Latest / Connected With Latham / Episode 97 – Drug Pricing: How the Drug Pricing EO Impacts FDA and Overlaps with Grassley-Led Legislation

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Episode 97 – Drug Pricing: How the Drug Pricing EO Impacts FDA and Overlaps with Grassley-Led Legislation · Connected With Latham

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Hello and welcome to Connected with Latham, where we discuss
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ideas, legal developments, and business trends shaping the global economy.
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This is the 17th episode of the Latham & Watkins Drug Pricing series,
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and I'm Chris Schott, a partner in the Healthcare & Life Sciences practice
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in our Washington, D.C. office.
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I focus my practice on all things market access, and that includes
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manufacture, compliance related to the Medicare drug rebate program,
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Medicare Parts B and D, and the 340B framework pricing program,
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as well as, of course, implementation of the Inflation Reduction Act
0:31
and other health care reform initiatives such as state laws.
0:35
Let me put in a quick plug.
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I'm pleased to announce the relaunch of the Latham & Watkins Drug Pricing Digest,
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where we track reports or coverage from the trade press,
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government publications and releases, and court opinions.
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We intend to distribute the digest at the start of every other week,
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and if you want to get it in your inbox rather than just finding it online,
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we'll include a subscription link in the podcast notes.
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Today, I'm happy to welcome two guests on the podcast
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listening partners Ben Haas and Bill McConagha.
1:01
If you've tuned in to the podcast before then you'll be familiar with them
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as they've both been guests previously.
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But Ben, why don't we start with you?
1:08
Do you want to quickly introduce yourself?
1:09
Thank you.
1:10
Chris, I'm an FDA partner and global vice chair of the Latham’s
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Healthcare & Life Sciences practice group here in DC.
1:16
It's a pleasure to be here today.
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Bill, how are you today?
1:20
Thanks, Chris.
1:21
I am great.
1:21
I am an FDA partner in Latham’s Healthcare & Life Sciences practice group.
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Like Ben, before joining private practice, I worked at FDA for over 17 years
1:31
in a variety of capacities,
1:32
including a little over a decade in the US, chief counsel,
1:35
a period as an assistant commissioner, and then spent almost four years
1:39
as a health policy advisor on the Senate Health Committee, which the listeners
1:42
may know is the committee of jurisdiction over 50 in the Senate.
1:46
Thanks, and thank you for joining the podcast today.
1:49
In each episode, we focus on a specific topic
1:51
that is relevant to market access, drug pricing, or the pharmaceutical
1:55
and health care sectors. More broadly.
1:57
And after discussing the substance, we ask the question, which Olympic sport
2:00
does it like? And we have the list of Olympic sports
2:03
here to see which most resembles the topic.
2:05
It was a strategy, complexity or frankly, level of conflict.
2:09
Seems like the intro got kind of long this time,
2:11
but we've finally made it to discussing today's topic.
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On April 15th, Trump signed an executive order
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titled Lowering Drug Prices by Once again Putting Americans First.
2:24
The document is not particularly long.
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It's about four printed pages.
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There are 14 sections, 12 of which are substantive.
2:33
And obviously a number of the sections focus on drug pricing,
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and we'll talk a little bit about that toward the end of the podcast.
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But more interesting, and really the focus of our discussion here today
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are the FDA related sections in the executive order.
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And so what are those sections?
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Well, today we plan to focus primarily on two things here.
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Section nine talks about accelerating the approval of generics and biosimilars.
2:55
And section ten talks about drug importation programs
2:58
that states can run import drugs in Canada.
3:01
We'll also talk a bit with Bill and Ben about some of the congressional proposals
3:05
that also target farmers activities, and the drug approval and pricing space.
3:11
So let's get started.
3:13
Bill, maybe we begin with the importation concept.
3:16
So we know the idea of putting drugs from Canada has been around for quite a while,
3:20
and President Trump appears to be showing renewed interest here.
3:23
Can you provide some background on what the section 804
3:26
provision here basically is?
3:28
Sure. Glad to do it. And thanks, Chris.
3:31
So, again, this is section ten of the executive order in which,
3:36
the president is essentially directing,
3:39
HHS and the commissioner of FDA
3:42
within 90 days to take steps to streamline
3:45
and improve the importation program under section 804, as you mentioned.
3:49
And so happy to to spend a moment discussing what this is.
3:53
So section 804 of the Food, Drug and Cosmetic Act, the Federal Food, Drug,
3:57
Cosmetic Act, was last amended in 2003.
4:01
So over 20 years ago, under the Medicare Modernization Act,
4:04
and it created a provision in the Federal Food, Drug, and Cosmetic Act
4:08
that allows for the importation of certain prescription drugs
4:11
from Canada by pharmacists and wholesalers in the United States.
4:15
And it's worth noting that an essential feature of this,
4:20
this legislation, this this, provision in the Food, Drug,
4:23
Cosmetic Act, now is the idea that for any importation program to become effective,
4:29
there had to be a threshold determination by the Secretary of HHS
4:33
that the importation would, one,
4:36
pose no additional risk to the public health and safety, and two
4:41
would result in a significant reduction in cost of the covered drugs
4:45
to the American consumer.
4:47
And I'll pause there on this idea that it's American consumers.
4:50
So there actually had to be some demonstrable savings
4:53
to the consumer who was, you know, procuring the drug, not simply
4:56
a lower cost that got consumed by so-called middlemen, in the process.
5:01
So for nearly 20 years, the law lay dormant,
5:05
so to speak, as no secretary of HHS made this certification
5:10
and this included both Republican and Democratic administrations.
5:14
So there was, for any number of reasons,
5:17
a decision not to make the certification.
5:20
And so for many who follow this closely,
5:22
like, like those of us in this practice, there was this sense
5:26
that the certification provision was sort of a poison pill.
