Life Science Compliance Update

October 29, 2015

Turing Pharmaceuticals – Compounding Pharmacy Fights Back

Turing Pharmaceutical's purchase of Daraprim from Impax Laboratories in August 2015 for $55 million was followed by a huge frenzy in the news media. Daraprim, which is used to fight toxoplasmosis, was previously priced at 13.50 per tablet. Once Turing purchased the drug, they raised the price per tablet to $750.

Turing's rationale behind the price jump was to place the additional money into research and development, to develop better treatments for toxoplasmosis, with fewer side effects, and to invest in marketing and education tools to make people more aware of the disease. Martin Shkreli, the founder and CEO of Turing, stands by his decision to raise the price of the drug, stating, "This isn't the greedy drug company trying to gouge patients, it is us trying to stay in business."

While Shkreli believes he and his company are doing a service to the pharmaceutical industry and patients as a whole by reinvesting in R&D, the Infectious Diseases Society of America and the HIV Medicine Association estimate that it would cost $336,000 a year to treat someone with toxoplasmosis at the $750/pill price. Both organizations believe that "this cost is unjustifiable for the medically vulnerable patient population in need of this medication."

Dr. Judith Aberg of Mount Sinai said that some hospitals will now find Daraprim too expensive to keep in stock, possibly resulting in treatment delays. Mt. Sinai will continue to use the drug, but each use of the drug requires special review.

After the initial outcry over the price hike of Daraprim, Shkreli responded by stating they would lower the price of the drug to an unidentified price, which would still allow the company to break even or even retain a small profit. To date, they have still not noted the new, lower price of Daraprim, but a spokesman did state the company is capping patient copayments at $10.

Recently, however, Imprimis Pharmaceuticals a compounding pharmacy claims they can make a close, customized version of Daraprim for just $1 a tablet. Imprimis Pharmaceuticals is known of mixing approved drug ingredients to fill individual patient prescriptions.

Imprimis CEO Mark Baum states, "While we respect Turing's right to charge patients and insurance companies whatever it believes is appropriate, there may be more cost-effective compounded options for medications, such as Daraprim, for patients, physicians, insurance companies and pharmacy benefit managers to consider."

Not only is Imprimis working on a more cost-effective tablet for fighting toxoplasmosis, but they are also "forming a new program called Imprimis Cares, which is aligned to [Imprimis'] corporate mission of making novel and customizable medicines available to physicians and patients today at accessible prices."

Imprimis says their version of the tablet, which would have to be compounded to order, has something extra known as leucovorin. "According to the Centers for Disease Control and Prevention, pyrimethamine [Daraprim's generic name] works to block folic acid synthesis in the parasite T. gondii, the cause of toxoplasmosis, and leucovorin helps to reverse the negative effects on bone marrow caused by the mechanism of this action," according to Imprimis. Imprimis is planning to sell their form of the tablet in oral capsules starting as low as $99.00 for a 100 count bottle.

Compounded drugs are typically made to fill a doctor's prescription for an individual patient, sometimes because the mass-produced version is either in short supply or completely unavailable. Compounded drugs can also allow for customized patient-specific formulations or dosages. Unlike drugmakers who make huge batches of drugs on complex production lines, compounders do not need Food and Drug Administration approval to create their compounded drugs.

It is worth keeping an eye on Imprimis to see what other drugs they imitate for a lower price. Imprimis CEO Baum stated, "We are looking at all of these cases where the sole-source generic companies are jacking the price way up. There'll be many more of these" compounded drugs coming in the near future.

April 22, 2015

Drug Shortages Policy Update

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We have covered drug shortage issues numerous times, including their impact on the healthcare system and patient care. Previous government studies have concluded that its own regulatory agencies have failed to address the problem, and in some cases may be responsible for furthering shortages.

The Food and Drug Administration (FDA) explains that shortages of pharmaceuticals can happen for a variety of reasons including manufacturing issues, quality control problems, and production delays. This puts patient’s lives at risk, as illustrated by the many recent stories on drug availability. In one example, the bladder-cancer drug BCG is currently sold by just one company, Merck, and they do not expect to produce enough of the medication until next year. Hospitals used to get around 20 vials of medicine a week, now one says it is limited to receiving six every two months. With 16,000 deaths projected this year alone, bladder cancer is the fourth-most common type of disease in men with around 76,000 new cases estimated this year among both men and women. The standard treatment for aggressive early-stage bladder cancer is BCG, a medication patients often need for months or even years.

