Life Science Compliance Update

June 28, 2016

Senate Judiciary Subcommittee Holds Hearing on CREATES Act

Recently, the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights held a hearing to examine Senate Bill 3056, the Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act of 2016. The bill was introduced by Senator Patrick Leahy on June 14, 2016, and targets "abusive delay tactics," such as when branded drug companies use existing Food and Drug Administration (FDA) safety programs and regulations to block the development of generic versions of their products.

At the hearing, senators heard from a panel of witnesses, including representatives from the American College of Physicians, the Consumers Union, the Heritage Foundation, and various academic and industry professionals. Support for the targeted approach of the bill was overwhelmingly supported by both senators and panelists alike.

Opening Statements

All four co-sponsors of the bill delivered an opening statement: Senators Patrick Leahy, Chuck Grassley, Subcommittee Chairman Michael Lee, and Ranking Member Amy Klobuchar. Senator Leahy highlighted two specific delay tactics that are addressed within the CREATES Act: sample sharing (brand-name companies preventing potential generic competitors from obtaining samples of the branded product) and participation in a shared safety protocol (some brand-name companies refuse to allow generic competitors to participate in a required REMS with ETASU protocol, or impose a limited distribution system when a REMS is not necessary, undermining the generic's ability to gain FDA approval.) Under the Act, generic drug manufacturers would be able to bring an action in federal court for injunctive relief, should it find itself facing one of those delay tactics.

Senator Grassley opined that some of the tactics used by brand-name manufacturers may "frustrate the intent" of the Hatch-Waxman Act of 1984, which was enacted to streamline and expedite the approval process for generic drugs. Ranking Member Klobuchar went one step further, noting that some companies' current conduct "threatens the Hatch-Waxman legacy."

Chairman Lee noted that such delay tactics exploit the use of REMS, and that the CREATES Act addresses the issue appropriately, by not piling antitrust law on top of regulation.

Testimony by Panelists

Peter Safir

Mr. Safir, Senior Counsel at Covington & Burling, was the only witness to speak in opposition of the CREATES Act. Mr. Safir shared two major concerns with the bill: (1) safety risks (he noted that "the CREATES Act does not establish robust criteria that eligible product developers seeking to obtain such a drug must satisfy in order to protect patients and other individuals who come into contact with the drug during its distribution") and (2) the 120-day negotiation period, stating that 120 days is a very short period of time and does not take into account the complexity of these proceedings, and such a short time period may have the unintended consequence of encouraging generics to sue brand-name companies rather than engage in shared REMS negotiations.

Beth Zelnick-Kaufman

Ms. Zelnick-Kaufman, Assistant General Counsel at Amneal Pharmaceuticals, testified as to the challenges her company and other generic manufacturers face in obtaining samples and negotiating shared REMS agreements. She cited several examples from her own experience, noting that the CREATES Act provides "essential relief and remedies."

Robin Feldman

Professor Feldman is the Director of the Institute for Innovation and Law at UC Hastings and was able to provide some context to the concerns being discussed, pointing out that the limited distribution system was a tactic used by Martin Shkreli and Turing Pharmaceuticals during the period they were acquiring and raising the price of Daraprim.

George Slover

Mr. Slover, Senior Policy Counsel at Consumers Union, testified about the results of a Consumers Union poll from March, which revealed that among consumers whose out of pocket drug costs are increasing, many will either skip doses or split them, put off doctor's visits, take expired medications, or postpone paying other bills to pay for their medications.

Alden Abbott

Mr. Abbott, the Deputy Director at the Heritage Foundation, believes that the Act would "promote welfare-enhancing competition in the market for brand name pharmaceuticals and biological products (biologics), and their lower-priced generic and biosimilar substitutes, without inappropriately undermining the intellectual property rights of individuals who bring forth new innovative medical treatments that greatly improve the quality of American healthcare" and "would not impose undue burdens on the manufacturers of brand name drugs and biologics."

Dr. Nitan Damle

The only practicing physician on the witness list, Dr. Damle is the President of the American College of Physicians, and voiced support on behalf of himself and the ACP for the CREATES Act and the broad push by Congress to control prescription drug costs.


Misuse of REMS and ETASUs

Chairman Lee showed a 2010 PowerPoint presentation, created by an unnamed law firm, that purported to show the pharmaceutical companies how to exploit the use of the FDA safety programs for the purpose of blocking competition and increasing profit. Mr. Safir noted that the PowerPoint seemed to be the work of a law firm who was marketing their services to a pharmaceutical company and should not be attributed to the industry overall. Mr. Safir commented that he does believe a bill like this "might be passed, but with additional protections."

Safety Concerns

Senators asked other members of the panel as to the validity of the safety concerns raised in Mr. Safir's testimony. Professor Feldman noted that the bill explicitly states that jurisdiction over patient safety issues remains with the FDA. Senator Al Franken had a different safety concern, noting that "rising drug prices are causing [his] constituents to forego lifesaving treatments."