5:30
It was a threshold that simply couldn't be met to effectuate the law.
5:34
And so the law had this symbolic value, but it was never going to actually,
5:38
become effective.
5:40
So the breakthrough that brings us to the discussion we're having today
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occurred in October 2020, in President Trump's first administration.
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So first, the secretary of HHS under Trump and that first administration
5:53
made the certification under section 804 in in 2020.
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And actually went so far as to promulgate a rulemaking
6:02
to kind of effectuate the program, to basically build
6:05
the architecture of what this program would be.
6:07
And that is found in 21 CFR part 251.
6:12
So the new rulemaking, consistent with section 804,
6:16
allows for states to sponsor what are called SIPs or SIPs
6:20
and this acronym stands for a section 804
6:24
import program, which is truly a horrible acronym.
6:27
But that's that's what the SIP is.
6:29
And, under the SIP program,
6:32
a state or Indian tribe, is able to propose kind of an importation program
6:37
and then as part of it, expected to kind of manage and oversee
6:40
the importation of the drugs in a way that shows their safety
6:43
in a way that assures the savings of the consumers,
6:45
and they have to follow fairly complex FDA process
6:49
involving kind of categorization, authorization, some testing.
6:52
I'll elaborate on this in a moment.
6:54
But much of this is, in the law itself.
6:57
And then, you know, finds, additional extension in this rulemaking
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and I guess I'd say at the risk of oversimplifying this,
7:06
I think the easiest way
7:07
to think of the program is, is having two kind of big steps.
7:11
The first is the state or local government
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submits this SIP to FDA, which lays out
7:18
its specific program, its partners, its safety controls.
7:22
And if FDA authorizes that authorizes
7:24
the SIP, then a huge step forward has been taken.
7:28
But there was a second piece of this, which is that the sponsor
7:31
must then submit a pre importation request
7:35
for separate review and authorization by FDA,
7:38
and this step calls for more detail
7:40
about the specific products that will be imported.
7:42
And it deals with some of the most complex features of the law,
7:46
which relate to kind of mandatory testing, requirements,
7:50
to ensure that, the drugs are authentic,
7:54
clarity about who's going
7:55
to do that, testing,
7:58
clarity on how the product
7:59
will be labeled and some other very technical issues.
8:02
There are other important factors to keep in mind as part of this.
8:05
You know, one is that by terms of the statute,
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certain drugs are not even eligible for inclusion in the SIP.
8:11
And this includes biologics.
8:13
It includes I.V.
8:13
drugs, products that are covered by a rim.
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So almost by definition, it's
8:18
a limited universe of products that can come in under this program.
8:22
Typically there would be solid oral dosage or subcutaneous drugs.
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And the theory is these would be the blockbuster type drugs,
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that are, you know, under a period of exclusivity, brand name
8:32
products in the United States for which there would be a price differential,
8:35
between the price for sale in the U.S.
8:37
and the price for sale in Canada.
8:39
Chris, the second point is to say that by law,
8:43
the supply chain has to be kind of very carefully limited here.
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There is supposed to be one manufacturer, one foreign
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seller, one importer, each with different responsibilities.
8:54
And so for this to work at all, there has to be some discipline
8:57
around the way this does supply chain works.
9:00
So the state that has made the most progress to date
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in moving forward to this is the state of Florida,
9:06
which submitted a sip through something
9:07
called the Florida Agency for Health Care Administration, and it was revised
9:12
several times between November 2020 and late, 2023.
9:18
And it was actually authorized by FDA.
9:20
The SIP was in January of 2024.
9:24
So notably, it was authorized during the Biden administration.
9:26
And so while the certification occurred under the Trump administration
9:30
and the rulemaking, the program was promulgated
9:32
under the Trump administration.
9:33
The Biden administration took this a step forward, and they authorized the SIP.
9:37
So Florida then submitted this pre
9:40
importation request, and it has not yet been approved.
9:43
And so the program has never gone live.
9:46
And towards the very end
9:47
of the Biden administration in December of last year or December 2024,
9:51
after he granted the Florida Agency for Health Care
9:54
Administration an additional six months until July of this year
9:58
to complete the required steps
9:59
to get approval of the importation request and launch the SIP.
10:03
And so the idea is that it is still very much alive and pending.
10:07
And now Trump is back, and the executive order seeks to make this,
10:12
a priority again.
10:13
And I see, just to wrap up the background here, kind of this
10:18
EO is a way to communicate that this is a policy priority, to the public.
10:22
At the same time, it's
10:23
kind of admonishing FDA to figure out how to move this forward.
10:27
And and I guess I should also note, just for the listeners
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who don't follow this closely, that I'm focused on Florida
10:32
because they've made the most progress to date under this law.
10:35
But there are a number of other states
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that that are working on mature programs and have submitted SIPs.
10:40
So, Colorado, Vermont, Maine, New Mexico also,
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submitted SIPs that that are not yet approved.
10:47
Yeah. Thanks, Bill.
10:48
Very helpful to lay out this background.
10:49
I'll note that Connecticut has a pending bill that would,
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you know, talk about how that state
10:54
is supposedly to then try to also engage in this program.
10:58
So you mentioned that this has been around in the statute for quite a long time.
11:01
So what are some recent changes to the section that you know for the program?
11:06
I don't know that there are any kind of major recent changes, at least,
11:10
that go beyond the kind of the last milestone in this, which was the,
11:14
extension of the time frame for,
11:17
the pre importation request, at the end of the Biden administration.
11:22
You know, I think the new story here is, is the executive order,
11:25
from the Trump administration.
11:26
And I think fundamentally, it's seeking to kind of accelerate approval
11:29
not only for perhaps Flor, but also to find a way to simplify,
11:33
the administration to the program.
