FDA on September 23 issued a Drug Supply Chain Security Act (DSCSA)-related compliance policy stating it will not take enforcement action against wholesalers that do not have systems in place to verify product identifiers of saleable returned product prior to further distribution until November 27, 2020. FDA’s decision was necessary because existing drug distribution systems are not prepared to handle and verify the large volumes of returned product in the supply chain in the United States. The extended compliance period also allows wholesalers to issue transaction statements for returned product without certification statements concerning verification processes.
Now is the time for pharmaceutical manufacturers to review their Open Payments/Sunshine Act internal compliance procedures, data collection forms and databases, and reporting and recordkeeping templates for payments and transfers of value made to healthcare providers. On August 14, 2019, the Centers for Medicare and Medicaid Services (CMS) published a Proposed Rule seeking to expand the Open Payments program, including the number and types of covered recipients and payment categories. As a result, drug manufacturers have at least two reasons to quickly conduct a comprehensive internal examination of their Open Payments program.
The Trump administration has issued a fourth set of proposed tariffs on an additional $300 billion of goods related to China, this time adding a range of commercial goods across industries. This round affects medical devices and their components, certain chemicals and precursors that are in pharmaceuticals and dietary supplements, and other FDA-regulated products. The administration continues to try to use tariffs as a means of balancing the trade deficit with China and to bring the Chinese government to the negotiating table on a longstanding set of issues related to intellectual property (IP), cyber, and technology transfer. There are two steps to the tariff process:
- At the proposed stage, parties can submit comments on why the proposed tariffs are damaging to US interests while not addressing the root cause of either the trade imbalance or China’s policies in the IP, cyber, and technology transfer areas. The Office of the United States Trade Representative (USTR) (and other government agencies) will consider the rationale for the comments and factor into the finalization of the tariffs whether the changes proposed in the comments would meet the US government’s objectives. Generally, this administration finds tariffs to be a useful tool,
- Once the tariffs are implemented, parties can request “exclusions” for their particular products. Exclusions require a party to indicate why application of the tariffs to its product would be damaging to US interests, disrupt the supply chain, significantly adversely affect the industry, or prevent a US company from providing products, services, or technical assistance based on the cost of the products under the tariff. Other fact-specific arguments can also be presented.
The PRC Ministry of Finance has announced it will audit 77 randomly selected drug makers in China, examining the companies' costs and profits to determine the reasonableness of their drug pricing mechanisms, in a bid to drive down medical costs. The audit will include some of the largest domestic drug makers as well as Chinese subsidiaries of three international pharmaceutical conglomerates.
Read the full LawFlash for more insight on the audit's key areas of focus. This initiative marks the first time the Ministry of Finance has launched a nationwide audit specifically targeting pharmaceutical companies, and it could be expanded if evidence is found to suggest issues are prevalent across the industry.
The Administration for Market Regulation of Jing’an District in Shanghai (AMR) on May 7 announced an administrative penalty decision against the Shanghai branch of a multinational pharmaceutical company for speaking fees it paid to physicians. According to the decision, the AMR found that the speeches in question never actually occurred and that the “speaking fees” were actually bribes. The AMR held that the physicians had utilized their official positions to unduly influence patients to purchase medical products promoted by the company branch, and that the payment of the fees constituted commercial bribery in violation of Article 7, Section 1(i) of the Anti-Unfair Competition Law of the People’s Republic of China.
The payment of speaking fees in the pharmaceutical industry has attracted heightened scrutiny from the Chinese government in recent years, and this case is not the first time the Shanghai AMR has targeted the practice. Read the full LawFlash for more details.
Over the last few months, FDA has continued its efforts to encourage and facilitate the use of the agency’s Expanded Access Program (EAP). This follows other FDA EAP actions, including its announcement of program improvements. Overall, these steps appear to signal that FDA is trying to position the EAP as a desirable option for patients, healthcare providers, and industry following the passage of the Federal Right to Try statute, in which, as noted in FDA’s recent Right to Try Frequently Asked Questions (FAQs), the agency plays a very limited role.
The US Supreme Court held on May 20 that a judge, not a jury, must decide the question of whether federal law prohibited drug manufacturers from adding warnings to the drug label that would satisfy state law. To succeed on a pre-emption defense on failure-to-warn claims, the drug manufacturer must present “clear evidence” that it fully informed the US Food and Drug Administration (FDA) of the justifications for the warning, and that the FDA, in turn, informed the drug manufacturer that the FDA would not approve the addition of the warning to the drug’s label. The Court remanded to the US Court of Appeals for the Third Circuit to decide the pre-emption question. Two concurring opinions provide the Third Circuit with roadmaps to opposite conclusions.
The Centers for Medicare and Medicaid Services (CMS) issued proposed regulations in February targeting manufacturer arrangements with pharmacy benefit managers (PBMs). These proposed regulations are a direct outgrowth of the administration’s drug pricing blueprint, and if finalized, would revise the Anti-Kickback Statute discount safe harbors that have protected drug manufacturer rebates from potential criminal liability, and affect their agreements with PBMs. However, what many may not realize is that even if the proposed regulations are not finalized, they warrant special attention, as the preamble elucidates CMS’s view on applicability of the current safe harbors to current contracting practices.
A handful of bills that comprised a healthcare reform package championed by Florida House Republicans are on their way to the governor’s desk where they’ll likely be signed into law. The result of an ambitious effort by lawmakers to overhaul how Florida regulates healthcare, the bills represent a striking departure from the current regulatory environment. Passed during the last week of the legislative session with a July 1, 2019, general effective date, providers will want to begin reviewing their policies in anticipation of the coming change.
The Drug Enforcement Administration (DEA) recently announced an enhancement to the Automation of Reports and Consolidated Orders System (ARCOS) to allow DEA-registered drug manufacturers and distributors to access anonymized information concerning their customers’ orders of certain controlled substances. Manufacturers and distributors of Schedule I and II and certain other Schedule III controlled substances are required to submit quarterly reports to ARCOS of controlled substance purchases and sales. With this enhancement, registrants will be able to view ARCOS data submitted by other manufacturers and distributors. Specifically, registrants will be able to see and download data on a customer’s (e.g., pharmacy’s) controlled substance purchases, in terms of both the amount of purchased controlled substances and the number of distributors from which controlled substances were procured. While this enhancement will help controlled substance manufacturers and distributors fulfill their suspicious order monitoring obligations, it also raises questions regarding the steps that distributors and manufacturers will be required to take if suspicious order patterns are detected.