Congress CREATES a New Action to Combat Drug Approval Delays

Lost in the proceedings that have occupied our collective attention these last few months was the passage of the omnibus “Further Consolidated Appropriations Act, 2020,” which became law in late December and kept our country operating (at least for the near term). Tucked away in that 700+ page act is a bipartisan bill that was known as the “Creating and Restoring Equal Access to Equivalent Samples Act of 2019” or the “CREATES Act” (H.R. 965/S.340). The CREATES Act seeks to prevent some common tactics used to delay lower-priced competition for pharmaceutical products. During this election cycle, both sides of the political aisle will laud their party’s efforts in passing this legislation. But the real question is whether this legislation will actually curb abusive practices. To effectively use this tool as it was meant, we must understand why it was necessary and how it works.

A History of Delaying Access

Pharmaceutical manufacturers have used many strategies to delay competition from lower-cost equivalent products over the years. While so-called “pay for delay” has garnered more media attention, another strategy used by manufacturers is to block competition by denying access to product samples to prevent the development of lower-cost equivalents.

For years, Congress had been facing complaints about this strategy. You see, developers seeking FDA approval to sell a generic or biosimilar product must perform bioequivalence tests comparing their proposed product against an already approved version of that product. The owners of the approved product often refuse to provide or would restrict access to samples of the product to developers. For products that required Risk Evaluation and Mitigation Strategy (REMS) plans — programs for prescribing and distributing certain drugs that have high potential for serious adverse effects — companies would claim their FDA-approved plan prohibited them from providing samples. Further, those companies would use the FDA’s requirement that competing products have a shared REMS program as an excuse to engage in protracted negotiations over the language of a shared program that would delay approval of the competitor. In more egregious cases, manufacturers would affirmatively seek to place their product under the REMS plan late in its lifecycle when it would be more prone to competition from generic equivalents. These roadblocks have meant lower-cost versions of these products were not being brought to market in a timely manner. And patients have been paying the price.

Both the House and the Senate proposed numerous versions of the CREATES Act over the past few years to combat these abuses. The version that was passed in December (Section 610 of Public Law No. 116-94)[1] contains two main provisions. First, the Act allows developers to bring a lawsuit to obtain a sufficient amount of a reference product for testing if the developer has been unable to obtain the product from the market or the license holder for the product. Second, the Act no longer requires a developer to have a single, shared REMS plan with the original license holder, but instead allows the developer to utilize a comparable REMS plan. Before delving into these provisions, the Act defines some key terms that are relevant to determine its scope.

The Relevant Players and Actions

The Act first sets the stage for the inevitable dispute before it provides the requirements for initiating resolution of that dispute. Picture if you will a developer, which the Act defines as a party seeking approval of an Abbreviated New Drug Application (ANDA), a paper New Drug Application (505(b)(2)), or an abbreviated Biological License Application (aBLA). Sec. 610(a)(4). To support its application, the developer needs to run tests on a “covered product,” which is an approved product that does not appear on the FDA’s drug shortage list (with certain exceptions such as if inclusion of the product is likely to alleviate the shortage). Sec. 610(a)(2).  Unable to obtain the covered product in the market, the developer requests that the license holder for the approved product provide the developer with “sufficient quantities” of the product at “commercially reasonable, market-based terms.” Importantly, the Act defines “sufficient quantities” as the amount the developer determines will allow it to conduct the testing needed to support its application and to fulfill any regulatory requirements. Sec. 610(a)(10). The “commercially reasonable, market-based terms” are defined as a nondiscriminatory price that is at or below the most recent wholesale acquisition cost (WAC) for the drug with a scheduled delivery that is within a timeframe that is based upon receipt of the request (discussed further below), and without any further restrictions. Sec. 610(a)(1). 

In this scenario, the license holder for the product either refuses or does not timely provide sufficient quantities of the product. Previously, the developer would have had limited options; primarily an antitrust lawsuit, which can be expensive and difficult to maintain. The CREATES Act, however, gives the developer an alternative course of action to obtain samples, and perhaps damages as well.