11:34
I think what's buried in the executive order is this idea that,
11:38
for whatever reason, the pre importation request has been a stumbling block.
11:42
Why is it taking it such a long time for this to move forward?
11:45
Why haven't they gotten to. Yes.
11:47
I think the executive orders admonishing FDA to try and figure this out.
11:51
You know, in terms of recent develops, I will note that for whatever it's worth,
11:56
the new administration did pull down from FDA website a link to the Biden
12:00
executive order that expressed support for the CEP program.
12:04
I don't find that surprising, right?
12:05
When the administration takes down the executive orders of the other,
12:08
it is certainly not to be interpreted as an act of hostility
12:11
towards the importation program.
12:13
I think quite the opposite.
12:14
As noted, this really, came to fruition in the first Trump administration.
12:19
And so this is, you know, this is an extension of that.
12:22
I'll also note that as at least it relates to the timing for Florida,
12:27
that the December 2024 letter from the Biden administration
12:30
that gave the Florida program, until July,
12:36
to kind of come back and try and solve the problems in the importation requests.
12:39
Also,
12:41
says that Florida
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could ask for another extension by May 6th of this year if they need one.
12:46
So there's clearly a mechanism in place
12:49
to kind of extend the, review here and work this out.
12:53
And, you know, it seems to all of us that the,
12:56
at this point that the Florida experience is the bellwether.
13:00
That's very interesting to hear how things have progressed
13:02
and what are some other factors, maybe, that are slowing down the progress
13:06
that's been around for a long time.
13:08
Florida has been added for a long time.
13:09
What are some other factors there that might explain what's taking so long?
13:14
Well, that's a that's a great question.
13:16
I don't know the details of the pre importation requests
13:18
and where the hang ups are,
13:19
but I think what they highlight is that there are complexities,
13:23
when the kind of
13:24
rubber meets the road, so to speak, here, which have to do with these questions
13:28
about how you're going to test
13:30
to prove the authenticity of the drug you're bringing
13:32
in, how you're going to deal with the labeling issue.
13:34
There are provisions in the rulemaking in the law
13:36
that talk about kind of compulsory sharing of information
13:39
by the brand name drug company, to kind of help assist with this process.
13:44
And my guess is that there have been stumbling blocks there.
13:47
I will note that just more generally, I think there are also
13:50
a variety of other potential obstacles here that could slow things down.
13:53
Generally. You know, the first is litigation.
13:56
So if if one of these steps goes live, I think it's
14:00
almost certain that the brand name drug manufacturers are going to sue.
14:03
So in 2020, when the rulemaking was promulgated by the Trump
14:07
administration, Pharma, on behalf of, you know, the drug industry,
14:11
United States filed litigation, to try and stop the ship.
14:15
This was in a in a lawsuit filed in federal court in DC.
14:19
And they argued, among other things, that the kind of compulsory data sharing
14:23
that I just referenced, the provision
14:25
of labels, these things violated intellectual property rights.
14:29
Of the companies, they abridged free speech.
14:31
And I think it really interesting, kind of
14:35
cause of
14:35
action here is this idea that they were uncompensated
14:39
takings under the, you know, the Constitution.
14:43
And so my, my sense is that those issues will continue to be pursued.
14:48
The suit itself was dismissed in February 2023, on the grounds
14:51
that there was no particular ship authorized at the time.
14:54
And so it never reached the merits, but it was dismissed without prejudice.
14:58
So if a ship goes live, I fully expect pharma will file again.
15:03
Another potential issue to think of in all of this is as at least
15:06
an obstacle, down the line is, is, you know, the Canadian reaction.
15:10
So I don't know, the very latest, but the government of Canada has signaled
15:14
on many occasions that it's not going to permit the sale of these Canadian
15:18
drugs into the U.S under the kind of terms laid out here.
15:21
And, and so they could try to block it from the source.
15:25
And, you know,
15:26
certainly the kind of current political dynamics relating to the tariffs
15:29
and the kind of the relationship between the U.S.
15:31
and Canada right now is a another complexity in all of this.
15:35
I think a related
15:36
practical question, frankly, just has to do with volumes.
15:40
So, you know, it's one thing if a SIP or two gets authorized, the United States.
15:45
But it's hard to imagine, as a practical matter, how this works
15:48
on a truly kind of widespread, systematic basis.
15:52
I think there are roughly 230 million
15:54
people in the United States that roughly 40 million in Canada.
15:58
So it's not clear how Canadian pharmacies are going to serve the local population
16:02
and then be able to serve
16:03
kind of eight times that, to their neighbor, to the south.
16:06
And it's just something to think about.
16:08
And I think that what critics of the law would say is
16:12
that virtual reality means that the only way that this could really work,
16:16
if it was ever to work on kind of a widespread scale, would be that
16:19
people would be trained shipping drugs from elsewhere in the world through Canada
16:23
into the United States, which is, a precisely,
16:27
a risk that the law seeks to avoid or safeguard against,
16:31
but might become kind of a real practical tension,
16:34
as we deal with these kind of volume questions.
16:37
And I
16:38
guess I'll just add that, you know, finally, as I mentioned a moment ago,
16:42
the terms of the pre
16:42
importation plan are by themselves under the law, kind of quite complicated.
16:46
And, as with all such things, the devil is in the details, right?
16:50
The need for the testing, the labeling, the truncated,
16:53
supply chain or practical challenges that may make it difficult
16:57
for widespread importation from Canada, even if some discreet, ships move forward.
17:03
Well, so it definitely sounds like there are a lot of moving parts to track here.
17:06
And one question I've received multiple times from manufacturers is
17:10
how would they find out if one of their, shall we say, brand
17:12
drugs might be a target for one of these importation programs?
