Politics & PDUFA

Everyone is preparing for a bumpy ride this year in Washington. The conventional wisdom is that President Obama has a year to enact new legislation before the political infighting becomes even more intense leading up to the 2012 presidential election. But the political tensions created by last November's mid-term elections make gridlock more likely.

Jill Wechsler Congressional Republicans will seek to cut the federal deficit by squeezing budgets at government agencies. Pressure to find more resources will intensify federal efforts to levy stiff fines on rule-breaking pharma companies and to impose higher user fees on industry. Challenges to the Obama administration's health reform program will create uncertainties about whether new fees and policies will be implemented as planned, or if manufacturers will have to pay stiffer rebates and taxes without gaining the millions of additional customers promised by a reformed health insurance system.

One certainty is that Republican Congressional leaders will spend considerable time and energy grilling Obama administration officials on reform shortcomings. A Senate Finance Committee hearing during last November's lame duck Congressional session was short and fairly friendly to Donald Berwick, administrator of the Centers for Medicare and Medicaid Services (CMS). But House leaders will not be so gentle in the coming months.

A prime Republican target is the Independent Payment Advisory Board (IPAB). It was established by the Affordable Care Act (ACA) to propose cost-cutting policies for Medicare under procedures that limit Congressional oversight and legal review. But pharmaceutical companies, as well as insurers, providers, and even consumers are leery that IPAB will cut costs arbitrarily and will require seniors to pay more.

Despite these obstacles, a number of reform initiatives are moving forward. CMS is publicizing additional preventive care benefits for seniors, while the IRS has crafted a process to calculate hefty new taxes on pharma companies required by the ACA. FDA is examining a host of policy issues related to developing biosimilars, including standards for product naming and interchangeability and what falls under the definition of "publicly available information." And the governing board for the Patient Centered Outcomes Research Institute (PCORI) held its first meeting last November and plans to assess what research is going on in this field and what information gaps it can fill with early projects that can illuminate PCORI's role.

Fees first

A top priority for pharma companies is to renew the Prescription Drug User Fee Act (PDUFA), which has to be reauthorized by October 1, 2012, for FDA to continue collecting nearly $700 million in fees to support its review process for drugs and biologics. Although that legislative deadline may seem far away, FDA wants to have a PDUFA V plan ready for public review by fall in order to transmit it to Congress by early 2012; failure to reauthorize user fees by summer next year theoretically would force FDA to lay off hundreds of staffers and shut down the review process.

In April 2010, FDA's Center for Drug Evaluation and Research (CDER) launched a two-year process for revising PDUFA. CDER director Janet Woodcock noted that 65 percent of human drug review funding comes from user fees, a situation that some critics claim makes the agency overly dependent on industry. Yet, despite some qualms about the current program, no one suggests that FDA curtail any activities or cancel the fees.

Pharma companies support user fees in general, but complain that multiple postmarketing requirements have slowed reviews and undermined approval time frames. Patient advocates, pharmacists, and doctors agreed that the proliferation of risk evaluation and mitigation strategies (REMS) make drug development more costly and complicates prescribing and dispensing. Consumer groups focused more on direct-to-consumer drug advertising, seeking user fee support for mandatory pre-review of DTC ads, clearer prescribing information, better protection of patients in clinical trials, and more comparative studies to ensure that new drugs are superior to those already on the market.

FDA has been discussing these and other issues at meetings with manufacturers, patient and consumer groups, and healthcare professionals, part of a broad, transparent consultative process required by the FDA Amendments Act (FDAAA) of 2007. A main FDA goal for PDUFA V is to gain more flexibility in meeting review time frames, possibly by extending the review clock for more complex applications, such as those with REMS, that require advisory committee meetings, or that involve inspections of foreign manufacturing facilities. However, that could mean extensions for almost all important applications.

The overarching issue is to what extent industry fees should fund FDA initiatives to improve drug development and regulatory science. FDA proposes to tap fees for more staff consultations on innovative clinical trial designs, on utilizing biomarkers in drug development, on complex manufacturing issues, and to standardize electronic submissions. The agency's wish list also seeks support for the Sentinel active surveillance system, meta-analysis standards, biomarker qualification, rare disease treatments, and improved dose selection and drug safety assessments. But this year's fee to process a new drug application (NDA) with clinical data already exceeds $1.5 million, and manufacturers fear that expanding the pool of activities supported by PDUFA would up the ante disproportionately.

Fees for generics?

Because PDUFA is "must-pass" legislation, members of Congress are lining up with proposals for a broader FDA reform bill. Legislators want to refine the REMS program, curb drug advertising, expand drug re-importation, ban pay-for-delay deals between innovator and generics firms, require that drugs demonstrate comparative superiority, and grant FDA authority to pull drugs off the market and to issue subpoenas. Stay tuned for more.

Billions in Penalties

With healthcare consuming an ever-growing portion of federal and state budgets, authorities are looking hard to save money by cracking down on healthcare fraud and abuse. The Justice Department announced last November that it had recouped $3 billion in civil settlements and judgments last year, much of it from pharmaceutical companies. At the top of the list is Pfizer's $2.3 billion settlement for promoting unapproved drug uses, the largest healthcare fraud payment in history. AstraZeneca agreed to a $302 million civil settlement, Novartis paid $193 million, and Teva was hit with a $100 million fine.

There's no sign of any letup: In October 2010, GlaxoSmithKline signed a $750 million settlement. Merck negotiated a $950 million deal with the Justice Department related to Vioxx. And last month brought in $421 million from Abbott, Boehringer Ingelheim, and B. Braun.

Evidently dozens of pharma cases are under investigation, and the number will rise as layoffs breed dismissed workers eager to blow the whistle on former employers. Regulators and prosecutors are looking to convince CEOs that compliance with the rules is important by levying criminal charges against individual executives considered responsible for serious violations. The first shoe fell in November 2010 when the Justice Department charged a former GSK executive with making false statements and blocking an FDA investigation into off-label uses; the trial begins in February, and conviction could bring a jail term as well as fines.

If the threat of jail doesn't compel manufacturers to clean up their acts, the prosecutors also are looking to ban companies committing fraud from doing business with Medicare and Medicaid. The HHS inspector general says it's aggressively pursuing exclusion penalties against executives who should or could have known of illegal behavior; the CEO of KV Pharmaceutical Co. was axed last year as a result, and more pharmaceutical executives may follow.

Jill Wechsler is Pharmaceutical Executive's Washington correspondent. She can be reached at jwechsler@advanstar.com