Cost and Compliance Dominate Agenda for 2011

The political tensions wrought by last November's mid-term elections will affect pharmaceutical manufacturers in many ways in the coming year. Congressional Republicans will seek to cut the federal deficit by squeezing resources to government agencies, including the US Food and Drug Administration. New House leaders may also seek opportunities to criticize lax regulatory oversight and drug quality failures that compromise product safety. Pressure on federal agencies to appear as tough regulators and to obtain additional revenues will intensify government efforts to fine violative companies and to ratchet up industry user fees.

Challenges to the Obama administration's healthcare reform program are likely to create uncertainties about whether new fees and policies will be implemented as planned. The alternative is that manufacturers may have to pay stiffer rebates and taxes without the benefit of gaining millions of additional customers as part of a reformed affordable-access health-insurance system. The conventional wisdom is that President Obama has one year to enact any new legislation or establish new programs before the political infighting becomes even more intense leading up to the 2012 Presidential elections.

Jill Wechsler

Fees first

The Prescription Drug User Fee Act (PDUFA) has to be reauthorized by Oct. 1, 2012, in order for FDA to continue collecting nearly $700 million in fees to support the review process for drugs and biologics. Although that legislative deadline may seem far away, FDA wants to have a PDUFA V plan ready for public review by fall in order to transmit it to Congress early 2012. Failure to reauthorize user fees by next summer theoretically would force FDA to lay off hundreds of staffers and shut down its drug review process.

In April 2010, FDA's Center for Drug Evaluation and Research (CDER) launched a two-year process for revising PDUFA. CDER Director Janet Woodcock noted that 65% of human drug review funding comes from user fees, a situation that some critics claim makes the agency overly dependent on industry. Yet, despite some qualms about the current program, no one suggests that FDA curtail any activities or cancel the fees.

Bio/pharmaceutical companies offered general support for user fees, while pointing out that multiple postmarketing requirements are slowing down the drug-review process and undermining approval timeframes. Patient advocates, pharmacists, and doctors agreed that the proliferation of risk evaluation and mitigation strategies (REMS) made drug development more costly and complicated prescribing and dispensing. Consumer groups focused more on direct-to-consumer (DTC) drug advertising, seeking user-fee support for mandatory pre-review of DTC advertisements, clearer prescribing information, better protection of patients in clinical trials, and more comparative studies to ensure that new drugs are superior to those already on the market.

FDA has been discussing these and other issues at meetings with manufacturers, patient and consumer groups, healthcare professionals and academic experts, as part of a broad, transparent consultative process required by the FDA Amendments Act (FDAAA) of 2007. A key FDA goal for PDUFA V is to gain more flexibility in meeting review timeframes and responding to sponsor meeting requests. The agency has proposed extending the review clock for more complex applications such as those with REMS, those that require advisory committee meetings, or those that involve inspections of foreign manufacturing facilities. But manufacturers fear that most new drug application (NDAs) would qualify for extensions under these criteria.

The overarching issue is to what extent industry fees should fund FDA initiatives to improve drug development and regulatory science. FDA proposes to tap fees to increase staff consultations on quality-by-design and other complex manufacturing issues, on innovative clinical trial designs, on using biomarkers in drug development and for standardizing electronic submissions. Additional resources also could support the Sentinel active surveillance system, standards for meta-analysis, biomarker qualification, development of treatments for rare diseases, and improved dose selection and drug-safety assessments. But this year's fee to process an NDA with clinical data already exceeds $1.5 million, up from $1.17 million in 2008, and manufacturers are wary that expanding the pool of activities supported by PDUFA would boost industry outlays disproportionately.

Many of these issues will be addressed by Congress as it crafts a broader FDA reform bill that includes PDUFA reauthorization. As with FDAAA, this "must-pass" legislation will be a prime candidate to carry measures establishing a host of new FDA policies and programs: curbs on drug advertising, expanded drug reimportation, ban on pay-for-delay deals between innovator and generic-drug makers, refinements to the REMS program, new requirements that drugs demonstrate comparative superiority, and enhanced FDA authority to pull drugs off the market and to issue subpoenas are some of the possibilities.

