Congress Has Lump of Coal for FDA in Funding Bill

Congress finished some important work before leaving town for the holidays, finally enacting new funding legislation for the federal government for fiscal 2008. The bill, signed by President Bush December 26, is critical for the Food & Drug Administration, because it allows the agency to start using the new, higher user fees it was authorized to collect by the drug safety law signed in September.

That means the agency can continue its full-steam ahead approach to implementing the user fee provisions of the FDA Amendments Act—the one piece of the legislation that both FDA and industry share unreserved enthusiasm for.

But the new funding comes with a big hitch: a provision stipulating that FDA cannot transfer any money to its other initial priority in implementing the law: the new Reagan-Udall Foundation, a public-private partnership that is supposed to help FDA develop new scientific tools to enhance its regulatory mission.

That may not sound like much to worry about. The new foundation is broadly supported by industry, which welcomes any opportunity to advance drug development science—but it seems like an afterthought in the context of the big changes in FDA’s regulatory authority over drug safety that are the centerpiece of the new law.

There are, however, very significant implications to the dispute, which could ultimately be critical to determining what role industry will have in the development of a new active surveillance system for pharmaceuticals.

Representative Rosa DeLauro, who chairs the House Agriculture Appropriations Subcommittee that oversees FDA, is concerned that the foundation may be an avenue for the pharmaceutical industry to exert more influence over the agency. She registered her concerns in a letter to FDA November 1.

FDA didn’t help the situation when it selected the board members for the foundation. The agency chose a very distinguished group to oversee the foundation, including former GlaxoSmithKline R&D President Tachi Yamada, who now heads the Gates Foundation’s global health program. On paper, Yamada is a perfect choice—his industry R&D background and current philanthropic position are hard to beat when considering the type of people who should oversee the foundation.

But the timing of the choice was disastrous. FDA announced the board selections on November 15—the same day that the Senate Finance Committee released a report on its investigation of claims that GSK intimidated an academic researcher who questioned the safety profile of Avandia. The report reviews a number of communications between GSK and the researcher, including emails from Yamada, and concludes that “the documents in the Committee’s possession raise serious concerns about the culture of leadership at GSK.”

Given DeLauro’s position that the foundation is an avenue to give industry undue influence over FDA, that made the selection of Yamada seem like a blunder.

Industry should hope that cooler heads prevail, and that DeLauro’s concerns can be assuaged. The Reagan-Udall Foundation should be a positive for drug development, and so pharma wants it to get off the ground.

But it is also the most viable short-cut to getting moving on a new active surveillance system for pharmaceuticals. The new law directs FDA to set up a public-private partnership to help build the database and develop the tools for analyzing signals to make regulatory decisions. The agency is leaning towards giving that mission to the new foundation—McClellan was one of the champions of including the provision in the FDA law in the first place.

Putting the new foundation in charge of developing the active surveillance system would address industry’s biggest concern with the project—whether product sponsors will have an appropriate role in shaping the new system.

That’s where things get really tough. DeLauro is already concerned about industry influence in the foundation. And Chuck Grassley, the ranking Republican on the Senate Finance Committee who oversaw the Avandia report, wants to play a role in shaping how the active surveillance project develops—at least to the extent it involves Medicare claims data. And Grassley’s view is that industry should have no role in analyzing that data.

So the fight over Reagan-Udall is probably just beginning. For industry the stakes may be higher than they seem.

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Venturing to Washington II: Fleecing the Drug Industry

The primary concern of Day 1 of the FDA/CMS Summit was just how bad for the industry are the unofficial tollgates of a more safety-conscious FDA and the official post-approval burdens imposed by the FDA Amendments Act.

Day 2 focused on a perhaps more inchoate fear – the chance that payors of all stripes will take the savings they need out of the hide of the drug industry.

And they will need them. Amgen VP of Global Coverage and Reimbursement Josh Ofman noted the variety of ways drugs cut overall health costs – but ultimately acknowledged, as did a variety of other speakers, that cost-containment was going to hit drugs hard – either, says Ofman, through controlling market access, restricting coverage (e.g., through formulary controls), or by imposing conditional coverage.

Most speakers did not expect the industry nightmare of a single-payor to soon take flesh. And the popularity of unfettered drug choice makes dispensing restrictions political and economic non-starters. But without them, the easiest (and most politically popular) target for cutting costs, separately noted Eli Lilly’s top politico Alex Azar and Rob Seidman, the influential former pharmacy chief at Wellpoint, is the biopharma industry—through price reductions and rebates (which fatten PBM profits as much as they cut drug expenses). Drugs covered by Part D—where consumer choice is most obvious (“what do you mean I can’t have Lipitor?” the consumer bellows at the pharmacist)—will likely face the brunt of the pricing assault.