GAO study and Congressional hearing

According to a recent report from the Government Accountability Office (GAO), the U.S. Drug Enforcement Agency (DEA) and the FDA should work together more closely to prevent shortages of prescription medications containing controlled substances, and the DEA should improve its process for authorizing quotas of the controlled substances used in these drugs. The report was requested by members of Congress, where there is bipartisan interest in combating increasingly serious drug shortages. Sen. Charles Grassley (R-IA) and Sen. Sheldon Whitehouse (D-RI) commissioned the GAO report in 2012, and soon, Grassley and Sen. Dianne Feinstein (D-CA), the leaders of the Caucus on International Narcotics Control, are scheduled to hold a hearing on the report's findings. The initial hearing was scheduled for April 14, but was postponed. A new date for the hearing has not yet been selected.

GAO findings

The GAO study looked at: (1) the trends in drug shortages; (2) the effect on patients and providers; (3) DEA’s administration of the quota process; and (4) coordination between DEA and FDA to prevent and mitigate shortages. The GAO analyzed data from 2001 through 2013 from the University of Utah Drug Information Service, which is generally regarded as the most comprehensive source of drug shortage data, and from 2011 and 2012 from YERS/QMS, which is the official record for the quota process. The GAO interviewed officials from DEA, FDA, organizations representing patients and providers, and drug manufacturers. In its conclusion, the GAO recommended the DEA and FDA take several actions to improve their management of the quota process. HHS agreed with the recommendations, although the DEA raised objections to the report.

Specifically, the GAO recommended that the DEA Administrator establish controls, including periodic data checks, to ensure that the Year End Reporting and Quota Management System (YERS/QMS) data, which is the official record of the quota process, accurately reflects both manufacturers' quota submissions and DEA's decisions. The GAO found that DEA’s lacking systematic data checks is “inconsistent with federal standards for internal control, which calls for agencies to have appropriate control activities in place, such as periodic data checks, to ensure that the data used by the agency for decision making are accurate.” The DEA told GAO that it does not monitor data from YERS/QMS to assess the administration of quotas, and without such it will be unable to evaluate its responses to manufacturers’ quota applications or understand the nature of its workload.

Additionally, the Administrator should establish measures for the agency related to quotas and ensuring an adequate and uninterrupted supply of controlled substances for legitimate use. Without these standards, the DEA does not have sufficient information to make decisions to manage its programs effectively. The quotes should be established along with internal policies for processing quota applications and setting aggregate, annual, and supplemental quotas to ensure that staff conduct these activities consistently and in accordance with the agency's regulations. DEA officials cited staffing problems for their failure to meet regulatory timeframes for the proposal and establishment of quotas.

The GAO strongly recommended DEA and FDA establish formal policies and procedures to facilitate coordination, including a specific timeframe in which DEA will respond to FDA request to expedite shortage-related quota applications. Interestingly, the Food and Drug Administration Safety and Innovation Act (FDASIA) already requires DEA and FDA to coordinate where additional quota may be needed to address a shortage of a drug containing controlled substances. The GAO report states that the agencies lack compatible policies and procedures and disagree on what constitutes a shortage of controlled substances.

Finally, the GAO recommended the DEA and FDA quickly update their MOU (memorandum of understanding) regarding steps each will take to reduce drug shortages. It further calls on the DEA and FDA to outline the type of information they will share and the timeframe for doing so in response to current or potential drug shortages.

FDA on shortages

In an April 10 blog post, FDA described how the agency works with its drug shortages team to ensure adequate supplies of FDA-approved drugs in the United States. FDA describes examples of manufacturers obtaining approval for formerly unapproved products, highlighting collaboration between the offices within the agency. FDA states:

Such approvals highlight the strength of collaborations between FDA’s shortages staff, our unapproved drugs team, and the Office of New Drugs. These approvals are crucial for FDA: once a drug is approved, we know what ingredients are in the drug, how it is made, and that it has been shown to be safe and effective for its labeled use. Approval of formerly unapproved products also helps alleviate FDA’s concerns about a potential market disruption or shortage of these drugs, because the manufacturers of approved drugs have invested in a manufacturing process that helps to ensure the drug is produced the same way every single time, lowering the risk for shortage.

