HHS ends FDA Unapproved Drugs Initiative, seeks to limit which drugs require FDA approval

To end the UDI program, HHS announced that it is withdrawing FDA’s Compliance Policy Guide (CPG), “Marketed Unapproved Drugs – Compliance Policy Guide Sec. 440.100, Marketed New Drugs Without Approved NDAs or ANDAs,” as well as all “compliance manuals, website statements and other informal issuances” relating to the policy. Although the notice terminating the policy acknowledges that the goal of reducing unapproved drugs on the market was “laudable,” the notice states that the policy had the unintended consequence of increasing drug prices for certain drugs that were previously marketed without FDA approval. In particular, HHS objected to the provision in the policy that provided an incentive for companies to obtain FDA approval by prioritizing enforcement against the unapproved versions of the drug, thereby providing a “period of de facto market exclusivity” before other products obtain approval.

According to the HHS announcement, this period of market exclusivity allowed manufacturers an opportunity to raise prices in an environment largely insulated from market competition. In this announcement and in a simultaneously issued FAQ document, HHS cites studies purporting to show that “the UDI had the unintended consequence of increasing drug prices and shortages,” and that the UDI only “rarely generat[ed] additional clinical evidence of safety or efficacy.”

HHS also asserts that FDA did not undertake notice-and-comment rulemaking in issuing the policy, although the notice does not explain why the guidance would not have qualified for the exemption from notice and comment rulemaking for such policies. See 5 USC 553(b). In addition, the HHS notice objects to FDA having revised the guidance in 2011 without first obtaining public comment.  However, if FDA were required to obtain comment on the 2011 revisions, then surely HHS would need to have obtained comment on a complete reversal of the guidance. Instead, the HHS notice declines to seek comments on the reversal, which will become effective on December 25, 2020, thirty days after the publication of the notice in the Federal Register, without any comment period.

Moreover, questions remain as to whether the policy reversal complies with FDA’s Good Guidance Practices (GGPs) or the requirements of the OMB Bulletin on Agency Good Guidance Practices. The HHS notice specifically claims that the policy change conforms to FDA’s GGPs regulation, but FDA regulations require that a policy change of this magnitude must be published first as a draft guidance for public comment before the policy shift can be finalized. See 21 CFR 10.115(g). Although these FDA regulations do not specifically apply to HHS, the Secretary of HHS is responsible for executing the Federal Food, Drug, and Cosmetic Act “through the [FDA] Commissioner.” 21 USC 393(d)(2). Moreover, consistent with the HHS own website, the Department is subject to the OMB Bulletin, which also requires such notice and the opportunity for comment on a significant guidance document.[1]

In addition, the HHS notice argues that FDA’s enforcement policy was too expansive in its interpretation of “new drugs” for which FDA approval is required. Absent from this criticism, however, are any arguments grounded in the extensive body of case law that has interpreted and applied the FDA approval requirements and exemptions that are reflected in FDA’s enforcement policy. The notice requests comment to help identify drugs, including those for which FDA has called for new drug application submission, that might qualify as exempt from FDA’s approval requirements because they are grandfathered or GRASE.

In particular, HHS requests information related to:

1. Lists of drugs marketed prior to June 25, 1938 that are currently available on the market.

2. The extent to which drugs marketed prior to June 25, 1938, or drugs that might qualify as GRASE, have regulatory approvals in countries outside the United States.

3. Whether there would be adverse clinical or economic consequences to deeming as GRASE those drugs previously approved by the FDA for which patent and regulatory exclusivity have expired.

4. Any published literature reviews or clinical studies related to any drugs potentially exempt from the new drug approval requirement.

Although the HHS notice suggests that FDA may have interpreted too expansively the universe of drugs for which approval is required, HHS also says that the notice does not limit FDA’s authority to take action against manufacturers of unapproved drugs that meet the definition of “new drug.” Importantly, even after the policy shift becomes effective on December 25, 2020, FDA will still have broad statutory authority to take enforcement action against any marketed prescription drugs that are not the subject of an approved NDA, BLA, or ANDA.

In addition, the notice states that it does not apply to:

• Investigational New Drug applications (INDs) that are in effect as of the effective date of the HHS announcement (December 25, 2020);

• any subsequent New Drug Application (NDA) based on new clinical trial investigations (other than bioavailability studies) derived under such an IND; and

• existing approved NDAs.

We believe that the incoming Biden Administration will seriously consider reversing the HHS notice, allowing for further enhancements and clarifications of FDA’s enforcement policy with respect to marketed unapproved drugs, perhaps including with regard to the “period of de facto exclusivity” criticized by the HHS notice.

If you may be interested in commenting on this policy shift or HHS’ request for information, feel free to contact any of the authors of this alert or the Hogan Lovells attorney with whom you regularly work.

Authored by David Horowitz, Robert Church, and Philip Katz