17:16
And Bill, it sounds like based on the pathway
17:17
you've described with the brands, drug information having to be shared,
17:22
it seems pretty clear that a manufacturer with a targeted drug
17:25
here would definitely become aware that this process is in motion,
17:28
but nevertheless, it makes sense to track all these developments
17:31
so that there's no surprise if something were to pop up.
17:35
And as part, I'll just add that as part of the importation request,
17:39
the sponsors are obligated to identify the products that they want to bring in.
17:43
So there is a mechanism to, identify
17:47
exactly what they're targeting on a program by program basis.
17:50
Yeah. So there would definitely be, some notice.
17:52
So maybe we now turn to Ben and talk about section nine of the executive order,
17:56
which is titled Accelerating Competition for High Cost Prescription Drugs.
18:00
So it looks like the CEO there is trying to speed up
18:03
the introduction of cheaper drugs into the market,
18:06
by calling for reports and recommendations on ways to accelerate approval
18:09
of generics, biosimilars, second and class and OTC over-the-counter medicines.
18:14
So, Ben, do you have a sense of what kind of actually
18:17
approaches President Trump, maybe seeking to pursue here?
18:21
Thank you.
18:22
Chris.
18:22
You know, I think really there are two, sections
18:25
within the executive order that should be reviewed in tandem here.
18:28
The first is, as you mentioned, section nine, the second would be section 13.
18:34
I think it would be helpful to level set what the,
18:38
text of the executive order actually says on those issues
18:40
because they do have very similar timelines.
18:44
First, under section
18:45
nine, the executive order directs that the FDA, within 180 days
18:50
or six months to issue reports, providing recommendations
18:55
for how to accelerate, the approval of generics,
18:58
biosimilar drugs and combination products,
19:02
to the market while maintaining, you know, FDA, his gold
19:05
standards of safety and effectiveness of all products.
19:10
Second,
19:12
section 13, directs
19:15
not only the FDA, but the DOJ,
19:18
and the Department of Commerce and the FTC to issue a joint report.
19:26
Providing recommendations on how to reduce
19:29
any competitive behavior from big pharma, from pharma manufacturers.
19:33
We'll talk about a few elements of what that putative,
19:37
anti-competitive conduct looks like.
19:39
But taken together, both the FDA and these other,
19:43
other federal agencies have six months, to engage in a listening session
19:48
and to issue reports, on how to address this.
19:51
Now, if you look at the executive order
19:54
consistent with this white House, the preamble to it provides
19:59
a we made really good progress, during the first Trump term,
20:03
that progress was kneecapped,
20:06
for stalled by the Biden administration.
20:08
So many of the concepts that are teed up in the executive order
20:12
or what we sort of predict will be the outcome of these ongoing reviews,
20:17
really do trace their provenance to steps taken by the first Trump
20:21
administration, to lower, prescription drug costs
20:24
and to likewise, combat
20:27
perceived, any competitive behavior by big pharma.
20:31
So what are we talking about in particular?
20:34
First, there were a series of recommendations
20:36
and policy efforts in the first Trump administration outside of you here.
20:40
The first was in 2017,
20:43
the FDA's Drug Competition Action Plan, or DCAP,
20:47
which focused on improving generic approval pathways for sponsors
20:51
and for his own internal processes to, accelerated
20:54
efficiency, closed loopholes and otherwise,
20:59
get around the delays that were perceived to be ongoing with respect
21:03
to generic competition, particularly for high cost drugs.
21:09
Since 2017,
21:10
at a fairly high level, FDA has made it easier for sponsors
21:14
under the DCAP to,
21:17
proceed through the development and approval process,
21:20
among other things, of bag that FDA issued a final guidance
21:24
on generic drug labeling.
21:26
In situations where their reference drug's labeling is not updated,
21:30
really to allow, generic manufacturers
21:33
to get their drugs through the FDA process more quickly.
21:36
Second, in 2018,
21:39
what I'll refer to as the drug pricing blueprint
21:42
official name, American Patients first, the Trump administration blueprint
21:47
to lower drug prices and reduce out of pocket costs was released.
21:52
That document included approaches,
21:55
to impose value based purchasing options, pricing negotiations,
22:00
reform on RB drug acquisition,
22:03
site neutral payment policies,
22:06
and more generally, the promotion of biologic innovation.
22:10
In a married to improvements to the generic approval pathway.
22:14
So that is another element we think
22:17
as part of FDA's ongoing review, they'll pick up that blueprint,
22:21
and carry it forward into the report that needs to be issued,
22:24
in six months, specifically this fall, in October.
22:28
Finally, I'll flag, the FDA final rule,
22:32
additional conditions for nonprescription use.
22:36
This should guide, the approach
22:38
to facilitating OTC switches.
22:41
Taking, prescription drug products that are only available at the pharmacy
22:45
behind the counter, to OTC status that can be purchased at outside
22:51
the counter or over-the-counter, I should say, in the pharmacy,
22:55
that final rule at an effective date or has an effective date in May, May
23:00
27th, 2025, the final rule
23:03
was delayed by the administration, transition.
23:06
And what it does is it implements the second part of section
23:09
nine by establishing a pathway to allow more drug products
23:12
to switch to OTC for quote unquote, additional conditions,
23:17
allowing sponsors to provide information beyond what can be provided
23:21
under the OTC drug labeling system, i.e., the drug facts label.
23:25
This process and that final rule in the implementation of the OTC
23:30
rule is seen as a, priority for the new, FDA commissioner.
23:35
Yeah.
23:35
Thanks, Ben.
23:36
Thanks for working through all of that and making the connection here
23:38
between the EO and and other existing initiatives.
23:41
And I think in that same vein, let's take a look at Congress.
23:45
So it seems like Congress also, of course, is concerned still with
23:49
the price for drugs and in particular the behavior of foreign manufacturers,
23:53
where there seems to be always this allegation that manufacturers
23:56
trying to limit competition through various means.