Congress CREATES a Potentially Powerful Civil Action

The CREATES Act now allows a developer to bring an action against a license holder alleging that the license holder has refused to provide sufficient quantities of the product in question on commercially reasonable, market-based terms. In order to successfully bring such an action, a developer must prove the following by a preponderance of the evidence:

1. The product requested is not subject to REMS with “ETASU” (elements to assure safe use under 21 U.S.C. §355-1(f)), or if subject to REMS with ETASU, the developer has obtained authorization from FDA to receive the product and has provided that authorization to the license holder;
2. As of the date of the lawsuit, the developer had not obtained sufficient quantities of the product on commercially reasonable, market-based terms;
3. The developer sent a written request to the license holder that was sent to a named corporate officer, was made by certified or registered mail with return receipt requested, specified a point of contact for the license holder to direct communications to, and specified an address for the product to be shipped upon reaching an agreement; and
4. The license holder did not deliver sufficient quantities of the product on commercially reasonable, market-based terms:
   1. For products not covered by REMS with ETASU, by 31 days after the date on which the license holder received the request; and
   2. For products covered by REMS with ETASU, by 31 days after the later of: (i) the date the license holder received the request; or (ii) the date the license holder received the copy of the authorization from the developer.

Sec. 610(b)(2). 

In order to best position itself to either timely receive product for testing or be in the best position for litigation, a developer should note three important aspects of the above elements:

1. It is important to know whether the product is on FDA’s drug shortage list (and for what reason) and whether the product is subject to REMS. A prudent developer should be aware of these two facts at the initial information gathering stage of the product, but it is important to re-check on these facts at the time of a request. 

2. The developer should know the most recent WAC for the product in order to negotiate the commercially reasonable, market based terms. 

3. If the product is subject to REMS with ETASU, the developer should avoid further delays by requesting authorization from FDA before making the request to the license holder, and including the authorization from FDA with the request. The Act requires the developer to make a written request to FDA to receive products covered by REMS to test such products in supporting an application to FDA, and gives FDA 120 days from receipt of the request to issue the authorization. 

The immediate reaction to the requirements of bringing an action under CREATES is that there is the potential for the license holder to play games, for example by not faithfully negotiating the “commercially reasonable, market-based terms.” However, the Act provides for monetary remedies that could deter some bad-faith actions by license holders.

In addition to obtaining an order requiring the license holder to provide the product at sufficient quantities under commercially reasonable, market-based terms “without delay,” the Act states a successful developer shall also be awarded reasonable attorney’s fees and costs. Sec. 610(b)(4)(A) (i), (ii). In addition, if the developer can show by a preponderance of the evidence that the license holder delayed in providing sufficient quantities without a legitimate business reason, or defied a court order to do so, the Act allows for an award of a monetary amount “sufficient to deter the license holder” from such future actions. Sec. 610(b)(4)(A)(iii). In all, the potential remedies may end up deterring future license holders from unreasonably delaying in providing samples, and further possibly resulting in faster approvals for competitors.

The Act does also provide some protections to license holders as well. First, the Act limits the maximum monetary amount that can be awarded to not greater than the revenue the license holder earned on the product during the relevant time period (basically from the date the license holder received the request to the date the developer received sufficient quantities). Sec. 610(b)(4)(B). The Act expressly states that providing samples of REMS product to a developer is not a violation of a REMS plan (Sec. 610(d)), and that the license holder is not liable for the developers unsafe use a requested product (Sec. 610(c)). Finally, the Act provides the license holder with certain affirmative defenses; mainly that it did not have control or access to the requested product or that the requested product could have been purchased in sufficient quantities at commercially reasonable, market-based terms from agents, distributors, or wholesalers of the license holder. Sec. 610(b)(3).

Further Limitation on REMS Product Abuse

The Act provides one additional tool for a developer to combat delay with respect to obtaining approval for products covered by REMS. With REMS products, the industry was seeing delays both in providing sufficient quantities of the product for testing and at the back end when developers were forced to negotiate with the license holder to agree on a single REMS for all available versions of a product. While a shared REMS program can have safety and efficiency benefits, often the negotiations to arrive at such a program were unnecessarily protracted.  The FDA attempted to mitigate this problem through draft guidance documents. The CREATES Act, however, creates another avenue by expressly allowing for the developer to obtain a separate but comparable REMS to that of the approved product. Sec. 610(f). 

Conclusion

Overall, the CREATES Act provides a potentially powerful tool for developers to combat some tactics that were typically used to delay the approval of lower-cost drug alternatives. In order to effectively use this tool, developers should be familiar with the requirements of the new civil action that is available to them. One hopes the CREATES Act will deter such tactics going forward, and that Congress can focus on drug price control measures before their self-imposed May deadline. After all, now that Congress is turning back to its regular job — campaigning — its members will likely need to notch another healthcare-related victory for constituents just in time for the November election.