Going for generics

Another provision in an FDA reform bill could authorize the collection of user fees for generic drugs. The issue has been discussed for years, but opposed by generic firms because even speedier reviews of abbreviated NDAs (ANDAs) won't help manufacturers if patent disputes delay marketing of new products for months, or even years. However, FDA's Office of Generic Drugs (OGD) is so overwhelmed by ANDAs (now over 800 a year) that approvals take months, and the backlog has grown to more than 2000 pending submissions. Agency officials are therefore pushing hard for industry to agree on a GDUFA, or generic drug user fee, program.

FDA held a public meeting in September 2010 to hear from generic-drug firms, along with consumer groups and pharmacists, on the shape and scope of such a program. FDA Commissioner Margaret Hamburg opened the session with a plea that "something must change" to prevent a crisis situation where FDA is unable to approve a new generic drug in time to reach consumers when innovator exclusivities expire. CDER Director Woodcock noted that generic drugs are the only FDA drug-review program not supplemented by user fees and that it's time to "get this show on the road."

The Generic Pharmaceutical Association (GPhA) and a coalition of major manufacturers (Teva, Apotex, Hospira, and Perrigo) agreed on the need to pay application fees to support a faster and more reliable review process. Approval goals and metrics would be clearly spelled out, and manufacturers would be able to pay an added fee to move a product off the review queue. Heather Bresch of Mylan, however, proposed a system with separate annual fees for approved products, for manufacturing establishments and for inspections—but no application-review fees due to the uncertainties of when a newly approved generic drug will come to market.

FDA wants a common GDUFA proposal from industry. Woodcock and her colleagues emphasize the need to tap fee revenues to support timely inspections of bioequivalence testing labs and of manufacturing sites, particularly foreign producers of active pharmaceutical ingredients. Such enhanced oversight not only could accelerate patient access to low-cost drugs, but also bolster public confidence in the quality and safety of generic drugs.

Biosimilars take shape

Another important FDA initiative is to establish standards and policies governing the development and approval of "similar" versions of biotech therapies. Patient and consumer groups and health plans and payers are pressing for a clear biosimilar development pathway to facilitate access to less costly therapies, a goal that will be increasingly important as more biologics come on the market.

FDA held a two-day public meeting in November 2010 to launch the process for establishing a framework for approving biosimilars, as stipulated by the Affordable Care Act (ACA) enacted in March 2010 (see the December 2010 Washington Report column, "Pharma Faces New Political Landscape"). A long list of brand and generic-drug manufacturers testified on the scope and size of tests and data needed to document the safety and efficacy of such products, and FDA will be digesting these and other comments in the coming months. FDA officials appeared interested in identifying a middle ground between ensuring product safety and efficacy, and making affordable new treatments available to patients.

Commissioner Hamburg indicated at a later meeting that a complete approval pathway for biosimilars may be elusive because the science and products will evolve continuously. For this and other reasons, some generic-drug makers suggest that they may skip the biosimilar process altogether and seek approval of follow-ons as licensed innovator products. That approach would benefit from some public knowledge about an innovator product, but avoid exclusivity battles and other legal issues that might delay market approval for the follow-on product.

Comparing effectiveness

Obama's healthcare reform legislation also expanded federal support for comparative effectiveness research (CER), and that initiative has already begun to take shape. The governing board for the Patient-Centered Outcomes Research Institute (PCORI) held its first meeting in November. It adopted bylaws and explored operating procedures and is now conducting a search for an executive director. Additional priorities are to work with the Institute's new Methodology Committee and to develop a communications plan, including guidelines for interacting with interest groups and for disseminating PCORI findings.

Before PCORI awards any grants for new CER projects, the Board wants to assess what research and analysis already is going on in this field and where there are information gaps to fill. The US Department for Health and Human Services (HHS), the National Institutes of Health, and the Agency for Healthcare Research and Quality have dispersed $1.1 billion to CER projects during the past two years—the funds were provided by the economic stimulus legislation of 2009, and most of these initiatives are up and running.

PCORI may gain assistance for conducting an environmental scan of current CER work from a planned HHS initiative to establish an online CER catalog. Similarly, the Partnership to Improve Patient Care is creating a database of federally funded CER projects to provide patients and healthcare professionals with information on treatment options. PCORI also would like to review state and private CER initiatives sponsored by insurance companies and research organizations to help identify opportunities for early projects that can increase general understanding of CER and further illuminate PCORI's role.

