At this point, it’s not really ground-breaking news that America has a problem with opioid drugs. By way of anecdote, when I became a federal prosecutor in 2011, the last heroin case that had been prosecuted in the Nashville U.S. Attorney’s office was in the early-1990s; although, to be fair, there were then lots of what we called “pill” cases involving opioids. When I left the office in 2017, at least half of the office’s major investigations were directly related to opioids–some pills, but mostly outright heroin or fentanyl/carfentanyl . In Nashville, Tennessee, OxyContin (which is an opioid-based painkiller) can be worth up to $1.25/milligram (mg). That means that just one 80mg OxyContin has a street value of $100. Price, is of course, a reflection of demand and demand, in this case, is driven by addiction.

That addiction is costing Americans a lot of money. The White House estimates that in 2015, over 33,000 Americans died from opioid related overdoses and that the economic cost of the opioid crisis was $504.0 billion, or 2.8% of GDP. To put that in some perspective, 2015 U.S. healthcare spending accounted for 17.7% of GDP, which means that Americans spent ~1/6 as much on opioids as they did on healthcare. State governments, often stuck footing the bill for indigent addicts because of increased law-enforcement activity and drug/medical treatment, are looking at the opioid manufacturers and distributors to help pay some of this cost.

In September, 41 state attorneys general announced serving subpoenas on 6 opioid manufacturers as part of a multi-state investigation into whether the companies engaged in any unlawful practices in the marketing and distribution of prescription opioids. The attorneys general are also looking into the distribution practices of 3 pharmaceutical distributors that account for the distribution of roughly 90% of the U.S. opioid supply. According the N.Y. State AG, opioid distributors alone make nearly $500 billion a year in revenue, but those numbers (perhaps as a result of the market response to the negative publicity generated by all of this) might not be as robust as they once were. Stock prices (many of these companies are privately held) for two of the manufacturers subject to the AG subpoenas have seen stocks nose dive by ~90% and ~75% respectively after both achieving all-time highs in 2015. Of course, the reason for those drops is likely non-singular, but the timing does perhaps signal the market’s appetite for risk.

So, obviously, if you are an AG looking to combat a public health disaster, going after the manufacturers of opioids (who, at least in 2015, had lots of money), much like the manufacturers of tobacco is pretty appealing. That said, there are some considerations that are likely to be major impediments in the effort to make this into a big tobacco settlement:

  1. Prescription pills are prescribed by a medical doctor. Unlike the pack of cigarettes bought at the gas station from a clerk whose only responsibility is to verify age, opioids are, ostensibly, ordered by someone with years of advanced medical training. Pinning all the responsibility (or even just “most of it”) on manufacturers and distributors alone will be a challenge.
  2. The success of the tobacco litigation was driven in no small part by the efforts of Richard “Dickie” Scruggs, the exceptionally well-connected Mississippi lawyer who spearheaded the class-action effort and coalesced all the states into letting him be the point-man for all negotiations. Much of what made Scruggs successful in that effort–1) the self-proclaimed advantage of home cookin‘; 2) the ability to wheel and deal in the Capital thanks to his access to then Senate Majority Leader, and brother-in-law, Trent Lott; 3) the close relationship with then Mississippi Attorney General Mike Moore (who, coincidentally, is advocating for the opioid suit, this time as a plaintiff’s attorney)–is unlikely to fly in today’s world given the guttural uneasiness associated with any of the tactics utilized by Scruggs, now a convicted felon for attempting to bribe a judge in a post-Katrina litigation, and overall discomfort with anything that smacks of nepotism.
  3. The stated goal of many of the proponents of the tobacco litigation was to put cigarette manufacturers out of business–this, of course, is a sentiment still voiced by some. But, no one is realistically seeking to litigate these pharmaceutical companies into the ground. While these companies manufacture opioids, they also research and manufacture drugs that help treat pediatric Crohn’s disease, multiple sclerosis and Parkinson’s disease, among others. Simply, even if there is a settlement in all of this, the reality is that the settlement is likely to contemplate the ability of these companies to continue to research and manufacture the next wave of pharmaceutical improvements.

The Medicare Payment Advisory Commission (“MedPAC”) met in Washington, DC, on April 6-7, 2017. The purpose of this and other public meetings of MedPAC is for the commissioners to review the issues and challenges facing the Medicare program and then make policy recommendations to Congress. MedPAC issues these recommendations in two annual reports, one in March and another in June. MedPAC’s meetings can provide valuable insight into the state of Medicare, the direction of the program moving forward, and the content of MedPAC’s next report to Congress.