Other Concerns

Senator Orrin Hatch (one of the original sponsors of the Hatch-Waxman Act), shared concerns raised by Mr. Safir: he is concerned that a generic could purposely choose to not cooperate during the 120-day negotiation period, or purposely intend to sue a branded company. Professor Feldman stated that she believes the "adequate business justification" required in the bill is enough to protect against such "game playing," while Ms. Zelnick-Kaufman feels that generic companies are economically incentivized to engage in the negotiation, and that it would not be a problem in practice.

Senator Hatch and Senator Thom Tillis both spoke to their support of the intent of the bill, but want to ensure the correct balance is reached: to not disincentivize innovation by branded pharmaceutical companies.


The Office of Inspector General ("OIG") of the U.S. Department of Health and Human Services ("HHS"), has recently updated its guidance about its decisions to impose permissive exclusion and other integrity obligations to protect Federal health care programs ("FHP"). This article explores that new advice and the potential impact for life science compliance programs.

Recently, the Inspector General Daniel R. Levinson of the HHS announced the OIG's updated published guidance regarding how the office would be making "decisions about using its permissive exclusion authority and requiring integrity obligations when presented with False Claims Act (FCA) settlement.

From a regulatory and historical perspective, the permissive exclusion authority referenced in the OIG's new guidance stems from Section 1128(b)(7) of the Social Security Act, 42 U.S.C. 1320a-7(b)(7).113 That section grants the OIG the exclusive regulatory authority to bring an exclusion action for violative conduct under the FCA including fraudulent claims, anti-kick-back and Stark related legal claims. The 1997 guidance though lacks any significant, meaningful enforcement provisions, and is explicitly described by the agency as a "policy statement with non-binding criteria."

Read Full Article in the June 2016 Issue of Life Science Compliance Update

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June 27, 2016

Senators Send FDA Letter with Concerns Over Draft Guidance Documents

Four United States senators sent a letter to United States Food and Drug Administration (FDA) Commissioner Robert Califf with concerns over the agency's apparent inability to revise, finalize, or withdraw draft guidance documents in a timely manner. The letter notes that on average, it takes between 425 and 797 days to finalize a draft guidance.

The comments echo comments that have been made at various Congressional hearings with myriad FDA officials, and stem from industry and physician complaints over the agency's use of draft guidance in carrying out regulatory responsibilities, particularly among those who "feel no choice but to follow draft guidances as if final, even if the most-up-to-date science would suggest an alternative path."

The letter comes a few months after the FDA's Center for Drug Evaluation and Research's (CDER) 2016 guidance agenda. The agenda outlined an increase in issuance of such guidance, with a total of 102 guidance documents set to be released this year. The number of planned guidance documents issued shows a steady incline: from 60 in 2013, 70 in 2014, and 90 in 2015.

The four senators, Lamar Alexander, Richard Burr, Johnny Isakson, and Orrin Hatch, take issue with the fact that on average, it takes the FDA over a year (sometimes over two years) to finalize draft guidance. Additionally, the FDA has been sending letters to industry with regard to "new thinking" by the agency that can only be found in draft guidance documents.

However, the senators did praise the FDA for using a new, more transparent website to list newly-issued guidance documents and for the withdrawal of forty-seven "outdated and unfinished" documents last May.

The bulk of the letter focused on requests by the senators, including an update on the stat that it takes between 425 and 797 days to finalize a draft guidance.

The letter also requests an updated list that identifies each draft guidance document that was published before December 31, 2015, and still is pending; an update on the plan for each Center and Office that "are continuing to work on their plan for which guidances will be withdrawn, reissued, or finalized;" whether or not the Agency plans to require Centers and Offices to systematically review guidances and withdraw, revise, or finalize those outstanding documents in a timely manner.

The letter also reiterated some concerns about how the Agency ensures that staff do not follow the guidance in the absence of any other policy or final guidance. The Agency has previously indicated that it provides initial and ongoing training for employees about how to develop and use guidance documents. The Senators asked for a "detailed description of who conducts these trainings, how frequently they occur, and the content and forum of the trainings. Please also provide copies of all training materials, including notes from presenters, slides or videos, and any review of the effectiveness of such training by the FDA or a contractor."

In a March 2015 response, the FDA stated that staff may sometimes reach the same results as proposed in a draft guidance when applying statutes and regulations, explaining that "[a] draft guidance reflects FDA current thinking, and thus also usually reflects its current interpretation of the statute and regulations." However, the Senators are a little concerned that when the FDA publishes a draft guidance, it includes a statement that the draft guidance document will represent the Agency's current thinking only "when finalized." The letter requests clarification as to whether a draft guidance which has not been finalized should be construed as expressing the FDA's current thinking.

The FDA has not yet responded to this letter. When the senators sent a similar letter in May 2014, the Agency took almost an entire year to respond, writing back in March 2015.


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