President Trump’s recently released 2019 budget proposal for the Department of Health and Human Services (HHS) makes changes to the 180-exclusivity period for first-to-file generic applicants, and is estimated to save $1.8 billion in Medicare costs over 10 years. Some generic drug manufacturers have been accused of blocking others from entering the market by filing an abbreviated new drug application (ANDA) or by intentionally postponing final approval and allowing the patent to sit with the “first filer” indefinitely. In the new proposal; however, if another manufacturer seeks approval while the first filer is fixing deficiencies, the initial filer now has only 180 days to correct its application deficiencies to maintain exclusivity.
 
In light of these new guidelines, Axinn, Veltrop & Harkrider FDA attorney, Chad Landmon, provides insight on the key budget priorities impacting the pharma industry and manufacturing initiatives and how the proposed new rule for generic drug patent approvals and exclusivity intersect and diverge from the previous 180-day exclusivity rule. He also discusses the implications that this new rule has for competing generic drug manufacturers, how it will change the application and approval process, and key considerations for manufacturers as they apply for drug exclusivity. –KB
 
 
Contract Pharma: What are the key budget priorities impacting the pharma industry? What effect might they have?
 
Chad Landmon: On the positive side, there is a proposal to increase funding for FDA, which should help to speed reviews of pharmaceutical and biologic products. This should be a positive to the industry, as well as allow the Agency to increase its staffing and broaden its expertise.
 
The administration has also suggested reductions in certain programs administered by HHS and the CDC. Given that some of these reductions are a result of shifting funds from various programs, it’s difficult to know exactly what the overall impact will be to the industry. Although, various patient groups will be advocating against certain cuts.
 
One interesting proposal allows for an authorization of five state Medicaid programs to negotiate prices directly with manufacturers, which has been discussed over the years as a way to reduce Medicaid drug expenses. If adopted, this proposal would certainly create uncertainty in the industry, along with challenges as to how to handle these new programs.
 
 
CP: How might the proposal impact generic and innovative products?
 
CL: Generally, the increased funding for FDA will be beneficial for both innovator and generic drug applications as they undergo Agency reviews. Through user fees and other funding, FDA has been increasing its staff over recent years with the goal of speeding application reviews and getting products to market more efficiently. Increased funding will allow FDA to further those efforts.
 
CP: How does the proposal plan to address drug pricing?
 
CL: There are a few proposals aimed at reducing overall drug prices. As previously mentioned, increased FDA funding will speed up the drug approval process, and will effectively increase competition and reduce drug prices.
 
Another proposal that is raising some controversy within the pharmaceutical industry relates to the 180-day generic drug exclusivity period for the first generic applicant to challenge a brand company’s patents for a product. This marketing exclusivity was put in place in the 1984 Hatch-Waxman Act to encourage generic companies to undergo the risk and expense of patent litigation, and this period has been critical to building up the generic drug industry. The new proposal would devalue that period by starting the running of the 180 days as soon as another generic applicant is otherwise eligible for approval, even if the first generic applicant is not yet ready for approval. Although this proposal would provide short-term drug cost savings by increasing the speed at which later generic filers come to market, in the long term, it raises a significant risk of reducing overall generic competition because it would create great uncertainty and decrease the incentive for generic companies to bring prompt patent challenges.
 
CP: What does the budget propose for manufacturing initiatives?
 
CL: The budget proposal includes initiatives for FDA to continue to develop its expertise in cutting-edge manufacturing techniques, including for complicated cell-based technologies. This expertise will help FDA improve its review of such technologies and assist FDA in establishing guidelines and standards for the industry.
 
In addition, the budget includes a proposal for FDA to create a new Center of Excellence on Compounding for Outsourcing Facilities.  This center would encourage the development of a more robust outsourcing industry and encourage the consistent implementation of cGMP standards.