23:59
But then can you tell us a little about
24:00
what's happening on the Hill in that regard?
24:03
Well, it's an age old issue.
24:04
I've been doing this for 25 years, and since the first day started,
24:07
there have been, efforts by, you know, brand drug manufacturers
24:12
to, forestall or delay a generic competition.
24:16
Likewise, there've been efforts by the generic industry to facilitate
24:21
the ease of entry to get around, pharma patents,
24:25
to bring products to the market more quickly.
24:28
It's been an issue, as I noted for many years,
24:31
Congress picking up the baton, from Trump,
24:35
seems particularly eager to,
24:38
push for bills that would address what they perceive to be, misconduct.
24:43
Particularly Senator Chuck Grassley is focused on
24:46
some of these practices that have grown in the industry over the years.
24:51
He's a sponsor of at least five bills
24:53
introduced, in the Senate Judiciary Committee in recent weeks.
24:57
Many of these bills have bipartisan support, of both Republicans
25:02
and Democrats.
25:04
I'll address a few of those here.
25:06
The first and perhaps most interesting or
25:08
compelling is the stop stalling act,
25:12
which is officially entitled the Stop Significant and Time Wasting
25:16
Abuse Limiting Legitimate Innovation of New Generics
25:20
act or Stop Stalling Act now, who's coming up with these names?
25:25
I don't know. That is quite a mouthful.
25:27
But what it does and what it's referred to colloquially is a sham act.
25:32
It's intended to stop Big Pharma from using so-called sham, citizen
25:38
petitions to forestall or significantly delay, generic competition.
25:44
Chris, I should say a few words on citizen petitions,
25:47
because when you take a step back, they are,
25:50
generally considered important for the public health.
25:53
But a citizen
25:54
petition allows, is for any stakeholder, whether it's a member of industry,
26:00
an individual,
26:02
a public health group, etc., to file
26:04
a public petition with the FDA,
26:07
then ask FDA to take or refrain
26:10
from taking, the action specified in the citizen petition.
26:14
So it's a way for non-regulated stakeholders, i.e.
26:18
individuals, to try to secure, an action, from the FDA
26:23
and FDA is generally subject to review to, respond to those submissions.
26:29
But, you know, like many other tools in the regulatory toolkit,
26:34
citizen petitions can be abused,
26:36
if they are filed at the last minute,
26:40
simply to delay, a final approval of, follow on generic etc..
26:45
And, you know, certainly big Pharma has been, accused
26:49
of that type of misconduct, of not filing meritorious petitions,
26:53
but rather petitions really just intended to extend the clock.
26:58
Praying companies are
26:59
filing sham petitions, often perceived, to be at the 11th hour.
27:03
They raise dubious claims.
27:05
They waste FDA time and resources.
27:08
And ultimately, many of them,
27:11
if not the vast majority, are rejected.
27:14
You know, critics, of the process and the citizen petition process,
27:17
as I noted, you know, at 30,000ft, it's very valuable to the public.
27:23
Have have argued that it's actually done more, to,
27:28
farm the public health and to help it,
27:30
because it's become a tool in the toolkit as a way to delay generic competition.
27:35
And I should be clear here that when we talk about delays,
27:41
they can be very financially significant.
27:44
So each day that a brand company maintains, a market,
27:49
presence or monopoly, I should say, could mean millions of dollars.
27:53
So, we're not talking about a week, not being that big of a deal.
27:57
It can be quite a big deal when we talk about high value medication.
28:01
So the bill would the Grassley bill would seek to curb,
28:06
those punitive abuses of the citizen petition process
28:09
by doing many things, among other things, it would grant FTC authority
28:14
to bring civil actions against parties filing what are,
28:19
determined to be sham petitions with the FDA.
28:22
Provides for penalties, up to and greater
28:24
than $50,000 per calendar day
28:28
of review or revenue earned by the seller of the branded product
28:32
in the context of a sham citizen petition, and finally defines
28:36
a sham citizen petition in a very specific way.
28:41
Objective and reasonableness of the petition.
28:45
Parties intention and, objective intent,
28:48
to delay approval of a generic or biosimilar product.
28:52
And then the petition is part of a series,
28:55
petitions or, a pattern of conduct intended
28:59
to, forestall if not impede, generic competition altogether.
29:05
So, Chris, there's that Grassley bill, another proposed bill, the Drug
29:10
Competition Enhancement Act, also seeks to halt so-called product shopping,
29:15
which is generally viewed as a means for branded pharma,
29:19
to avoid generic competition by doing what?
29:22
Well, what it would outlaw are very minor small modifications,
29:27
to a drug or biologic, that are intended to extend a patent term
29:32
or to limit or delay, lower cost generic, market entry.
29:37
This is commonly referred to as product hopping.
29:40
You know, when you make a product,
29:41
change it in a new patent for a very minor modification,
29:46
really just to first prevent a generic, applicant
29:49
from obtaining, follow on approval, that prior formulation
29:55
to evergreen
29:56
the product preserve the competitive,
29:59
insulate and in perpetuity forever.
30:03
There are two types of product topping that are addressed by this doll.
30:06
The first is a hard switch, which is when a brand of manufactured
30:10
discontinues or withdraws an application.
30:13
It introduces a foreign product with pat protection
30:17
within a certain period relative to that static or biosimilar approval.
30:21
The second is a soft switch, which is when a brand
30:24
manufacturer takes actions that would unfairly disadvantage
30:28
the listed retro reference product relative to a follow on product.
30:34
So specific exemptions would exist under this bill.
30:38
I urge everyone to read it.
30:40
But again, this is another, legislative effort
30:44
to avoid what is perceived to be a pretty common tactic
30:48
by Big Pharma to preserve market monopolies over high value drugs.