As thought leaders in health law, Epstein Becker Green monitors MedPAC developments to gauge the direction of the health care marketplace. Our five biggest takeaways from the April meeting are as follows:

1. MedPAC unanimously passes a draft recommendation aimed at improving the current ASP payment system and developing the Drug Value Program as an alternative, voluntary program.

In the March meeting, MedPAC discussed a proposed recommendation to address the rapid growth in Part B drug spending. The short-term policy reforms for the current ASP payment system would be made in 2018, while the Drug Value Program would be created and phased in no later than 2022. MedPAC passes this draft recommendation unanimously with no changes. In the June report to Congress, MedPAC intends to add text to reflect more detail on certain issues, as well as other approaches and ideas for reducing Part B drug spending.

2. MedPAC discusses key issues addressed in a draft chapter on premium support in Medicare to appear in MedPAC’s June report.

MedPAC has developed a draft chapter on premium support in Medicare to serve as guidance if such a model were to be adopted. MedPAC does not take a position on whether such a model should be adopted for Medicare. A premium support model would include Medicare making a fixed payment for each beneficiary’s Part A and Part B coverage, regardless of whether the beneficiary enrolls in fee-for-service or a managed care plan. The beneficiary premium for each option would reflect the difference between its total cost and the Medicare contribution. The draft chapter addresses key issues for this model from previous MedPAC sessions, including the treatment of the fee-for-service program, standardization of coverage options, the calculation of benchmarks and beneficiary premiums, as well as a new proposal regarding premium subsidies for low-income beneficiaries. The draft chapter will be included in MedPAC’s June report to Congress.

3. MedPAC unanimously passes a draft recommendation for the implementation of a unified prospective payment system for post-acute care.

In the March meeting, MedPAC proposed a draft recommendation regarding a PAC PPS. During the discussion in the previous meeting, the percent of the reduction in aggregate payments was the largest point of contention. MedPAC decided the proposed 3% reduction was too low, and increased the reduction to aggregate payments to 5% for the finalized draft recommendation. MedPAC passes this draft recommendation unanimously with the change to the reduction of aggregate payments.

4. Regional variation in Medicare Part A, Part B, and Part D spending and service use

MedPAC compared its most current evaluation of geographic differences in Medicare Program spending and service use with calculations from previous years. The primary takeaway from the current data was that there was much less variation in service use relative to variation in spending.  Most of the service use variation in Part A and B services came from post-acute care.  Among Prescription Drug Plan (PDP) enrollees, drug use also varied less than drug spending.

5. Measuring low-value care in Medicare

MedPAC has been measuring the issue of low-value care, meaning services considered to have little or no clinical benefit, for the last three years. In June 2012, MedPAC had also recommended value-based insurance design, in which the Secretary could alter cost-sharing based on evidence of the value of services. In order to do so, however, CMS would first need information on how to define and measure low-value care.  MedPAC has been using 31 claims-based measures for low value care developed by researchers and published in JAMA. For 2014, MedPAC’s analysis found that 37% of beneficiaries received at least one low-value service.  Medicare spending for these services was estimated to be $6.5 billion.  MedPAC acknowledges that this estimate is conservative because the measures used do not also include downstream services that may result from the initial low-value service.  MedPAC also briefly discussed the issues associated with formulating performance measures in general, including for the merit-based incentive payment system (MIPS) included in Medicare Access and CHIP Reauthorization Act.

When FDA published its draft guidance Internet/Social Media Platforms with Character Space Limitations— Presenting Risk and Benefit Information for Prescription Drugs and Medical Devices in June 2014, I, like many others with an interest in pharmaceutical and medical device promotion, believed that the issue of social media promotion of drugs and medical devices was largely settled. Even with the limited concessions offered by FDA to reduce the traditional risk disclosure requirements, absent a substantial shift in FDA’s position, Twitter was not going to be a medium that drug and device companies could use to effectively promote their products. Sure, companies could use Twitter for corporate communications, disease awareness messaging and reminder ads that didn’t mention products’ indications, but promotional claims for products appeared to be off limits. Only the simplest and lowest risk drugs and medical devices could possibly meet the standards for disclosure of risk and indication information recommended by FDA in the guidance within the 140-character limit, and once the required disclosures were included, there was little room remaining for effective product messaging. But that was before Twitter rolled out promoted video last August.

Imagine my surprise when late one night, while scanning my Twitter feed to catch up on the day’s news, I came across this video:

In it, Biogen Idec provides a detailed overview of the manufacturing process for the recombinant hemophilia treatment intended for a direct to consumer audience.  In a therapeutic area in which traditional blood derived clotting factors may give rise to infection risk, the manufacturing process for this recombinant alternative may be a key differentiator for patients.  While the video is educational in tone and does not make claims about the efficacy or relative safety of the product, the four and a half minute video includes robust disclosures of the product’s indication and risks. It is a terrific example of the creative ways in which manufacturers may be able to use Twitter’s video capabilities to escape the strict 140-character limit, allowing them to produce compliant promotional communications for use in this medium. Up next from Elocatate’s Twitter account as the company continues to test the waters – patient testimonial videos.


