21st Century Cures Act: No Cure for an FDA Patent Bias

Reproduced with permission from Pharmaceutical Law & Industry Report, 15 PLIR 31, 01/06/2017. Copyright 2017 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com

One of the more controversial provisions in the legislative behemoth known as the 21st Century Cures Act, signed into law by President Obama on December 13, 2016, involves an overhaul of the regulatory approval process for new uses for old drugs, a fertile target for private investment in the important field of precision medicine. To incentivize investment in drugs that have already gone (or soon will go) generic, the Act makes it cheaper and easier for brand manufacturers to negotiate the FDA approval process. Instead of requiring multiple randomized well-controlled clinical trials, the current gold standard for all drug approvals, FDA will be allowed to rely on data from "observational studies, registries, and therapeutic use'' to approve new indications for already-approved drugs. In addition, the legislation streamlines and expedites the review process for precision medicines and "qualified indications,'' defined by the Act as cancer and other therapeutic uses "to be determined'' by FDA.

Critics point out that this is Congress, once again, meddling in science; that a forced speeding up of FDA regulatory reviews will artificially short cut an approval process that has served the public for more than half a century; and in the end will lead to compromises in patient safety. But the real question is why these legislative incentives are needed in the first place. Here, some of the blame can be squarely placed on FDA. For years, FDA has promoted policies that discourage investment in new uses for drugs already on the market specifically, albeit unintentionally, undercutting its own efforts to spur advances in precision medicine. These policies target method of use patents and stem from an historic misreading of the Hatch-Waxman Act and FDA's kowtowing to political pressure to help reduce public health care costs even if it means undermining the patent system on which much of the U.S. pharmaceutical business is based.

Source of FDA's Patent Bias

Studies have shown that, on average, it costs $2.6 billion and takes 14 years to bring a new drug product to market. During the time the drug compound is protected by patent, the brand manufacturer enjoys a monopoly. New uses discovered during this period are protected by the compound patent as well as any patents that may be issued for the new methods of use. Method patents, for example, might be obtained for new therapies or to improve drug safety and efficacy and might be based on new dosing regimens, combination uses or companion diagnostics used to identify specific patient genotypes as is the case of many precision medicines. But getting such new uses on the brand label can still be very expensive. While not as significant as obtaining the initial drug approval, investments in new uses can still run into the tens or hundreds of millions of dollars needed to fund R&D and the randomized clinical trials required for FDA approval.

If the brand manufacturer believes its investment can be safely returned, the company will have all the incentive it needs to develop new uses and precision medicines. If, however, generics are allowed to "free ride'' on those investments the brand's capital will go elsewhere. New uses would then become the responsibility of government agencies and non-profits, which have limited resources and few of the market-driven incentives for their efficient allocation. This is where patent protection becomes critical.

Congress recognized the problem when it enacted Hatch-Waxman in 1984. For drug compounds no longer protected by patent, Congress wanted to make sure that generic entry would not be slowed down or precluded by new patented indications added to the brand label. It did this by permitting generic manufacturers to "carve out'' such indications and receive approval for only the non-protected uses. This would allow copycat generic drugs to be "skinny labeled'' for the non-protected indications and marketed in parallel with the brand, which would be labeled for the patented indications. In theory, the public would benefit from early entry of low cost generic drugs and brands would still be incentivized to invest in new patented uses that would appear only on the brand label. In reality, it has never worked this way.

The problem centers on FDA's policy of granting an AB "therapeutic equivalence'' rating for generic drugs including skinny labeled generics. This all-important rating, listed in the FDA's Orange Book, signifies that the generic is fully substitutable for the brand. Under the public health laws in many states, pharmacies are required to fill brand prescriptions with AB rated generics unless instructed otherwise by the prescribing physician. In most other states, pharmacies are merely required to request patient permission to substitute the generic — requests that are rarely refused due to the lower copay requirements imposed by most insurance companies. The upshot is that AB rated generic drugs are automatically substituted for the brand regardless of what the brand was prescribed for or how it was intended to be used. In the case of a skinny labeled generic, it means a "free ride'' on the brand prescription even for the patented indications for which it was explicitly not approved. It is no wonder, therefore, that brands have shied away from investing in new therapies and precision medicines that cannot be protected by patent.

Whether the 21st Century Cures Act will alter current investment trajectories remains to be seen. If well controlled clinical studies are no longer essential for approval and FDA reviews can be expedited, the Act may well stimulate private investment in "new cures'' and precision medicine. However, that raises an even thornier issue involving patient safety. If critics of the Act are truly concerned about patient safety being compromised by a watered down FDA review process, they should be doubly concerned that the current process allows safety information to be deliberately removed from generic labels when method of use patents are being avoided.

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