prices paid for drugs, and data from manufacturers would clarify average net volume and drug prices in different markets. And reimbursement policies would be revised to avoid encouraging clinicians to administer more costly medicines in doctors’ offices.

	To prevent inappropriate prescribing of newer, more expensive therapies, the panel also seeks to discourage direct-to-consumer advertising of drugs by eliminating the tax deduction for outlays in this area. Clinicians and hospitals would further restrict pharma sales visits, the use of free drug samples, and other inducements.

	Insurers also would set annual limits on beneficiary outlays for prescription drugs and make other changes in drug benefit plans to avoid imposing excessive burdens on individual patients. The report recommends an end to “pay-for-delay” agreements that postpone generic-drug entry into a market and proposes regulatory and legal changes to foster competition. One specific is for Congress to revise the Orphan Drug Act to ensure appropriate use of market exclusivity awards and achieve more reasonable pricing.

	The two industry representatives on the panel of 17 health policy leaders added a dissenting view to the 150-page report, noting challenges in calculating appropriate prices for important new medicines and the need to fully assess how the committee’s recommendations would affect future innovation. Former Merck Executive Vice-President Michael Rosenblatt and former Genzyme Chairman Henri Termeer (who died in May 2017) oppose government negotiating of drugs, formulary exclusions based on price, broader drug importation, greater exercise of government “march-in” rights, and blanket curbs on drug advertising.

	At the same time, five members of the panel complain that the recommendations don’t go far enough to promote transparency and price reform, and that alternative payment models are needed to achieve such goals. 


Experts slam drug prices and endorse government price negotiations and curbs on drug advertising. 


New Report Stresses Importance of Affordable Drugs

	As FDA and industry near the halfway mark in the 10-year process for establishing a national electronic drug tracking system by 2023, there’s considerable concern among pharma companies, wholesaler/distributors, and pharmacists about meeting the deadline. The process for establishing the rules and infrastructure for the track-and-trace system envisioned in the Drug Supply Chain Security Act (DSCSA), part of the Drug Quality and Security Act of 2013 (DQSA), is proving to be complex and challenging for all parties.

 to imprint unique product identifiers on individual packages by November of 2017, saying it would not enforce that policy until Nov. 27, 2018. While major pharma companies are meeting the earlier timeframe for serializing and identifying drug packages, many generic-drug makers and contract manufacturers reported confusion over who is responsible for devising the identifiers and for confirming compliance with requirements. And while manufacturers applauded gaining an additional year to fully identify individual drug packages, pharmacists and other supply chain partners raised concerns that the delay would make it even more difficult for them to comply with reporting requirements for 2018 and 2019.

	Ilisa Bernstein, deputy director of the Office of Compliance in the Center for Drug Evaluation and Research (CDER), described considerable progress in realizing the electronic, fully interoperable track-and-trace system for drugs at a recent conference on implementing DQSA drug compounding and tracking initiatives sponsored by the Food & Drug Law Institute (FDLI). She had to acknowledge that manufacturers and other supply chain trading partners continue to use a wide variety of data transmission modes and formats, that some required data elements are not being exchanged, and that some transactions are still recorded on paper. And parties still are unsure how to report and verify suspect or illegitimate products within set timeframes.

	FDA has yet to announce a pilot program required by the DSCSA to test the use of identifiers to verify transactions and notify parties of errors, and to assess if the system can identify, manage, and prevent the distribution of suspect and illegitimate drugs. FDA intends to launch its pilot soon, said Bernstein, and meanwhile manufacturers and other parties are conducting their own test runs in specific areas. FDA also is working to develop and finalize a long list of guidance documents on key processes and policies, such as dealing with “grandfathered” products in the supply chain when new requirements take effect, and handling waivers, exceptions, and exemptions.

	Many of these issues were raised at an FDA public meeting last August and will be discussed further at another meeting Dec. 5–6, 2017. Electronic interoperability, standards for data exchange, data architecture, and aggregation and inference are on the agenda. A third public meeting in February 2018 will review the status of the supply chain security program and what is needed to achieve a secure distribution system by 2023.

	A thorny issue is data aggregation and inference and whether distributors and pharmacists may “infer” from the bar code on a case of drug product that it contains legitimate and identified packages without having to open every box. In addition, manufacturers remain uncertain about what company address should be used to register a product with FDA in situations involving co-licensed partners or where the license holder does not engage in production. Wholesalers and distributors face difficulties dealing with state licensing requirements, which continue to duplicate or conflict with new FDA registration policies. And all parties wonder how they will meet the 24-hour timeframe for responding to verification requests during lengthy local holidays.

	As the US drug tracking system moves forward, FDA and industry are keeping an eye on similar initiatives in other regions. The Asia-Pacific Economic Community and the World Health Organization are developing track-and-trace toolkits and policies. The International Coalition of Medicines Regulatory Authorities are examining areas for policy “convergence” in this area, and FDA is collaborating with parties developing the European Falsified Medicines Directive to avoid duplication and divergent policies.

Manufacturers and trading partners struggle to meet drug tracking requirements