Unfair? Absolutely. As much BS as drug companies hand out about their R&D spend, the fact is they can’t invest in new medicines if they can’t charge enough for the ones they get to market. Investors, for one, won’t allow it. Rob Seidman somewhat cynically commented that if the drug companies can’t create new products for less than $1 billion, they “need to build a better mousetrap.”

So—some mousetrap suggestions. First, there are ways of cutting that cost. Lilly’s Chorus division has shown it can get products to proof-of-concept much quicker than traditional development programs, giving their late-stage clinical colleagues a much broader choice of likely programs to push forward (and their business development colleagues a slew of out-licensing candidates that would otherwise have been dust-collectors on lab shelves).

Second, former Pfizer exec Stephen Williams, now with a new firm he founded called Decisionability, offered an interesting solution to the rising reimbursement risks – securitizing them in much the same way private equity firms and royalty buyers have learned to securitize drug-development programs. Instead of packaging development-stage products into tradeable securities (e.g., Morgan Stanley’s Pharmaceutical Royalty Monetization Assets—click here for more on just how clever the financial community can be), theoretically one could bundle approved products into packages that could cut a sponsor’s risk of reimbursement problems and permit investors to share in the upside of a positive outcome.

But drug companies also need to figure out ways of cutting reimbursement risk without turning to Wall Street. And one very practical solution is to start exploring how to create at least two formulations, one Part D and one Part B, for a molecule entering development (it’s a point we’ve mentioned before—here for example). That means exploring how a small-molecule headed for Part D might be useful in an IV infusion…and doing so at the earliest stages of planning for proof-of-concept. Take those biotechs, for example, developing small-molecule therapies for cancer or as replacements for niche drugs in orphan diseases, like lysosomal storage disorders: oral is convenient, sure. But IV can have both therapeutic and reimbursement advantages, too.

It’s reimbursement-oriented portfolio management – and it’s why R&D executives need to be au courant on the challenges their commercial colleagues face with payors (and why the marketing guys should focus on more than just market size when they kibbitz on drug development issues).

Final suggestion: there were roughly 200 attendees at the FDA/CMS Summit. More than half were the drug companies’ policy mavens. It’s clear, at least to this blogger, that what was once inside-the-beltway wonk material is now central to financial and drug-development strategy. If senior marketing, finance and R&D execs are leaving this stuff to their Washington groups, they’re leaving themselves wide open to the competitors who aren’t.

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DTC User Fees Clear First Hurdle; New Era for Advertisers Ready to Begin

An update on an item we reported last week: the status of the new direct-to-consumer advertising user fee program created as part of the huge Food & Drug Administration Amendments Act enacted in September.

As of November 26, FDA had received commitments from advertisers to submit at least 130 television ads for prescription drugs for pre-review by the agency.

That is well above the 68 commitments the agency needed to get by November 26 in order to launch the program. It is also way more than the 47 commitments the agency had received when Division of Drug Marketing Advertising & Communications Director Tom Abrams provided an update during a Food & Drug Law Institute conference 10 days earlier.

The program was designed with the assumption that there would be about 150 pre-reviews per year. That looks like a pretty sound estimate. FDA may be a little short of that number in advance commitments, but sponsors can decide later in the year to submit ads (albeit with a higher fee as a penalty).

“The next steps are to tally the number of ads and establish the fee per ad,” FDA says. The agency plans to “issue a Federal Register Notice stating the fee and will also invoice the participating companies.” The law requires FDA to have the money in hand by January 26, so there may still be some nervous moments early in 2008 while the agency waits for the checks to come in.

FDA is authorized to collect $6.25 million in fees to fund reviews in 2008, plus another $6.25 million to establish a reserve fund for future years. So if the agency ends up with exactly 130 commitments, the fee for a review will be just under $100,000.

That may sound like a lot to pay for the privilege of having a regulator criticize your ad before it airs.

But it is a pretty small price to pay compared to the alternatives. FDAAA didn't just authorize the new user fee program; it also gave FDA new authorities to punish advertisers that the agency thinks cross the line. Ads pre-reviewed by FDA are safe, as long as the sponsor made all the changes suggested by the agency. The new fines for violative ads start at $250,000 for a first offense, and increase to $500,000 for repeat violations. That’s not a ton of money, but then you have to factor in the cost of being made an example of by the agency.

