A Look Ahead in Life Sciences: What We Are Tracking in the Third Quarter of 2024 and Beyond

How Companies Develop Their Products

• We are monitoring new bipartisan legislation, the Innovation in Pediatric Drugs Act of 2023, from Reps. Anna Eshoo (D-CA) and Michael McCaul (R-TX), which would increase funding for pediatric trials and require drugs for rare diseases to be studied in children. The legislation would also grant the FDA authority to penalize companies that do not complete required pediatric studies. The House Energy and Commerce Committee held a meeting on this legislation on February 29, 2024.
• We are monitoring the May 2024 House Energy & Commerce Subcommittee on Health’s passage of an amended version of H.R.3433, the Give Kids a Chance Act of 2023 (first introduced in May 2023), to the full House Energy & Commerce Committee for review. The original bill aims to improve outcomes for children with rare cancers by incentivizing drug makers to conduct pediatric clinical trials when studying combinations of multiple cancer drugs. The amended bill now also includes provisions from two other long-discussed bills that would codify the FDA’s longstanding interpretation of exclusivity for orphan drugs (permitting FDA approval of the same drug for two different patient populations) and reauthorize the agency’s rare-pediatric-disease priority review voucher program.  
• We are watching whether Congress will advance legislation extending the sunset date of the FDA’s rare pediatric disease priority review voucher program. Under the current statutory sunset provisions, after September 30, 2024, the FDA may award a voucher for an approved rare pediatric disease product application only if the sponsor has rare-pediatric-disease designation for the drug and if that designation was granted by September 30, 2024. After September 30, 2026, the FDA may not award any rare pediatric disease priority review vouchers. Companies holding or pursuing rare pediatric disease designations should be mindful of these upcoming deadlines. On June 18, 2024, Sen. Bob Casey Jr. (D-PA) introduced a bill that would extend the FDA’s authority to continue issuing rare-pediatric-disease priority review vouchers.
• The FDA issued its long-awaited draft guidance on Diversity Action Plans to Improve Enrollment of Participants from Underrepresented Populations in Clinical Studies for Phase 3 or pivotal study drug and biologic developers and device developers conducting clinical trials (whether under investigational device exemptions or not), pursuant to section 3601 of the Food and Drug Omnibus Reform Act of 2022 (FDORA). The draft guidance describes the format and content of Diversity Action Plans, the medical products and clinical studies for which a Diversity Action Plan is required, and the timing and process for submitting Diversity Action Plans to the FDA. The draft guidance also outlines the criteria and process that developers can use for seeking a waiver. Stakeholders can submit comments on the draft guidance until September 26, 2024. Read our blog on FDA’s draft guidance here.
• In May 2024, the FDA issued its long-awaited draft guidance under section 2503 of FDORA: Platform Technology Designation Program for Drug Development. FDA’s Platform Technology Designation Program is intended to bring efficiencies to drug development, manufacturing, and review processes for applications that incorporate designated platform technologies. Read Goodwin’s client alert on the FDA’s draft guidance here. Public companies seeking to pursue platform technology designation in drug development should consider whether to update their risk factor and government regulation descriptions about the program and its potential benefits.
• We saw FDA’s FDORA-directed issuance of draft guidance on Processes and Practices Applicable to Bioresearch Monitoring Inspections, which contained helpful best practice insights for the industry across 483 inspection types and responses. Read Goodwin’s blog on the best practice insights here.
• We are continuing to monitor implementation by the Medicines and Healthcare products Regulatory Agency (MHRA) of legislation to reform the regulatory framework for clinical trials in the UK. On March 21, 2023, the MHRA published its response to the public consultation that it conducted at the beginning of 2022 on legislative proposals concerning the regulation of UK clinical trials. The MHRA has confirmed that the new legislation will ensure patients and their safety are the focus of all clinical trials; bring the benefits of clinical trials to everyone; create a proportionate and flexible regulatory environment; cement the UK as a destination for international trials; and provide a framework that is streamlined, agile, and responsive to innovation. On October 12, 2023, the MHRA introduced a Notification Scheme in the UK, which ensures that initial clinical trial applications for certain Phase 3 and Phase 4 trials are approved by the MHRA within 14 days instead of the statutory 30 days, provided the sponsor shows the trial meets the MHRA’s inclusion criteria.
• We are monitoring implementation of Executive Order 14117 and a related Advance Notice of Proposed Rulemaking issued by the U.S. Department of Justice (DOJ). They target foreign access to “bulk sensitive personal data” of US persons by countries of concern (i.e., the People’s Republic of China [including Hong Kong and Macau], Russia, Iran, North Korea, Cuba, and Venezuela) and certain entities and individuals connected to these countries. The proposed DOJ framework would prohibit or restrict certain transactions through which a country of concern or covered person could access human genomic data, personal health data, or biometric identifiers (among other types of data), subject to proposed volume thresholds ranging from 100 to 1 million US persons. These rules could implicate commercial relationships with counterparties with ties to the listed countries, including for clinical trial data, depending on the thresholds to be determined in the rulemaking. We will continue to monitor these developments, which may inform updates to public company regulatory risk factors, particularly for companies with connections to China or another country of concern. (Client Alert available here.)

