FDA guidance aims for loophole to avoid rebates

The FDA has completed a draft guidance that would create a legal loophole for drug companies to bypass legal commitments to pay rebates to PBMs and payers. The guidance, which is under review at the Office of Management and Budget, is intended to allow companies to sell drugs at net prices that don’t include rebate payments.

If and when it is implemented, HHS believes the guidance would enable drug companies to create a parallel market that would function alongside regular supply chains. In this separate channel, imported drugs could be sold at lower list prices to patients who are uninsured or who have large deductibles.

The guidance could also give companies the ability to free themselves from long-term contracts and negotiate new contracts for distributing drugs through conventional supply chains.

The scheme, first announced by HHS in a plan released in July, rests on FDA giving the green-light to a sleight of hand trick involving National Drug Codes (NDCs), codes that FDA assigns to drugs so it can track them throughout the supply chain.

Drug manufacturers would be permitted to obtain a new NDC for imported drugs.

While the imported products would be designated with different NDCs, manufacturers would be required to ensure that the imported drugs are identical to those produced for the U.S. market. The imported drugs would be manufactured in the same factories as those intended for the U.S. market.

Because contracts identify drugs by NDC, according to HHS, the manufacturers would be able to sell the imported drugs without regard to long-term contracts they had entered into for the U.S. market.

In its plan outlining the proposal, HHS said “multiple manufacturers have stated (either publicly or in statements to the Administration) that they wanted to offer lower cost versions but could not readily do so because they were locked into contracts with other parties in the supply chain. This pathway would highlight an opportunity for manufacturers to use importation to offer lower-cost versions of their drugs.”

The HHS plan downplayed safety concerns, stating that because drugs would “imported through conventional supply channels, this pathway generally would rely on applicable existing safeguards to ensure supply chain integrity.”

The proposal is, however, likely to raise safety concerns.

Beyond the potential for counterfeit or adulterated drugs entering the supply chain, there will be concerns that having identical products on the market with different NDCs could interfere with FDA’s ability to track drugs.

The scheme is also certain to face criticism — and possibly litigation — from PBMs and insurers who will argue that the government is inappropriately allowing drug manufacturers to slip out of legal commitments.

The FDA draft guidance on “Importation of Certain FDA-Approved Human Prescription Drugs, Including Biological Products” was sent Monday to the Office of Management and Budget for review. There is no deadline for OMB to complete the review.

https://www.biocentury.com/bc-extra/politics-policy/2019-10-08/fda-guidance-aims-loophole-avoid-rebates