30:53
Lastly, the
30:54
Judiciary Committee in the Senate has also introduced three bills
30:58
that focus on using patent exclusivity
31:01
rules to enhance, competition.
31:04
One of these focuses on the rather well known or so called pay for delay
31:08
tactic of pharma industry, under which,
31:12
they would make small changes to the existing practices intended to assist,
31:18
generic and biosimilar companies, through license agreements
31:22
and other means, to essentially engage in corporate or commercial agreements
31:29
to, bring generic into cooperation
31:33
to preserve the market for that product.
31:36
Thanks, Ben for walking through these first two of the five bills.
31:40
I'm just happy that the word sham will finally be defined legally.
31:44
I think in other word, that could use help here is shambolic.
31:46
So we should look out for the next bill that maybe talks about that.
31:49
So those are the first two of those five bills.
31:52
There are three others that were introduced which also align with
31:56
a portion of the executive order.
31:57
And these other three bills seem to all have one theme in common,
32:01
namely that they take a negative view of patents.
32:04
So I find that somewhat ironic.
32:06
Because the 30 year old framework established by Hatch-Waxman
32:10
and the Biologics Price Competition Innovation Act,
32:13
really has been the foundation for the unparalleled life enhancing
32:16
and I would say,
32:17
life saving pharmaceutical innovation that we've seen in this country.
32:20
So unfortunately, now, 30 years later, those very patents
32:24
that allow innovators
32:25
to benefit from their inventions and recoup the significant outlay,
32:29
which, of course, then
32:30
is used for developing further treatments and further therapeutics,
32:33
and that those that that very regime is somehow coming under a shadow.
32:38
Many of the provisions in these bills appear to be motivated by
32:41
the sentiment that is, takes a dim or negative view of patents
32:45
and the executive order, which was issued after these bills became public strikes.
32:50
But at the same court in section two,
32:54
Bill, do you have some thoughts on
32:57
how the Hatch-Waxman regime is being regarded nowadays?
33:00
I think it's a fantastic question.
33:02
And, you know, going back to the importation issue
33:05
I was talking about earlier,
33:07
there are a lot of folks who have been following this for a long time
33:10
that have wondered, if there's a concern about prices in the United States,
33:14
why don't we revisit the terms of Hatch-Waxman as opposed to, say,
33:17
open up our borders and find these other ways to kind of nibble around the edges?
33:21
Let's go to the heart of the issue, which are the,
33:25
you know, the terms of the Hatch-Waxman.
33:28
Provisions
33:29
that basically created the modern generic drug industry in the United States.
33:33
I think others and I don't I would never
33:36
deign to speak for Senator Grassley, but I think others would say
33:39
that the, architecture of the,
33:43
you know, kind of the deals or equities in, Hatch-Waxman makes sense,
33:47
but there have been abuses of the patent system
33:50
that have led to perversions of what's been intended there.
33:53
And so what we need to do to really effectuate the true intent of Hatch-Waxman
33:57
is get our arms around some of these anti-competitive activities. And,
34:02
and so I see both sides of that argument.
34:05
But I'm delighted to talk about, you know, very briefly,
34:07
the other three, bills just around this out.
34:10
If, if you can Santa Cruz. Absolutely.
34:13
Please go ahead. Oh, it sounds good.
34:14
So, for the sake of our listeners,
34:16
in just the interest of time, I'll try and do this briefly, but,
34:19
there are indeed, three other bills.
34:21
And, I'll begin with one that plays off the point that Ben was making
34:24
just a moment ago about pay for delay.
34:26
So, the first I'll talk about is to preserve access
34:30
to affordable generics and biosimilars act.
34:33
And this is indeed a bipartisan bill
34:36
that has been introduced in several previous Congresses.
34:38
And it would statutorily prohibit so-called pay for delay.
34:42
The concept that Ben was talking about at the end of his remarks just a moment ago
34:46
and just, you know, again, as a reminder, pay for delay is
34:49
when a brand name drug company and kind of an initial generic entrant
34:54
enter into a deal in which the generic company
34:57
is compensated for delaying entry into the market.
35:00
So the generic company
35:02
makes money because it's getting paid for doing nothing.
35:05
The brand name company benefits because it has a continued monopoly.
35:09
Same concept applies in the case of, you know, brand
35:12
name, biologic and a biosimilar interchangeable.
35:16
This idea is that the party that suffers in this is the American consumer
35:20
and the taxpayer, to the extent that, these are products that are reimbursed
35:25
because there's no lowering of of the cost of these drugs in the marketplace.
35:29
So this bill attempts to deal with pay for delay statutorily.
35:34
It also addresses so-called reverse payments,
35:37
which are settlements where transfers of value
35:39
were made to potential generic competitors to settle claims of patent infringement.
35:43
Which gets to this point.
35:45
You just mentioned, Chris, about abuses in the patent system.
35:48
So, as the listeners may know, in 2013 there was kind of a landmark Supreme Court
35:53
case called FTC v Watson Pharmaceuticals
35:57
that held that certain of these so-called pay for delay agreements,
36:01
are prohibited, is anti-competitive.
36:03
And so what this bill would do is legislatively prohibit
36:07
such arrangements as in a competitive based on certain recited findings.
36:12
You know, that these arrangements
36:13
are monopolistic, that they delay the market of generics and biosimilars.
36:17
They're, you know, antithetical to free competition and consumer interests
36:22
and most fundamentally, antitrust principles,
36:24
because these are really FTC bills, not FDA bills.
36:28
At their heart, though, they clearly impact FDA regulated products.
36:31
As with all these things, the devil is in the detail.
36:35
You know,
36:35
it's not clear to me that this legislation really kind of clarifies current
36:40
uncertainties around the application of what it means to be anti-competitive.
