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By: Jason M. Reefer
Under the federal Food, Drug and Cosmetic Act, a drug is classified either as a branded drug (a drug whose composition is novel) or as a generic drug (a drug designed to be a copy of a branded drug). Manufacturers of the latter are currently immune from most products liability lawsuits. But this near-immunity may soon come to an end. The U.S. Food and Drug Administration proposed a rule to change federal law in a manner that purports to expose generic-drug manufacturers to personal injury liability. Indicative of the complexities of the proposal and importance of the issues, more than 100 comments were submitted in response. Yet questions remain as to whether the FDA’s proposal would do more harm than good and if an alternative to the FDA’s approach should be adopted.
The modern era of drug regulation began in 1984, when Congress passed the Drug Price Competition and Patent Term Restoration Act, commonly known as the Hatch–Waxman Amendments to the FDCA. At that time, Congress had two goals: to provide incentives for the invention of new drugs and to lower the prices for patients to obtain existing drugs. In furtherance of these goals, Congress provided branded-drug manufacturers with greater patent protections to reward innovation and generic-drug manufacturers with a streamlined approval process to decrease the costs of market entry.
To obtain the FDA’s approval to market a branded drug, the drug’s sponsor must prove through the new drug application, or NDA, process that the drug’s active pharmaceutical ingredient is safe and effective for a particular indication. To do so, NDA sponsors must conduct extensive clinical trials and formulate warnings to apprise physicians of the side effects identified during those trials. The costs associated with the NDA process are staggering. Forbes has estimated that it costs approximately $5 billion to bring a branded drug to market.
Once a branded drug’s patent expires, a competitor may seek to obtain the FDA’s approval to market a generic version. This is done through the abbreviated new drug application, or ANDA, process. The focus of the ANDA process is sameness. Rather than replicate costly clinical trials or formulate warnings from scratch, an ANDA sponsor need only show that the generic drug’s active pharmaceutical ingredient, route of administration, dosage form, and strength are the same as its branded counterpart, and that the generic drug’s proposed labeling is the same as the branded drug’s FDA-approved labeling. The U.S. Department of Health and Human Services has estimated that R&D costs for a generic drug are a fraction of what it takes to bring a branded drug to market, just $1 million to $2 million. These savings are passed along to consumers in the form of lower prices.
By increasing competition and lowering market-entry costs, Congress not only has achieved its goal to increase access to safe and effective drugs but also has saved consumers and other payers, including the federal government, a substantial amount of money. Generic drugs typically cost 76 percent less than branded drugs, according to the Department of Health and Human Services, and the increased availability of generic drugs has saved the American health care system over $1.2 trillion during the 2003–2012 period (and $217 billion in 2012 alone), according to the Generic Pharmaceutical Association.
In November 2013, however, the FDA proposed a rule that would alter the responsibilities imposed on generic-drug manufacturers, thereby threatening the delicate balance struck by Congress through the Hatch–Waxman Amendments and possibly driving up the cost of generic drugs. The FDA’s proposal was prompted by a citizen petition that focused on the FDA’s changes-being-effected process and two U.S. Supreme Court cases in which that process was at issue, PLIVA v. Mensing, 131 S. Ct. 2567 (2011), and Wyeth v. Levine, 129 S. Ct. 1187 (2009).
The FDA’s regulations require a branded-drug manufacturer to revise its labeling if it possesses “newly acquired information” establishing an association of a serious hazard with a drug, and it may use the changes-being-effected process to revise its warnings in a unilateral fashion—that is, before the FDA has had a chance to approve or reject the labeling change. In Levine, the court held that failure-to-warn claims against a branded-drug manufacturer are actionable because the manufacturer could have used the changes-being-effected process to revise its labeling to include the warnings advocated by the plaintiff.
In contrast, to market a generic drug, the Hatch–Waxman Amendments require the labeling for the drug to be the same as the FDA-approved branded labeling. For the past 30 years, the FDA has maintained that this federal “duty of sameness” applies both pre- and post-approval. As such, under the current regulatory scheme, a generic-drug manufacturer may not use the changes-being-effected process to revise its labeling to include a warning additional to or different from that of the branded labeling. In Mensing, the court held that failure-to-warn claims against a generic-drug manufacturer are subject to dismissal because the manufacturer does not have the ability to unilaterally revise its labeling to include the warnings advocated by the plaintiff.
Based on Levine and Mensing, one who takes a branded drug is dissimilarly situated from one who takes a generic drug in that the latter is usually left without a remedy for injuries allegedly caused by the drug. In Mensing‘s wake, courts throughout the country have dismissed thousands of products liability lawsuits filed against generic-drug manufacturers. Now the FDA plans to effectively undo the Supreme Court’s decision in Mensing and to render Levine the law of the land for all drug manufacturers. Indeed, the FDA’s express intention in proposing the rule is to “create parity” between branded manufacturers and generic manufacturers, thereby exposing both to failure-to-warn liability. The FDA intends to do so by amending its regulations so that both branded-drug and generic-drug manufacturers may use the changes-being-effected process to make unilateral labeling changes.
To no one’s surprise, the proposed rule has drawn mixed reviews. The plaintiffs bar and other consumer advocates hail the proposal as a step necessary to ensure that injured patients have full access to the civil justice system, which, they claim, provides a powerful incentive for manufacturers to provide adequate warnings. Additionally, supporters of the proposed rule contend that increased litigation will inure to the benefit of patient safety, a core purpose of the FDCA. Industry representatives, on the other hand, assert that the proposed rule represents an invalid exercise of the FDA’s regulatory authority because it runs afoul of the Hatch–Waxman Amendments’ statutory text, Congress’ goal to increase availability of low-cost drugs and the FDA’s longstanding interpretation and application of the FDCA and the regulations promulgated pursuant thereto. Moreover, manufacturers highlighted potential negative ramifications of the proposed rule, such as physician confusion and decreased public confidence in situations where a generic drug’s labeling is materially different from the branded drug’s labeling.
In light of the proposed rule, some have said that maintaining the status quo makes the most sense. Others have proposed alternatives. For example, to create parity between generic-drug manufacturers and branded-drug manufacturers, the FDA could revise its regulations such that the changes-being-effected process could only be used to revise labeling to include new or different warnings after the FDA has approved a proposed revision. Once the FDA’s approval has been obtained, all manufacturers of the drug would be obligated to revise their labeling accordingly and to do so by a particular date. Additionally, Congress could enact an express-preemption provision similar to that found in the Medical Device Amendments of 1976 or an injury-compensation program of the sort created by the National Childhood Vaccine Injury Act of 1986.
Although the FDA initially expected to issue a final rule in December 2014, it recently announced that it would delay any action until the latter part of 2015. Regardless of the specific course the FDA chooses to follow, the debate that has surrounded the proposed rule is expected to continue within the legislature and in the courts for many years to come.
Reprinted with permission from the “February 10 edition of the ‘Products Liability Supplement’” © 2015 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382 – reprints@alm.com or visit www.almreprints.com.