FDA further explains if a single manufacturer is the sole maker of a newly-approved product it may result in the drug’s prices being higher than what patients and prescribers paid for an unapproved version of the drug. FDA specifically notes that it “does not factor costs” into the approval of drugs and encourages companies to apply for the approval of generic versions of medication, citing neostigmine, a formerly unapproved drug that now has two approved manufacturers.

The FDA’s blog post does not address one of the more interesting conclusions from the GAO study, which found that disagreements over the official meaning of a “drug shortage” might ironically help facilitate them. According to a report citing the University of Utah Drug Information Service (UUDIS), there was a 47 percent drop in new drug shortages between 2011. In 2015 the UUDIS was tracking 301 active shortages, an increasing trend according to a 2014 GAO report. However, during the same time period, FDA claims drug shortages declined. While UUDIS defines a shortage as a supply disruption that affects how a pharmacy prepares or dispenses a drug product or that influences patient care when prescribers must use an alternative agent, FDA’s definition considers whether the combined supply from all manufacturers in a specific drug market meets historical demand patterns.

FDA’s definition considers the relevant market in which the drug exists, looking at the clinical implications of the supply disruption in question. The agency may question if patients may use another version of the drug containing the same active ingredient. FDA uses third-party market research databases to assess the market share of possible disruptions, then contacts manufacturers of products in the relevant market who generally will voluntarily provide information such as their inventory status, rate of demand (units per month), manufacturing schedules, and any changes in ordering patterns. FDA may conclude that supply meets the historical or anticipated demand. This higher level of information differentiates the FDA drug shortage data from UUDIS, the latter of which will not delist an issue until all presentations or forms of the drug are back on the market.


We will continue to monitor drug shortages, including their impact on the effectiveness of medical treatment in the United States and the government’s response. The upcoming Congressional hearing on the recent GAO report will provide additional insight into potential legislative and regulatory vehicles that may be employed to deal with the current crisis. Clarity and consistency over the definition of a drug shortage could be a topic, if the GAO report is any indication.

October 23, 2014

Drug Shortages Update


Thomas Sullivan

Over the years we have discussed the impact of drug shortages on healthcare in the United States. With increasing national attention on the threat of Ebola, our August post regarding the relationship between public distrust of the pharmaceutical industry and slower research and development of important antibiotics is particularly relevant. The public, for the most part, remains unaware of the extensive role played by pharmaceutical companies in the funding of important research. Experts recommend the industry consciously articulate its work in getting treatments and cures to patients.

For our readers interested in the Sunshine Act, this is especially relevant as we debate the need for more context surrounding Open Payments data, so that the public can have a more complete understanding of the role collaboration between companies and physicians play in the research and development of much needed drugs.

Drug Shortages Remain

Unfortunately, many necessary drugs are simply not being produced at an adequate rate—if at all. Last year we reported a University of Utah assessment which found 300 “active" -- or ongoing -- drug shortages at the end of April 2013, just about the same as it did at the end of December 2012 (299 shortages) and September 2012 (282 shortages). We also noted a national survey reporting that of almost 25 oncology pharmacists, 93% reported delays in chemotherapy administration or changes in treatment regimens, 85 percent saw higher costs, and 10 percent experienced reimbursement challenges.

Shortages of cancer drugs also led to additional labor expenses to address the problem, such as the extra hours hospital pharmacists spend trying to locate and purchase scarce medications or find alternatives, according to a research announcement from St. Jude Children's Research Hospital.

Legislation introduced to help tackle this ongoing problem, such as U.S. Rep. Elijah Cummings (D-MD) bill, The Gray Market Drug Reform and Transparency Act of 2013 (PDF) (H.R. 1958), went nowhere. The legislation came after a report Cummings co-authored with Sens. John Rockefeller (D-WV) and Tom Harkin (D-IA), finding that "many hospitals and healthcare providers were unable to procure injectable cancer drugs from their usual and reputable sources.” Additionally, “those sources had reported being bombarded with unsolicited calls offering the hospitals and healthcare providers the same drugs, but with a catch: The drugs were subject to massive markups”.

