November 05, 2018

Biologic and Biosimilar Settlement Agreements Now Must Be Disclosed to DOJ and FTC

Recent amendments to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA),1 titled the Patient Right to Know Drug Prices Act,2 require parties to inform regulatory authorities of executed settlement agreements that address the manufacture, marketing or sale of biologic and biosimilar products. The changes became effective immediately after President Donald Trump signed them into law on October 10.

The move brings settlement agreements regarding biologics and biosimilars into line with what the MMA already requires for agreements regarding small-molecule drugs.

The expanded reporting requirements are not surprising, as biological products are the fastest-growing therapeutic product category in the U.S.3 Unlike small-molecule drugs, composed of chemicals and made in labs, biological products are either composed of organic cells, or are made by cells, rendering them far more complicated than small-molecule drugs.

The term “biologics” encompasses “a wide range of products such as vaccines, blood and blood components, allergenics, somatic cells, gene therapy, tissues, and recombinant therapeutic proteins. Biologics can be composed of sugars, proteins, or nucleic acids or complex combinations of these substances, or may be living entities such as cells and tissues,”according to the Food and Drug Administration.

Biosimilars are highly comparable to a specific, approved biologic product upon which they are based, in all clinically meaningful matters of safety, purity and potency.5 Biological products are technically included within the definition of a “drug” under the Food, Drug, and Cosmetic Act. However, before these amendments, the MMA reporting requirements did not include biologics or biosimilars but focused on settlement agreements involving branded and generic small-molecule drugs.

The Federal Trade Commission (FTC) and the Department of Justice Antitrust Division are particularly interested in “pay for delay” settlement agreements where patent disputes result in an agreement that a generic manufacturer will delay production of its generic product until an agreed-upon future date. 

Antitrust concerns are implicated when parties agree that one market player will delay bringing a competing product to market in exchange for money or other business benefits. The FTC has taken particular aim at “pay for delay” tactics, even stating that “one of the FTC’s top priorities in recent years has been to oppose a costly legal tactic that more and more branded drug manufacturers have been using to stifle competition from lower-cost generic medicines.”7

As with small-molecule drugs, the filing required by the MMA amendments must be made with the Assistant Attorney General and the FTC no more than 10 business days after the execution of the settlement agreement.8 Filing notice of an agreement is specifically exempted if the sole concerns of the agreement are purchase orders for raw material supplies, equipment and facility contracts, employment or consulting contracts, and/or packaging and labeling contracts.9

The MMA amendments will give enforcement agencies a clearer window into the existence of such arrangements involving biologics and biosimilars and, as a result, it seems likely that the FTC’s crackdown will continue and expand.

The president’s signing of the MMA amendments occurred amidst several weeks of increased focus on drug pricing, including the Trump administration’s release of a proposed rule through the Centers for Medicare & Medicaid Services (CMS) that would require companies to disclose list prices for drugs and biological products in direct-to-consumer advertising.10 Additionally, the outlawing of “pay for delay” tactics is on the short list of solutions proposed by Democrats to cut drug prices should they take control of one or both houses of Congress after the midterm elections, a move which is openly supported by the FTC.11

Companies that manufacture biologic or biosimilar drugs or related products should review the expanded guidelines to ensure compliance.

 

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