Will the promoted video format be right for every company or every product?  No, but it does add another alternative that companies may consider when determining how best to promote their products where they are – and these days, that’s increasingly on Twitter and other social media platforms.  The freedom from Twitter’s character space limitations offered by the video format presents an intriguing opportunity for drug and medical device manufacturers to use Twitter in a new and complaint way.

FDA is the subject of a lot of criticism, some deserved, and some not.  However, I don’t think FDA gets enough praise when it does something right.  Therefore, I thought it was important to follow up on my previous blog and let everyone know that FDA has cleared up some of the ambiguities I mentioned there.

Specifically, on December 9th, FDA issued draft guidance making it clear that federal, and not state, law determines whether a company needs to register with FDA as a wholesale distributor or 3PL as required by the DSCSA.  This clarification likely has the greatest impact on prescription drug manufacturers because the DSCSA added an exemption to the scope of activities considered to be wholesale distribution and triggering wholesale distributor licensure obligations under the DSCSA.  Under the new definition, a manufacturer distributing its own drugs is no longer considered to be engaging in wholesale distribution.

FDA should be lauded not only for providing this clarification, but for the timing of its release.  I am not sure if it was merely a coincidence, but FDA issued this draft guidance the day after the comment period for FDA’s Pre-emption Guidance ended.  And by releasing it before the effective date of the reporting requirements for wholesale distributors, manufacturers have one less thing to worry about as they prepare to implement the track and trace requirements that commence on January 1, 2015.

Notwithstanding all of the good to come out of this guidance, there are still many ambiguities it does not address, such as whether states are permitted to require manufacturers to be licensed as wholesale drug distributors come January 1, 2015.  Hopefully, now that the comment period for the Pre-emption Guidance has closed, FDA will work diligently to issue final guidance and clarify this and the other remaining ambiguities.

For those entities required to report, I encourage you to review the draft guidance and evaluate whether the requirements it imposes align with the DSCSA.  FDA is accepting comments to the Draft Guidance through February 9, 2015.  For those who do not have to report, I encourage you to take advantage of the opportunity to spread a little holiday joy and submit comments thanking FDA for providing this clarification in a timely manner.

FDA's Second Guidance on the Drug Supply Chain Security Act Misses the Mark

Although FDA appropriately identified the need for guidance on the Effect of Section 585 of the FD&C Act on Drug Product Tracing, Wholesale Drug Distributor and Third-Party Logistics Provider Licensing Standards and Requirements; the Draft Guidance issued by FDA this month does not ask the right questions.

In November 2013, Congress enacted the Drug Supply Chain Security Act (“DSCSA”) with the intent of establishing a “Uniform National Policy” for wholesale distributor and third party logistics provider (“3PL”) licensure.  Congress hoped to achieve this goal by adding Section 585 to the Federal Food Drug and Cosmetics Act (FD&C Act) which prohibits states from:

Establish[ing] or continu[ing] any standards, requirements, or regulations with respect to wholesale prescription drug distributor or third-party logistics provider licensure that are inconsistent with, less stringent than, directly related to, or covered by the standards and requirements applicable under section 503(e) (as amended by [the DSCSA]), … or Section 584. 

This preemption provision was a welcomed addition to the FD&C Act because it signaled the end of the patchwork of state laws governing wholesale distribution of prescription drugs.  However, it soon became evident that there was some disagreement about Congress’ intent and that additional guidance on the scope of this preemption provision was needed.

Therefore, when I saw that FDA had published this draft guidance, I was excited, until I started reading it.  Unfortunately, it became immediately apparent that FDA was not addressing the questions stakeholders are struggling with.  From personal experience, the following questions are some of the most important ones left unanswered by this guidance:

  • Does FDA interpret Section 585(b), the wholesale distributor and 3PL preemption provision, to establish a regulatory floor or both a ceiling and a floor with respect to wholesale distributor and 3PL licensure?FDA's Second Guidance on the Drug Supply Chain Security Act Misses the Mark

The draft guidance restates the language applying preemption to state laws that are inconsistent with or covered by the DSCSA.  Yet its conclusion appears to ignore this language and interpret the DSCSA as establishing a floor.