Administration Efforts Have Not Worked

This year, a New York Times story on drug shortages outlined the persistent problem, and how it forces doctors to resort to rationing in some cases or to scramble for alternatives. The number of annual drug shortages — both new and continuing ones — nearly tripled from 2007 to 2012. The story notes that drug shortages have become an “all but permanent part of the American medical landscape.” Most commonly, shortages exist for generic versions of sterile injectable drugs, in part because the factories that make them are growing older and suffer from quality control issues causing temporary closings of production lines or even entire factories.

In an analysis by the United States Government Accountability Office (GAO) which was required by the 2012 law giving the U.S. Food and Drug Administration (FDA) additional power to manage shortages, the GAO concluded that FDA was preventing more shortages now than in the past, yet the shortages have continued to grow.

"From prolonged duration of a disease, to permanent injury, to death, drug shortages have led to harmful patient outcomes," the GAO found. For example, a 2012 study by researchers in the Pediatric Hodgkin Lymphoma Consortium found that when drug shortages forced doctors to switch medications in a national clinical trial for Hodgkin lymphoma, the number of patients who were cancer-free after two years fell from 88 percent to 75 percent (see page five of the report; AARP bulletin).

Because of the law, manufacturers are now required to alert FDA of potential shortages before they happen. But as reported, agency officials have been careful when using their regulatory muscle. For example, in some cases where particles were found to be contaminating a drug that was in short supply, the agency allowed the company to filter the drug to avoid disrupting supplies instead of shutting down the production line altogether.

FDA’s Role in Drug Shortages

In the past few months, FDA updated sections of its website relating to drug shortages. The agency has a publicly available question and answer section providing new information on drug shortages and updated FDA policy positions. When asked what FDA can do to address shortages, the agency states its two major goals are to address “underlying causes” and “enhance product availability”. Using a case-by-case approach, FDA looks at the cause of the shortage and assesses its risk to the public health before acting.

If a manufacturing or quality problem exists, FDA works with the firm to address the issues. Problems may involve very low risk (e.g. wrong expiration date on package) to high risk (particulate in product or sterility issues). Regulatory discretion may be employed to address shortages to mitigate any significant risk to patients, some of which is provided to the agency through legislation like FDASIA.

Food and Drug Administration Safety and Innovation Act (FDASIA)

FDASIA itself provides both expanded authority to FDA and additional regulatory requirements on manufacturers, which must report to FDA permanent discontinuances of certain critical drugs, as well as temporary interruptions in manufacturing that may lead to a shortage. Before FDASIA, the law only required reporting of discontinuances. FDASIA also requires all manufacturers of critical drugs to notify FDA of discontinuances or interruptions in manufacturing, whereas previously this applied only to sole source manufacturers. 

In addition, FDASIA enables FDA to require mandatory reporting of discontinuances or interruptions in manufacturing of biological products. The legislation also requires FDA to issue a public non-compliance letter to manufacturers who fail to comply with the early notification requirements. Before the passage of FDASIA, the agency lacked any enforcement mechanism for early notification.

Other FDA Actions

FDA states that it will work with other firms making a drug deemed in shortage, in an effort to help ramp up production if the firm is “willing to do so.” Often the firm needs new production lines approved or new raw material sources approved to help increase supplies. FDA can expedite review of these to help resolve shortages of medically necessary drugs. However, FDA notes it cannot require the other firms to increase production.

Additionally, when a shortage occurs and a firm has inventory that is close to expiry or already expired, if the company has data to support extension of the expiration dating for that inventory, FDA is able to review this and approve the extended dating to help increase supplies until new production is available.

But when American manufacturers are not able to resolve a shortage immediately and the shortage involves a critical drug needed for domestic patients, FDA may look for a firm that is willing and able to redirect product into the United States market to address a shortage. FDA considers a list of criteria to evaluate the product to ensure efficacy and safety. These criteria include the formulation and other attributes of the drug as well as the quality of the manufacturing site where the drug is made.

Many of the FDA’s steps described above are outlined in the agency’s long-term strategic plan, which outlines its “priority actions,” as well as actions drug manufacturers, and others can take, to prevent drug shortages by promoting and sustaining quality manufacturing. FDA also publishes a “drug shortage database” on its website allowing industry and consumers the ability to see the status of drug shortages and learn additional details, if known.