36:44
It says that any agreement
36:47
providing to generic or biosimilar applicant with, quote, anything of value,
36:51
including exclusive license, unquote, would be presumptively anticompetitive.
36:55
So it's essentially saying that the burden is on those making the deal to basically
37:00
show that it's consistent with, you know, antitrust principles.
37:05
And there are certain exceptions here laid out in the statute.
37:09
It does say that some agreements are permissible.
37:11
If it can be shown, you know, that they are,
37:15
pro competition or at least that the pro competition
37:17
aspects of them would outweigh the entire competition.
37:20
But basically it would do all of this legislatively.
37:23
It would grant FTC specific authority to institute civil actions,
37:27
and it would grant the FTC authority to get up to treble damages.
37:31
So there would be a clear financial penalty disincentive into
37:34
entering into these, these, these agreements.
37:37
Chris, the second bill
37:39
I want to touch on is the Affordable Prescriptions for Patients Act.
37:43
This is also a bipartisan bill.
37:44
This is also a bill that has been introduced in previous Congresses.
37:48
And it includes many of the same sponsors who back to pay for delayed legislation.
37:51
We just discussed
37:53
the bill targets manipulation of the patent system
37:56
via what are called patent thickets, and the patent evergreen concept
38:00
that Ben just spoke about,
38:02
where pharma tries to extend patents and thus essentially limit
38:05
the ability of lower cost alternatives to enter into the market.
38:09
It is incredibly technical, and I'm not an IP lawyer,
38:13
so I'm not going to attempt to get into the weeds.
38:14
I would simply confuse all of you, and I think with each sentence
38:18
will advertise that I was a history major and not a scientist in college.
38:22
So I'll pause there, but just simply say that we wanted to call it out today.
38:26
In the interest of being fulsome in kind of talking about these bills
38:29
and how they may relate to the executive order,
38:32
and urge listeners who may be interested
38:35
in looking at the bill more closely to do so, because it is certainly a piece
38:39
of this current effort to promote competition and choice in the marketplace.
38:44
And to your
38:45
point, a moment ago, Chris, suspicious of patent abuses,
38:49
finally, the last bill to cover, is the Interagency
38:53
Patent Coordination and Improvement Act of 2025.
38:57
Again, a bipartisan bill, again, one that has been introduced in past Congress.
39:01
Its aim is to ensure more consistency between FDA
39:05
and the Patent and Trademark Office PTO.
39:08
So PTO, as as our listeners may know, is supposed to get information
39:12
from FDA and other agencies when examining patents
39:15
to ensure that, in a sense, all the agencies are all on the same page,
39:19
have access to the same patent listings, and this bill
39:23
would enhance communications by, requiring kind of a report
39:27
on interagency exchanges and establishing an interagency task force on patents.
39:32
And it's intended, I think, to address the perception
39:37
that the applications, the product approval
39:39
applications would get submitted to FDA for review and approval.
39:44
May include information relevant
39:46
to patent ability that has not been shared with the patent examiners.
39:50
And so the idea is to kind of get the agencies together
39:54
to make sure they are seeing the same things,
39:56
but also to impose affirmative duties on the sponsors,
40:01
to be sharing the same type of patent information
40:04
with both agencies to basically
40:07
reduce and competitive surprises.
40:10
And so to this fundamental question you ask when we open this up, Chris,
40:12
how does all of this relate to the executive order?
40:15
And in this case, particularly section two of the executive order?
40:19
I think this all all these bills just remind us
40:23
that patents and antitrust
40:26
concepts are tools that, you know, provide,
40:29
you know, lawmakers and the executive agencies, with opportunities
40:34
to try and promote, you know, generic entry into the marketplace.
40:38
Well, both.
40:38
Thanks very much for unpacking these pretty dense technical provisions
40:41
that, like you said, really stray into the intellectual property, field.
40:45
Maybe we can turn it back to Ben
40:46
here to wrap up this FDA portion of the discussion here.
40:50
So, you know, Ben, how would you describe this executive
40:53
orders, possible impact on the FDA activities in the coming months?
40:59
It's really impossible to predict.
41:01
Chris.
41:02
At this point, I think this is a perfect example
41:06
of, on the one hand, trying to empower
41:09
or, the executive order and via Congress,
41:13
the FDA to be an aggressive and robust regulator
41:17
to combat a public health issue that has been identified,
41:21
by the white House, high cost, products, facilitating generic entry, etc..
41:27
So, well, putatively FDA would be given additional tools.
41:32
They'll have additional work if you marry that to the fact
41:35
that we are experiencing, in an ongoing way, a reduction in force.
41:40
Many of the folks the key, intellectual,
41:44
firepower at the agency, the institutional knowledge,
41:47
the folks that would actually implement these new policies and rules are gone.
41:52
So it's difficult to predict, given
41:54
the relatively short timeline, six months,
41:58
whether or not we'll actually see, any movement
42:01
to achieve, these policy objectives, given the ongoing reduction in force.
42:06
Well, thanks to
42:07
both of you for this fulsome discussion of how the, you know, relates to FDA
42:11
type issues and certainly this overlap with the five Grassley bills.
42:15
So maybe to close out,
42:17
let me talk a little bit about the drug pricing perspective here.
42:19
And I'll just highlight one aspect which is section three which addresses
42:23
the Inflation Reduction Act.
42:24
So for a while commentators had wondered how President Trump would deal
42:29
with the IRA because obviously it came from the prior administration.
42:33
What do you bandanna? What do you enhance it?
42:35
And so section three in the executive order makes clear,
42:38
that Trump certainly intends to use the IRA provisions.
42:42
So section three has, three pieces to it.
42:45
The first piece talks about asking the Secretary of Health, Human Services
42:50
to issue guidance within 60 days for initial price applicability year 2028.
42:56
So there's been final guidance issued for 2046 27.