Deciding Whether a Company Can Market or Sell a Specific Product

Pharmaceuticals and Biologics

• In June 2024, the FDA issued draft guidance, “Considerations in Demonstrating Interchangeability With a Reference Product: Update,” which describes the FDA’s evolution in thinking around considerations for switching studies intended to support a demonstration of interchangeability with a reference product. Specifically, the FDA notes that “currently available analytical technologies can structurally characterize highly purified therapeutic proteins and model in vivo functional effects with a high degree of specificity and sensitivity using in vitro biological and biochemical assays.” As such, the FDA notes that it will update its interchangeability guidance to reflect that applicants can “choose to provide an assessment of why the comparative analytical and clinical data provided in the application or supplement support a showing that the switching standard … has been met.” Sponsors developing biosimilars should consider how this draft guidance may alter their development plans and regulatory strategies, and public companies developing biologics or biosimilars should review any current risk factor or government regulation descriptions to determine if updates are needed to reflect the acceptance of analytical data for interchangeability demonstrations.
• We are continuing to monitor the implementation of the European Commission’s legislative proposals —Regulation 2023/0131 and Directive 2023/0132 — to replace the current EU regulatory framework for all medicines (including those for rare diseases and for children). The proposals, announced on April 26, 2023, aim to reduce costs, expedite the introduction of new medicines, and prevent medicine shortages. Read our summary of these proposals here. The European Commission provided the legislative proposals to the European Parliament and the European Council for their review and approval and, in April 2024, the European Parliament proposed amendments to the legislative proposals. Read our summary of these proposed amendments here. Once the European Commission’s legislative proposals are approved (with or without amendment), they will be adopted into EU law. 
• We are continuing to monitor the implementation of the Windsor Framework that will apply as of January 1, 2025, in the UK. On February 27, 2023, the UK government and the European Commission announced a political agreement in principle to replace the Northern Ireland Protocol with a new set of arrangements: the Windsor Framework. This new framework fundamentally changes the existing system under the Northern Ireland Protocol, including the regulation of medicines in the UK. In particular, the MHRA will be responsible for approving all medicines destined for the UK market (i.e., Great Britain and Northern Ireland), and the European Medicines Agency (EMA) will no longer have a role in approving medicines destined for Northern Ireland. The MHRA will grant a single UK-wide marketing authorization for all medicinal products sold in the UK, enabling medicines to be sold in a single pack and under a single authorization throughout the UK. The Windsor Framework was approved by the EU-UK Joint Committee on March 24, 2023, meaning the UK government and the EU will enact legislative measures to bring it into law.
• We are continuing to monitor the effects of the International Recognition Procedure (IRP) (effective January 1, 2024) in the UK, which replaces the European Commission Decision Reliance Procedure. The IRP allows the MHRA to consider the expertise and decision making of medicine regulators in Australia, Canada, the EU, Japan, Singapore, Switzerland, and the US when approving a new medicine. The decentralized and mutual recognition reliance procedure, which allows the MHRA to have regard for approvals in the EU, will be incorporated under the umbrella of the IRP.

