Just Six Months Later, FDA (Somewhat) Revives its Unapproved New Drugs Initiative

By: KS Reagan, Peter Mathers, and Samantha Hong

On May 27, 2021, HHS emphatically and unequivocally withdrew the agency’s November 2020 notice that had terminated FDA’s Unapproved Drugs Initiative (UDI) and had withdrawn FDA’s enforcement policy with respect to unapproved drugs.[1]  HHS cited “multiple legal and factual inaccuracies” with its November 2020 notice and further stated that the notice “could result in significant harm to public health by suggesting that unsafe or ineffective drugs could circumvent the drug approval process.”  Importantly, the withdrawal notice did not reinstate FDA’s former enforcement policy and instead announced that FDA plans to issue new guidance on its enforcement priorities with respect to unapproved drugs.  In the meantime, FDA intends to employ its existing general enforcement approach, involving “risk-based prioritization in light of all the facts of a given circumstance.”  This decision follows other similar steps taken by the Biden Administration to undo some of the unilateral actions taken by the Trump Administration in its final weeks.[2]

Brief History of FDA’s Unapproved Drug Initiative

Under the Federal Food, Drug, and Cosmetic Act (FFDCA), any “new drug” must be the subject of an approved application submitted to the FDA before it may be legally marketed in the United States.[3]  The FFDCA defines “drug” to mean, among other things, an article “intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in man or other animals.”[4]  A “new drug” is a drug that is not generally recognized as safe and effective for its labeled conditions except that a drug is considered grandfathered—and not subject to FDA approval requirements—if 1) it was marketed prior to 1938 with labeling that “contained the same representations concerning the conditions of its use,”[5] or 2) prior to 1962, it was commercially used or sold in the United States, not a “new drug” as defined in the FFDCA at that time, and not covered by an effective application[6].

In 2006, FDA launched its Unapproved Drugs Initiative (UDI) in an effort to combat alleged illegal marketing of drugs that lack FDA approval for safety and efficacy.  As part of the UDI, FDA issued a compliance policy guide, “Marketed New Drugs Without Approved NDAs and ANDAs,” that described FDA’s risk-based approach for taking enforcement actions involving unapproved drugs, focusing on, for example, drugs with potential safety risks, drugs that lack evidence of effectiveness, and health fraud drugs (“CPG 440.100”).[7]  FDA updated CPG 440.100 in 2011 to state that the guidance’s enforcement priorities and FDA’s exercise of enforcement discretion do not apply to any unapproved drugs first introduced to the market after September 19, 2011—all of which were to be eligible for immediate enforcement action.[8]

CPG 440.100 encouraged firms to voluntarily seek approval for drugs that other companies were marketing without approval.  As FDA stated, in that circumstance, FDA was more likely to take enforcement action against remaining unapproved drugs on the market, thus providing a “period of de facto market exclusivity before other products obtain approval.”  FDA hoped that the potential for a period of market exclusivity would incentivize firms to be the first to obtain approval to market a previously unapproved drug.

HHS 2020 Notice to Terminate” the UDI

On November 25, 2020, HHS issued a notice (“2020 Notice”) to terminate the UDI and withdraw CPG 440.100.[9]  The 2020 Notice stated at the outset that “[t]he Trump Administration, through [HHS], is continuing its efforts to reduce the price of prescription drugs,” noting that an “unintended consequence” of CPG 440.100 was that the period of de facto market exclusivity “allowed manufacturers an opportunity to raise prices in an environment largely insulated from market competition.”  In support, the 2020 Notice cited reports of increased prescription drug prices of drugs approved “through the UDI,” e.g., Daraprim, and relied on a single study describing the effects of the UDI on drug prices and drug shortages.  The 2020 Notice further defended its decision to withdraw CPG 440.100 by citing “legal concerns” about whether the UDI was properly implemented without notice-and-comment rulemaking pursuant to the Administrative Procedure Act.

The 2020 Notice additionally sought information from the public regarding “the contours of the exceptions to the definition of ‘new drugs’,” i.e., grandfathered drugs, that are statutorily exempt from new drug approval requirements, and drugs that are generally recognized as safe and effective.  In so doing, the 2020 Notice implied that FDA had waffled on its interpretation of “new drug” over time and changed its position without explanation in CPG 440.100.  In particular, the 2020 Notice questioned FDA’s decision, pursuant to the UDI and CPG 440.100, to require new drug applications from manufacturers of drugs that may have been on the market for decades.