42:59
So the next cycle would be to have proposed guidance for 2028.
43:04
The guidance for the prior ones 2026 came out in March.
43:07
I mean, the initial guidance and for version 87 that was issued in May.
43:11
So now 60 days from April 15th when this executive order was signed,
43:15
it doesn't seem to depart too much from the cycle that we've seen
43:19
for the prior to two rounds here with the proposed guidance.
43:23
The second subsection here,
43:25
talks about the part D redesign
43:28
and essentially premium stabilization.
43:31
So as we probably all recall, toward the end of last year,
43:35
there was an issue with part D premiums increasing unexpectedly
43:39
as a result of the changes, IRA was making to the part D benefit.
43:43
And the administration had to ish had to set up
43:46
this demonstration project to stabilize premiums.
43:49
So here within 100 days, there's supposed to be,
43:54
a recommendation on
43:55
how to best stabilize and reduce Medicare Part D premiums.
43:59
The third piece here is interesting because again,
44:02
it touches on congressional prerogatives.
44:05
So here the Secretary is instructed to work with Congress to modify
44:09
the IRA's negotiation program by aligning the time periods
44:14
for eligibility between small molecule drugs and biologics.
44:18
So, as it currently stands, a and the approved small molecule drug
44:22
can first become eligible seven years after approval, while
44:25
a biologic first becomes eligible after 11 years.
44:28
So this so-called pill penalty
44:30
has been discussed widely, including in the last Congress.
44:33
And here, the executive order instructs the Secretary to, quote, work
44:38
with Congress to modify the law to align those two time periods.
44:43
If that were to come to pass, it would be very interesting
44:45
to see how that would impact the drugs already on the list.
44:49
Would some that might no longer be eligible if the seven year period
44:53
for in these drugs becomes 11 years, but they fall out, how would that happen?
44:57
So definitely something to be focused on and to watch.
45:01
There's always a concern with budget neutrality eliminating the so-called pill
45:04
penalty would exclude more drugs from the negotiation process for longer,
45:09
so it remains to be seen how that might all be addressed.
45:12
Let me mention one more time the relaunch of the bi weekly drug
45:16
pricing digest,
45:17
and we'll put a link for subscribing to that here in the show notes.
45:21
So with that,
45:22
we can maybe return to the question we had asked at the very beginning.
45:25
Which Olympic sport is it like, maybe we start with you, Ben, what do you think?
45:29
Which Olympic sport have you picked?
45:31
Well, I've thought long and hard about this, Chris.
45:34
I would say we have an issue or a perceived issue of,
45:39
lack of, generic repetition, high drug prices, etc..
45:44
And we have talked about a lot of different tools to address that issue.
45:48
So I'm going to go with fencing.
45:50
We're going to throw a bunch of stuff against the wall and see what sticks.
45:54
Very good.
45:55
I really like that analogy. Bill, what have you come up with?
45:59
I fear it's going to pale in comparison.
46:02
My Olympic sport is trampolining,
46:05
and, many of you aren't even aware that's an Olympic sport.
46:09
And here's why.
46:11
It's exciting.
46:12
It's kind of fun to watch their highs and lows.
46:16
There are judges involved, so there's an element of intrigue,
46:18
like ice skating, right? What are the rules?
46:22
Do they really count?
46:24
But here's the most essential piece.
46:26
When I watch trampoline and I ask myself, what am I watching?
46:29
What is this?
46:30
And, I think there's kind of an element of, trying to see
46:35
what comes of all of these initiatives.
46:38
Are they politically symbolic?
46:39
Will they translate into actually changes in the law?
46:41
Would they just translate into kind of enforcing current law
46:45
more efficiently?
46:48
And and so I'm
46:50
very interested, to see what comes of it.
46:53
And I don't know if that's an incredible time,
46:55
but I'm going to double down on trampolining.
46:57
Very exciting.
46:58
I had to really discipline myself.
47:00
Yeah, to stay on the list of Olympic sports
47:02
because there's so many other things that you could think of.
47:04
But I had to pick canoe slalom and I hadn't really heard of this before.
47:08
But essentially here you navigate a whitewater course, by passing
47:12
through 25 upstream and downstream gates, and it is quickly, at times as possible.
47:17
And it seems to me here, that's kind of what we're doing.
47:19
We're being thrown these gates we have to pass through by the president.
47:24
We're being thrown more gates to pass through by Congress.
47:28
And we have to react really quickly while we're on this water course,
47:31
you know, hurdling downstream, to figure out what's the best pathway to
47:36
to make it successfully through all these hurdles,
47:39
get our therapists to market and and get reimbursement.
47:44
So I think that wraps up the substance of our podcast.
47:47
And as always, we now have to figure out where do we go for the after party.
47:52
Bill, I think you had a good idea.
47:54
Where are we going?
47:54
Well, I live in the burbs and drive a minivan,
47:56
so I'm not equipped to suggest a place for a cool party.
48:00
So what I did was I turned to, a much cooler colleague.
48:04
So I'll call out the great Meryl Bartlett, who, for listeners that don't know, is
48:08
a, a lawyer in RFD group who practices with me and Ben,
48:12
she is a fantastic attorney, an even better person.
48:15
And she has suggested Happy Gemini, which is a wine bar
48:19
with great handmade pizza.
48:21
Excellent. That sounds great.
48:23
Can't wait to go.
48:25
Thanks to Ben
48:26
Haas and Bill McConagha for joining the podcast today and sharing
48:29
insights on the FDA-related provisions and Trump's drug pricing executive order.
48:33
And thank you to our listeners for checking out the Latham & Watkins
48:36
Drug Pricing series, which is part of our Connected with Latham podcast.
48:40
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48:44
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49:22
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Results depend upon a variety of factors.
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Unique to each representation.
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