Although comparative effectiveness is not a formal component of drug development in the US, increased government involvement in this field is slated to pressure pharmaceutical companies to demonstrate the value of new therapeutics, especially for crowded drug classes. The development of CER standards and methodologies promises to impact the scope of evidence required by regulators to reduce uncertainty, which will be an important development for manufacturers.

Costs drive compliance

By steering patients and providers to the most effective treatments, CER advocates hope to improve healthcare quality, while also reducing spending on medical services and products. With healthcare consuming an ever-growing portion of federal and state budgets, authorities are looking hard at all opportunities to save money, and healthcare fraud and abuse seems to be a prime target. The Justice Department announced in November that it had recouped $3 billion in civil settlements and judgments last year, much of it from pharmaceutical companies.

At the top of the list is Pfizer's (New York) $2.3-billion settlement for promoting unapproved drug uses and illegal marketing, the largest healthcare fraud payment in history. That surpassed an earlier $1.4-billion deal with Eli Lilly (Indianapolis) for illegal marketing of its pain reliever Bextra. AstraZeneca (London) agreed to a $302-million civil settlement, Novartis (Basel) paid $193 million, Teva (Jerusalem) was hit with a $100 million fine, and Forest Laboratories (New York) doled out $93 million.

There's no sign of any let-up: in October, GlaxoSmithKline (GSK, London) agreed to a $750-million settlement, in this case for failing to correct manufacturing problems at a Puerto Rican plant that resulted in adulterated products. And Merck & Co. (Whitehouse Station, NJ) negotiated a $950-million deal with the US Department of Justice (DOJ) to settle marketing violations related to Vioxx (on top of the $5.6 billion the company has paid out to settle various Vioxx lawsuits and claims). Extensive layoffs throughout the pharmaceutical industry will only encourage more dismissed workers to blow the whistle on malfeasance by former employers. And industry cost-cutting appears to be eroding plant maintenance and increasing reliance on foreign suppliers, giving rise to serious product quality problems and product recalls and shortages.

The crackdown on illegal drug company behavior is slated to intensify as regulators and prosecutors look for more stringent enforcement actions to convince corporate leaders of the importance of complying with FDA marketing and manufacturing rules and of addressing violations cited in warning letters. One strategy is for the federal government to bring criminal charges against individuals considered responsible for serious violations. The first shoe fell in November when the DOJ charged a former GSK executive with making false statements and blocking an FDA investigation into off label uses. The trial begins in February, and conviction could bring a jail term as well as fines.

In addition to the threat of jail time, prosecutors also are looking to ban companies committing fraud from doing business with Medicare and Medicaid. The HHS inspector-general issued guidelines in October 2010 that signal more aggressive pursuit of exclusion penalties against executives who should or could have known of illegal behavior. Last year, KV Pharmaceutical (Bridgeton, MO) had to sever ties with its CEO when he was hit by an exclusion order that would have halted company sales to federal agencies.

KV is one of several leading pharmaceutical companies embroiled in drug manufacturing and quality control issues that have drawn the scrutiny of FDA and Congress. Johnson & Johnson (J&J, New Brunswick, NJ) made front-page news throughout 2010 with multiple recalls of McNeil Consumer Healthcare's over-the-counter painkillers and cold medicines. Pfizer and J&J also had to recall thousands of drug packages tainted by foul odors that evidently came from chemicals applied to shipping pallets used in Puerto Rican plants. Glass flakes have been found in intravenous drugs made by Amgen (Thousand Oaks, CA) and Novartis.

FDA wants to conduct more inspections of foreign plants and to move aggressively against manufacturers found in violation of the rules. In addition to waving the enforcement stick, agency leaders talk of more guidance and assistance to help companies meet quality and safety standards and to bring high quality drugs more quickly to patients. The challenge is for industry and regulators to find the resources and appropriate policies to achieve these objectives in the coming year.

Jill Wechsler is Pharmaceutical Technology's Washington editor, 7715 Rocton Ave., Chevy Chase, MD 20815, tel. 301.656.4634, jwechsler@advanstar.com.