More importanly, the pre-review program is probably the last chance for industry to fend off more draconian measures to restrict or even ban DTC ads. An outright ban is unlikely to survive Constitutional review by the courts, but that doesn’t mean Congress won’t find other ways to make advertisers miserable.

Now the question is: what exactly will FDA do with its pre-reviews? The agency has always been willing to make comments on ads prior to broadcast, but it has never before had enforcement tools to punish companies that decline to take its advice. We think that change in the balance of power will make a significant difference. You could read more of our thoughts on that in “The New Era of DTC,” from The RPM Report in October.

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Uncertainty Surrounds FDAAA Implementation

The recurring joke at the Food & Drug Law Institute’s November 16 conference on implementation of the Food & Drug Administration Amendments Act was that no one knows what to call the law. The acronym (FDAAA) is decidedly unfriendly, prompting pronunciations ranging from “F-D-triple-A,” to “fuh-DAAAA,” to (our favorite), “F-D’oh.”

The uncertainty about what to call the thing is funny. The uncertainty about what some of the key provisions mean for FDA and industry is no laughing matter.

The FDA speakers at the FDLI conference ended up raising at least as many questions about the new law as they answered. Here are just a few key ones.

(1) When will FDA be able to spend the new user fees it is collecting under the bill? Hard as it may be to believe, the new Prescription Drug User Fee Act, negotiated over the course of 2006 and enacted essentially intact in FDAAA this year, has not yet given FDA the raise it so desperately wanted. FDA started collecting the fees at the new, 25% higher rate on October 1, but because Congress has not yet passed an appropriations bill for the agency, it can’t actually spend the money. FDA Chief of Staff Susan Winckler told FDLI that the agency should be able to cope with the current budget situation for the rest of the year, but it will definitely struggle to meet new performance goals if it doesn’t get authorization to spend the money by the first quarter of 2008.

(2) When do sponsors have to file Risk Evaluation & Mitigation Strategies for drugs currently covered by risk management programs? March 24. Or September 24. It depends how you read the law. FDA Chief Medical Officer Janet Woodcock said that issue will be resolved by the agency’s chief counsel. Since the REMS authority is the centerpiece of the new law—and since it is by no means clear to sponsors what products are going to be covered by the REMS provisions—that is a pretty important deadline.

(3) Will all Phase IV commitments be mandatory under FDAAA, or just ones that FDA considers most critical? “I hadn’t thought about that,” Woodcock said. Typically, new drug approvals include a host of different types of post-marketing commitments, Woodcock noted, some of which are more important than others. But at this point FDA has no idea whether it plans to make all post-marketing commitments mandatory—and hence subject to new enforcement authorities included in the law.

(4) Will the new direct-to-consumer ad user fee program get off the ground? It looks like a close call. We delved into this one already, so we won’t repeat ourselves. (Click here.)

(5) What on earth did Congress mean to do by revising the Citizen Petition rules? A three person panel at FDLI, including FDA deputy associate general counsel Jeffrey Senger, spent a good while parsing the language. The section is clearly meant to address concerns that petitions are used by brand manufacturers to delay generic launches. But how will it work in practice? There are lots of "thorny" questions; “I don’t have answers,” Senger said. “Truly the courts will determine many of them.”

So there is plenty of uncertainty ahead for industry as it awaits decisions about FDA on the new rules for drug safety and other sections of FDAAA. FDA is plowing through the issues, and Woodcock pledged that the agency will make it all work. “I am not a lawyer, but I am an implementer,” she told FDLI. “We will be doing these things in the timeframes envisioned by the law.”

Some progress is clear: new requirements for registration of clinical trials take effect December 26, and the National Library of Medicine will have the system ready for industry to start using on that date. The new user fees are in place, even if FDA can’t spend the money yet. And discrete steps—like forming a new internal pediatric review committee and an external risk communication advisory committee—are done.

More importantly, it sure sounds like FDA thinks it can implement the key REMS section without any new guidance or regulation. “I don’t see a lot of regs coming from this,” Woodcock said, noting that FDA already has guidances on risk management plans in effect.

And, most significantly of all, it is clear that the new legislation is going to be implemented with an eye towards making the drug safety system work better for everyone. FDAAA signals a “new phase in drug regulation,” Woodcock said. The new authorities are “pretty groundbreaking.”

But, she added, “it doesn’t diminish our commitment to make safe and effective drugs available in a timely manner.” FDA will use its new powers “judiciously.” And, she said, the new tools “may help ensure that treatments get to and remain on the market.”

If only industry could be sure about that....

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