Over the last few weeks the important reauthorization of the Prescription Drug User Fee Agreement or PDUFA has been top of mind for industry leaders and legislative leaders alike.

PDUFA (and its sister MDUFA) provide for the both the resources the FDA needs to fulfill its role of ensuring that products are safe and effective in a way while including performance metrics for the agency to ensure that it is efficient and does not hamper innovation.  Few pieces of legislation will have a greater effect on our industry in the coming years as we shared in the letter on the importance of reauthorizing MDUFA and PDUFA last April.

Word from D.C. as of today is that the Senate has reached an agreement to limit discussion and vote to 17 amendments to S.3187, the FDA bill.  Voting on these amendments will commence tomorrow, May 24 at 2:00pm Eastern time.

Overall, the proposed legislation is good for the FDA, industry and the patients that will ultimately benefit from new innovations.  Of the 17 amendments, four may be problematic.  Interestingly each of these 4 will require 60 votes to pass.

Importation Amendment #2107 – Sen. McCain 

At face value this sounds like a good idea.  Lifting the ban on importing drugs from Canada woould make less these expensive drugs available in the U.S.  Free trade is good right?  Usually so.  But, don’t confuse this amendment with free trade.  Legitimate drugs coming our of Canada at the prices established on the government schedule (similar to our medicate schedules) would in fact be cheaper in the short term, but over time the normal economic factors would come into play and the  pricing pendulum would swing back as the market equalized.  At best this would be a short term benefit.

Add to this the quality concerns,  and this amendment is probably not making a good law better.  One quality concern is that there is no exemption for biologics.  Biologic products are especially susceptible to contamination and have particular and highly sensitive requirements for production, cold storage, and shipment that, if not observed, can render the product ineffective or unsafe.  Here in the U.S. the FDA, working with industry  ensures that the proper safeguards are in place.  It is unclear how this will be accomplished with imported products.  Secondly, and  of even greater concern, is that there is no guarantee that drugs from Canadian pharmacies actually originate from the legitimate supply chain.  Products of suspect origin or counterfeit products trans-shipped through other nations already do enter the Canadian market.  These products would then be eligible for import into the United States.  This concern has on the rise in Canada and should this amendment pass, the FDA simply does not have the resources to accomplish this just as the Canadians have not had the resources to fully monitor and control the supply chain there.

Patent Settlements Amendment #2111  – Sen. Bingaman/Sen. Vitter

Patent protection is the reward for the risk and huge investments made by industry in bringing innovative and life saving pharmaceuticals to market.  The are the foundation these investment decisions are built on.  The amendment would effectively make it commercially impossible for generic litigants to enter into settlement agreements at any stage, so every such lawsuit would have to be fought to the end – at great expense for both parties and needlessly consuming scarce taxpayer-provided judicial resources.  It seems that they only party truly benefiting from this will be the lawyers.  We know empirically that patent lawsuits over generic drugs are lost as often as they are won. There is no basis to believe that forcing a lawsuit on every patent and then forcing such lawsuit to be fought to the bitter end will in any way increase the “win rate” of generic litigants or benefit consumers.

Additionally, for small business this is especially concerning. Small businesses do not have massive legal resources or the funding to take an issue like this to a fully litigated conclusion.  Having the ability to meet and  agree to a reasonable settlement that satisfies both parties is often the small business owners only option.  This amendment would remove that option and should it become  law would most likely become problematic during the rule-making stage  when the SBA Office of Advocacy reviews it under the Regulatory Flexibility Act.   Thus, a well intended amendment is probably not a good idea.  We have a legal process that already works.  By entering into commercially reasonable, lawful settlement agreements, innovator and generic drug-makers today routinely settle litigation on terms that are favorable to consumers by permitting generic launch prior to the expiration of innovator patents.

Genetically Engineered Salmon Amendment #2108 – Sen. Murkowski

Earlier this month, we shared how possible amendments regarding genetically modified salmon negatively effect Arizona and the industry as a whole by setting a very dangerous precedent.  This amendment would have the Congress second-guess the FDA by seeking redundant and costly studies from other federal agencies based on political and market considerations.  Congress should not substitute its judgment for that of the scientists at FDA by attempting to alter FDA’s scientific review of in this case, not to mention the consultative efforts of the Commerce Department and the Interior Department, specifically National Marine Fisheries and the Fish and Wildlife Service.

Fraud Amendment #2109 – Sen. Sanders

This amendment would terminate statutory exclusivity for a drug or biologic granted under Hatch-Waxman, the Orphan Drug Act, BPCA, the BPCIA, or any other Federal Food Drug and Cosmetic Act (FFDCA) provision if there is a criminal conviction of a Sponsor, a finding of civil liability, or a settlement agreement in which the Sponsor admits to fault—not just to the violations of the Federal Food Drug and Cosmetic Act, but to other laws beyond the scope and authority of the FDA.  While misdeed need to be appropriately addressed in all industries, and are, these exclusivity provisions are a critical part of the FDA statutory framework that provide a pathway for approval of generic drugs, a new pathway for approval of biosimilars, and provide the incentives deemed necessary by Congress to incentivize the development of drugs for rare diseases and research into pediatric uses of biopharmaceuticals.

Corporate and private equity investment, as well as federal grants and research contracts are the fuel for the engine of innovation in this sector.  In what is often perceived as a high risk investment category, statutory exclusivity, like patents, helps to sweeten the reward if, after a very long haul, these companies are successful.

Violation of the False Claims Act, Anti-Kickback laws, Foreign Corrupt Practices Act, Social Security Act and state laws referenced in the Amendment are serious issues and already carry severe criminal and civil penalties, including fines of millions and billions of dollars, imprisonment, and exclusion from participation in federal programs. But to single out one industry with additional far reaching and economically crippling  sanctions is neither fair or reasonable.  The first time it is applied, it is likely to be challenged in the courts, but until then it creates yet one more reason for wary investors to shy away from all companies in the sector. Ultimately, weakening incentives for biomedical innovation only serves to hurt patients awaiting new therapies for devastating diseases; not punish bad actors who are a rare exception to the rule.

Wrapping it up

Reauthorization of PDUFA is critical to the health of the bioscience industry,  the efficiency and effectiveness of the FDA, and to the patients who desperately need these future life saving innovations.   That is why the FDA and industry worked long and hard to present an agreement that meets the needs of the FDA, the industry and most importantly the American people.  Members in both Houses of Congress have worked tirelessly to bring a very good law to the floor but it is always good to remember that not all changes are necessarily improvements.

Tomorrow will be an interesting day on Capitol Hill.