Although I believe that Congress intended the DSCSA to establish both a floor and a ceiling, I recognize that Congress could have done a better job communicating this intent.  Notwithstanding the existence of some ambiguities regarding Congress’ intent, the DSCSA clearly states that Congress intended to create Uniform National Standards governing wholesale distribution and 3PL licensure.

Additionally, at least some weight should be given to the fact that the scope of Section 585(b) evolved as the DSCSA worked its way through Congress.  When initially introduced in the Senate as a standalone bill (S.957), Section 585(b) would only have preempted those state laws that were less stringent than the federal Law, and thus would have only established a regulatory floor.  Therefore, FDA should not just ignore the fact that Section 585(b) was ultimately expanded to prohibit states from enforcing laws that are also inconsistent with, directly related to or covered by the federal law, regardless even if FDA has a higher approval rating than Congress.

Assuming FDA concludes that the DSCSA establishes both a regulatory floor and ceiling, it will be important for the final guidance to describe how stakeholders should evaluate whether a state law is preempted by the DSCSA.

  • Come January 1, 2015, will states be permitted to continue requiring prescription drug manufacturers to be licensed as wholesale distributors with respect to the distribution of the manufacturers’ products?

As of January 1, 2015, the distribution of a prescription drug by its manufacturer is expressly excluded from the definition of wholesale distribution under Section 501(e) of the FD&C Act.  Therefore, it would appear that the answer to this question is “no” because doing so would be inconsistent with the federal law.  However, FDA should consider directly answering this question to resolve any ambiguities created by the draft guidance.

  • Assuming the answer Question 2 is “no,” could states impose any state licensure obligations on manufacturers relating to the distribution of the manufacturers’ prescription drugs?  If so, could such requirements impose the same obligations that are applicable to wholesale distributors? Could such licensure requirements be tied to a manufacturer’s distribution of its own products?

Although it appears that manufacturers cannot be required to be licensed as wholesale distributors, it is less clear whether states would be wholly prohibited from licensing prescription drug manufacturers.  Understanding states may be interested in continuing to require manufacturers to be licensed in their state, it would be helpful if FDA could provide some guidance on what types of licensure programs would be permissible.

  • Between January 1, 2015 and the effective date of the new regulations promulgated pursuant to Sections 583 and 584, which federal standards will states need to compare their laws against? 

The only federal standards that will be in place come January 1, 2015, will be the standards included in Sections 501(e), 583 and 584 of FD&C Act.  As the provisions in 583 and 584 only provide general guidelines for the regulations to be promulgated by FDA, it is unclear which state requirements will be permissible and which will be prohibited.  For example, pursuant to Section 583(b)(6) the regulations promulgated by FDA must require the mandatory physical inspection of any facility used in wholesale distribution and Section 583(c) would allow these inspections to be performed by an approved third-party accreditation or inspection service.  However, until the regulations are promulgated it is unclear as to what the scope of these inspections would be.  More specifically, can states continue to require wholesale distributors be VAWD accredited as a condition of licensure?

Stakeholder Engagement Is Important to Ensure the Benefits of the DSCSA are Realized

The answers to these questions will not only provide stakeholders with the guidance they need, they also will provide insight into whether the DSCSA will be successful in eliminating the inefficiencies caused by the current patchwork of state laws governing prescription drug wholesale distribution.

I likely did not identify all of the areas where stakeholders want FDA to provide additional guidance.  Therefore, it is important for all stakeholders to let FDA know what questions need to be answered in the final guidance by submitting comments before December 8th, 2014.

by Wendy C. Goldstein and Kathleen A. Peterson

On December 27, 2011, the U.S. Food & Drug Administration ("FDA"), Office of Prescription Drug Promotion ("OPDP") (formerly the Division of Drug Marketing, Advertising, and Communications) released a new draft guidance document titled "Guidance for Industry on Responding to Unsolicited Requests for Off-Label Information About Prescription Drugs and Medical Devices" (the "Draft Guidance"). The OPDP will accept comments on the Draft Guidance through March 29, 2011.

The FDA has a longstanding policy of permitting pharmaceutical manufacturers to respond to unsolicited requests for medical information about their products, even where such information pertains to unapproved products or uses. However, there has been considerable debate over what constitutes "unsolicited" in this regard. In July 2011, a group of seven manufacturers filed a "citizen petition" with the FDA, requesting FDA clarification of the following issues: (1) Manufacturer Responses to Unsolicited Requests; (2) "Scientific Exchange"; (3) Interactions with Formulary Committees, Payors, and Similar Entities; and (4) Dissemination of Third-Party Clinical Practice Guidelines.

The Draft Guidance relates only to the first of these requests. The Draft Guidance further states that it is not intended to address unsolicited requests for information about products that are not approved for any use.

Read the full alert here