FDA Manual of Policies and Procedures (MAPP)

In September of 2014, FDA also published a MAPP establishing the Center for Drug Evaluation (CDER) and Research’s procedures for notification, evaluation, and management of drug shortage situations for all CDER products including those studied or marketed under investigational new drug applications (INDs), new drug applications (NDAs), biologics license applications (BLAs), abbreviated new drug applications (ANDAs), and unapproved drugs marketed without an approved application. The MAPP outlines the priorities and responsibilities of important CDER workers like the Drug Shortage Staff (DSS).

The MAPP is a useful look at agency strategic thinking. For example, below is a flowchart created by FDA’s CDER, outlining its procedure after receiving an initial notification of a potential drug shortage:

Drug Shortages Article

Additional Steps to Combat Drug Shortages

Recently, Health Affairs published “Health Policy Brief: Drug Shortages,” updated on September 24, 2014. The Health Policy Briefs are produced under a partnership of Health Affairs and the Robert Wood Johnson Foundation. The Brief provides an excellent overview of the drug shortage issue. In particular, it outlines several potential ways to combat shortages in the United States. Medicare Part B reimbursements, other government drug pricing programs, group purchasing organizations, national stockpiles, and exclusivity are discussed in greater detail.

A well-cited reason for generic sterile injectable drug shortages is the low reimbursements rates from Medicare Part B. The Brief notes these changes stemmed from: “changes via the 2003 Medicare Prescription Drug, Improvement, and Modernization Act that reduced payment rates for outpatient physician-administered drugs, which includes chemotherapy drugs.”

“It is theorized that these lower payments incentivized both physicians and manufacturers to switch to higher-cost drugs, thereby reducing investment in cheaper generic drugs, leading to "growing market concentration" and eventual drug shortages,” the Brief stated. Critics have pushed for changes to the reimbursement structure, calling for additional incentives to use generic medication. Some legislative proposals to change the basis of Medicare Part B payments have been introduced, but none are expected to pass in the near future.

The Brief’s next topic, other government drug pricing programs like Medicaid and the 340B drug discount program control prices, “negatively influencing the profit potential of drug manufacturers, inhibiting their ability to invest in factory upgrades and thus contributing to drug shortages.” Congress has proposed exemption for certain generic sterile injectable drugs from these pricing programs, but the proposals have not advanced far.

A third topic, group purchasing organizations (GPOs), are entities that negotiate pharmaceutical contracts on behalf of health care providers. These organizations force manufacturers to accept low prices which ultimately encourage a softer market and may create drug shortages. The Brief notes a proposal that has not yet been tried—strengthening “failure-to-supply” clauses in contracts between GPOs and manufacturers—with the goal to require higher prices in exchange for secured drug supplies.

Next, national stockpiles are suggested as a way to influence the demand side of the market, as the Brief mentions, “ensuring that manufacturers have sufficient incentives and resources to maintain robust production.” But specific shortages are hard to predict and ultimately more production by the industry as a whole is necessary, rather than stockpiling specific drugs.

Finally, the Brief cites exclusivity—the protection of intellectual property and manufacturing rights—as a boon to the brand-name drug market. This creates more profit, and similar exclusivity rights to manufacture generic medication may improve the generic drug supply to reduce shortages. But this is challenging, as pointed out: “because the very idea of extended patent exclusivity is antithetical to the price-reducing objective of generic drugs. An exclusivity policy might also create a perverse incentive by which manufacturers would actually be rewarded for keeping a drug in short supply instead of manufacturing it.”


The Brief concludes by noting economists have predicted over time, manufacturer-reported investments in facilities and increased generic drug approvals may result in a market-driven correction, reducing shortages that exist today. Additionally, in the meantime, although both major parties agree on the threat posed from drug shortages, there is not agreement on major policy steps to further address the problem. Some authorities granted to FDA may help the situation, but ultimately both private and public sector actions are necessary. We will continue to follow the drug shortage issue and the need for consumers and policymakers to have a more complete understanding of the role collaboration between companies and physicians play in the research and development of much needed drugs, thereby helping to reduce shortages which affect the quality of healthcare for all Americans.


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