HHS Decision to Withdraw the 2020 Notice Due to “Multiple Legal and Factual Inaccuracies”

Just six months later, on May 27, 2021, HHS withdrew the 2020 Notice citing “multiple legal and factual inaccuracies” (“2021 Notice”).  The 2021 Notice strongly stated that the 2020 Notice “does not accurately reflect the Department’s or FDA’s thinking because it is inconsistent with the [FFDCA], FDA regulations, and judicial precedent, among other legal authorities, and is not supported by the facts.”  In particular, these issues include the following:

1. HHS failed to consult with FDA before issuing the 2020 Notice. 

The FFDCA requires that the Secretary of HHS “shall be responsible for executing” the FFDCA “through the [FDA] Commissioner.”[10]  HHS determined that HHS’s failure to consult with, or even notify, FDA in advance of issuing the 2020 Notice and withdrawing the CPG 440.100 guidance—an act “executing” the FFDCA—violated that mandate. 

2. HHS misinterpreted the term “new drug” and the regulatory history.

HHS rejected the 2020 Notice’s suggestion that FDA had ever deviated from its decades-long interpretation of “new drug” as “referring to the entire drug product and not just the active ingredient.”  HHS explained in the 2021 Notice that FDA has long interpreted the word “drug” in “new drug” to refer to the entire drug product and not just the active ingredient, and that the U.S. Supreme Court has affirmed this interpretation.[11]  Consistent with this product-specific interpretation of “new drug,” FDA has construed the grandfather clause of the “new drug” definition (21 U.S.C. § 321(p)) to mean that a drug product cannot be grandfathered if it differs in any respect from the pre-1938 version of the drug product. 

3. The UDI and CPG 440.100 did not require notice-and-comment rulemaking. 

HHS maintained its long-standing position that enforcement policies are not legislative rules and need not be promulgated through the notice-and-comment rulemaking process set forth in the Administrative Procedure Act.[12]

4. The 2020 Notice relied on flawed facts.

HHS pointed to limitations of the single drug pricing study used to support the 2020 Notice and further explained that the price increases associated with the drug Daraprim were not attributable to the UDI.  

What’s to Come

At this time, FDA no longer has a formal written enforcement policy for prioritizing (or deferring) action against the marketing of unapproved drugs.  Indeed, it is not clear whether the agency intends to reinstate its Unapproved Drugs Initiative, or whether it will take a different approach moving forward that takes into account other factors.  For instance, might FDA change its practice of taking enforcement action against unapproved versions of a drug (after a “grace” period) once it has approved one or more versions of the drug?  Will FDA enforcement priorities, explicitly or not, begin to reflect consideration of the economic impact of taking unapproved drugs off the market?  Will FDA try to re-introduce some form of the September 19, 2011 cut-off date (perhaps setting a new cut-off date), after which new unapproved drug products would be subject to immediate enforcement action?  The only certainty, as HHS and FDA repeatedly emphasized in the 2021 Notice, is that they continue to view narrowly the exceptions to the new drug approval requirements (both the “general recognition” standard and the “grandfather” provisions) and that all unapproved new drugs are potentially subject to enforcement action at any time.  We will continue monitoring FDA’s actions in this space.

[1] “Termination of the Food and Drug Administration’s Unapproved Drugs Initiative; Request for Information Regarding Drugs Potentially Generally Recognized as Safe and Effective,” Notice of Withdrawal, 85 FR 28,605 (May 27, 2021).

[2] See, e.g., “Making Permanent Regulatory Flexibilities Provided During the COVID-19 Public Health Emergency by Exemption Certain Medical Devices from Premarket Notification Requirements,” Notice of Withdrawal, 86 FR 20,174, 20,176 (Apr. 16, 2021) (stating, “[u]pon review, HHS and FDA have determined that the proposed exemptions in the January 15, 2021 Notice were published without adequate scientific support, that the Notice contained errors and ambiguities, and that the Notice is otherwise flawed….), available at https://www.govinfo.gov/content/pkg/FR-2021-04-16/pdf/2021-07760.pdf.

[3] 21 U.S.C. § 355(a).

[4] 21 U.S.C. § 321(g)(1).

[5] 21 U.S.C. § 321(p).

[6] Drug Amendments of 1962, Sec. 107, Pub. L. No. 87-781, 76 Stat. 780 (1962), available at https://www.govinfo.gov/content/pkg/STATUTE-76/pdf/STATUTE-76-Pg780.pdf

[7] “Marketed Unapproved Drugs – Compliance Policy Guide Section 440.100,” 71 FR 33,466 (June 9, 2006).

[8] “Marketed Unapproved Drugs – Compliance Policy Guide Section 440.100,” 76 FR 58,398 (Sept. 21, 2011).

[9] “Department of Health and Human Services Termination of the Food and Drug Administration’s Unapproved Drugs Initiative; Request for Information Regarding Drugs Potential Generally Recognized as Safe and Effective,” 85 FR 75,331 (Nov. 25, 2020).

[10] 21 U.S.C. § 393(d) (emphasis added).

[11] See U.S. v. Generix Drug Corp., 460 U.S. 453, 458-89 (1983)

[12] See 5 U.S.C. § 553.