On November 20, 2020, the Department of Health and Human Services (HHS) announced it was terminating the U.S. Food and Drug Administration's (FDA) Unapproved Drugs Initiative (UDI), which is further described in a Notice published in the Federal Register on November 25, 2020. HHS found that the Compliance Policy Guide (CPG) issued with the UDI was "linked to prescription drug price increases and shortages" and announced its withdrawal, effective 30 days after the date of publication of this Notice in the Federal Register.

We've summarized the background and implications of the UDI and its subsequent withdrawal below.

Historical Background

In 2006, the FDA released (and subsequently revised in 2011) its "Marketed Unapproved Drugs – Compliance Policy Guide, Sec. 440.100, Marketed New Drugs Without Approved NDAs or ANDAs" (CPG) which sought to push manufacturers of drug products that were marketed before 1962 through the FDA's Drug Efficacy Study Implementation (DESI) review program so that they could be evaluated for safety, effectiveness, and quality in compliance with the 1962 amendment to the Food, Drug, and Cosmetic Act (FD&C Act). The original FD&C Act was passed in 1938 and required that new drugs be approved for safety. Prior to 1938, only the sale of adulterated or misbranded drugs was prohibited; FDA approval was not required.

The DESI review program, established by the FD&C Act in 1962, requires that a new drug be proven both safe and effective in order to receive FDA approval. This amendment required the FDA to conduct a retrospective evaluation of the effectiveness of the drug products the FDA had approved as safe between 1938 and 1962 through the new drug approval process. Under the 1938 grandfather clause (see 21 U.S.C. 321(p)(1)), a drug product that was on the market prior to passage of the 1938 Act and which contained in its labeling the same representations concerning the conditions of use as it did prior to passage of that act was not considered a new drug and therefore was exempt from the requirement of having an approved new drug application. Additionally, under the 1962 grandfather clause, the FD&C Act exempts a drug from the effectiveness requirements if its composition and labeling has not changed since 1962 and if, on the day before the 1962 Amendments became effective, it was a) used or sold commercially in the United States, b) not a new drug as defined by the FD&C Act at that time, and c) not covered by an effective application. See Public Law 87-781, section 107 (reprinted following 21 U.S.C.A. 321); see also USV Pharmaceutical Corp. v. Weinberger, 412 U.S. 655, 662-66 (1973). Finally, a product would not be considered a new drug if it is generally recognized as safe and effective (GRAS/GRAE) and has been used to a material extent and for a material time. See 21 U.S.C. 321(p)(1) and (2).

At the time of implementation of the CPG in 2006, the FDA estimated that several thousand drug products were marketed illegally in the United States without required FDA approval. The CPG established the Unapproved Drugs Initiative (UDI), a process the FDA used to remove hundreds of drugs that first came to market prior to 1962, and which did not have new drug applications (NDAs) demonstrating efficacy approved by the FDA. The CPG called for companies which were marketing these pre-1962 drugs without FDA approval to submit applications showing the products were safe and effective before continuing to market them.

However, the UDI also impacted drug pricing, especially for sole-source drug products, allowing drug manufacturers to set higher prices for drug products that lacked adequate competition. This phenomenon occurred as a result of the 2011 UDI Guidance that permitted previously unapproved drugs to enjoy a period of de facto market exclusivity before other products obtained approval, which was originally intended as an incentive for companies to seek approval for their previously unapproved drugs.

Recent Termination of the UDI

After the implementation of the UDI through the CPG, the HHS found numerous instances in which Americans were forced to pay significantly more for medication. Additionally, a study conducted by the Yale School of Medicine and the University of Utah found that the UDI also could be linked to drug shortages. 24 of the 34 drugs studied experienced shortages after the FDA took enforcement action, with a median shortage of 217 days. In its withdrawal of the UDI guidance documents, the HHS cites increased patient access due to lower prices and lack of shortages as positive impacts on the public health resulting from the end of the UDI.

The HHS makes clear that the termination of the UDI does not limit the FDA's authority to act against manufacturers of unapproved drugs that qualify as "new drugs" under the FD&C Act. Unapproved drugs claiming to mitigate, treat, or cure COVID-19 fall into this category.

This Notice does not impact FDA's regulatory exclusivities authorized by statute, such as the grant of new chemical entity exclusivity, orphan drug exclusivity, or pediatric exclusivity, and does not apply to drugs subject to the following: 1) drugs subject to investigational new drug applications (INDs) in effect as of the effective date of this Notice, 2) any subsequent new drug application based on new clinical investigations (other than bioavailability studies) derived under such INDs, or 3) existing approved NDAs.

In its Notice, HHS called for comments regarding whether certain drugs may qualify as being exempt from the FDA premarket approval requirements for "new drugs" under the FD&C Act. The FDA has not established a clear definition of "new drug" in its evolution, instead grandfathering in drugs generally recognized as safe and effective and were marketed before the FD&C Act's enactment in 1937, acknowledging that the "new drug" definition did not include drug products marketed between 1938 and 1962, and, in 2011, noting that "it is not likely that any currently marketed prescription drug is grandfathered or is otherwise not a new drug."

The lack of clarity regarding "new drugs" prevented manufacturers of generic drugs from entering the market without an approved abbreviated new drug application, which allowed manufacturers of non-generic prescriptions to enjoy a monopoly in the marketplace while generic manufacturers went through the regulatory process, further compounding the issues of drug shortages and increased prices.

HHS wishes to engage with the public surrounding the exceptions to the definition of a "new drug." In this regard, HHS is reviewing whether certain drugs might qualify as exempt from the FDA approval requirement. To aid their effort, HHS is now asking for input from patients, healthcare providers, industry, and other stakeholders regarding:

• lists of drugs marketed before 1938 that are currently available on the market;
• the extent to which drugs marketed before 1938 or drugs that may qualify as generally recognized as safe and effective (GRASE) have regulatory approvals in countries outside the United States;
• whether there would be adverse clinical or economic consequences to deeming as GRASE drugs previously approved by the FDA for which patent and regulatory exclusivity have expired; and
• any published literature reviews or clinical studies related to any drugs potentially exempt from the new drug approval requirements.

Responses to the department's request for input on whether certain drugs might qualify as exempt from the FDA premarket approval requirements must be submitted electronically at Imports@hhs.gov. HHS said that it would consider the information submitted by the public "on a rolling basis, and until further notice."

Frequently asked questions regarding the HHS' announcement can be found here.

For More Information

For more information please contact Eva Yin or any other member of Wilson Sonsini's FDA Regulatory, Healthcare, and Consumer Products practice.