Medical Devices and Medtech

• In September 2023, the FDA published a trio of draft guidances related to its efforts to “strengthen and modernize” the 510(k) program. The draft guidances address two foundational issues of concern with the 510(k) process — best practices for selecting a predicate device and when clinical data is needed in a 510(k)— in addition to providing updated performance testing recommendations for manufacturers of 510(k) implant devices. See our summary of the guidances here.
• We are monitoring the FDA’s implementation of the action items identified in its 2024 CDRH Safety Report and 2024 CDRH Innovation Report. The action items identified in the reports include advancing improved device quality, enhancing the medical device recall program, and modernizing premarket review.
• We are continuing to monitor the implementation of new cybersecurity authorities for software-containing or internet-connected devices, enabling the FDA to require sponsors to develop cybersecurity plans for post-market implementation, as mandated in section 3305 of FDORA. The FDA issued its guidance on its Refuse to Accept Policy for cyber devices and related systems in March 2023, but this policy expired on October 1, 2023, after the FDA published its final guidance in September 2023, “Cybersecurity in Medical Devices: Quality System Considerations and Content of Premarket Submissions.” In March 2024, the FDA issued a draft guidance with select updates to the September 2023 cybersecurity guidance related to cybersecurity considerations for cyber devices and for documentation in device premarket submissions.
• We are continuing to monitor the effects of Regulation (EU) 2017/745 (the European Medical Device Regulation, or MDR), which has been applicable since May 26, 2021, in the EU. The MDR requires manufacturers to have submitted all applications for medical devices that they want to transition to the MDR by May 26, 2024, and they need to have a signed contract with an EU Notified Body for review and conformity assessment by September 26, 2024. The MDR also requires the use of the EU’s medical device database, EUDAMED, which effectively outlines the life cycle of medical devices by collating and processing information about those medical devices and related companies, such as the manufacturers of those devices.  EUDAMED will be comprised of six modules related to: (1) actor registration (e.g. manufacturer, authorised representative, distributor or importer); (2) unique device identification/device registration; (3) notified bodies and certificates; (4) clinical investigations and performance studies; (5) vigilance and post-market surveillance; and (6) market surveillance. Modules (1), (2) and (3) are already available and Modules (4), (5) and (6) are under development. The use of EUDAMED is not yet mandatory. There will be a gradual roll-out of EUDAMED requiring manufacturers to provide information about their products to available EUDAMED modules without needing to wait for the remaining modules to be developed. This mandatory registration is expected to take effect as of late 2025.

In Vitro Diagnostics and Laboratory Testing

• We are monitoring legislative interest in diagnostics policy. In March 2023, the Verifying Accurate Leading-edge IVCT Development Act of 2023 (the VALID Act) was introduced in the US House of Representatives by Reps. Larry Bucshon (R-IN) and Diana DeGette (D-CO). However, Congressional interest in diagnostics policy has largely fallen off after the VALID Act was not included in the 2023 omnibus bill at the end of 2022. On March 21, 2024, the House Committee on Energy and Commerce Subcommittee on Health held a hearing, “Evaluating Approaches to Diagnostic Test Regulation and the Impact of the FDA’s Proposed Rule.” Stakeholders at the hearing unanimously expressed a preference for a legislative approach to diagnostic test regulation. On the Senate side, in March 2024, Sen. Bill Cassidy (R-LA) issued a request for information on test regulation.
• We are monitoring the FDA’s efforts to reclassify most in vitro diagnostics (IVDs) that are currently Class III (high risk), including infectious disease and companion diagnostic IVDs, into Class II (moderate risk). According to a press release dated January 31, 2024, the FDA intends to propose reclassification of IVDs for which it believes there is sufficient information to establish special controls that, in combination with general controls, provide a reasonable assurance of safety and effectiveness for the tests.
• We continue to monitor the implementation of a new Regulation 2024/0021 that extends the transition periods under Regulation (EU) 2017/746 (IVDR) for in vitro diagnostic medical devices (IVDs) in order to reduce the risk of shortages of IVDs in the EU. The new Regulation extends the transition periods under the IVDR (subject to fulfilment of certain conditions) until December, 31 2027 for high risk IVDs, and until December, 31 2029 for lower risk IVDs. The new Regulation has been adopted by the European Parliament and the European Council, and will enter into force following its publication in the EU’s Official Journal.

How Companies Manufacture, Promote, and Monitor Their Approved Products

• We are continuing to monitor recent bills introduced in the House and the Senate, Further Strengthening America’s Supply Chains and the National Security Act, sponsored by Rep. Michael Waltz (R-FL) and Sen. Marco Rubio (R-FL). The draft legislation seeks to decrease US dependency on foreign supply chains and specifically would require drug makers to share additional information with the FDA about where pharmaceutical ingredients are sourced. While no action has occurred on these bills since their introduction and referral to their respective House and Senate committees, given that other legislative and executive actions focused on dealings with foreign adversaries, this measure may be one to watch.
• Industry members and their supply chain partners are continuing to enjoy a one-year stabilization period until November 27, 2024, to allow trading partners to implement, troubleshoot, and mature their electronic interoperable systems to meet the requirements of the Drug Supply Chain and Security Act (DSCSA). This stabilization period is intended to avoid disruption to the supply chain and ensure continued patient access to drug products as trading partners work to fully implement the enhanced drug security requirements of the DSCSA. The FDA also issued a compliance policy guidance, effective immediately, regarding the enforcement of requirements for enhanced drug distribution security. It also issued a revised final compliance policy guidance that describes the FDA’s policies regarding enforcement requirements for wholesale distributors and dispensers to verify a product’s identifier in certain circumstances. As the year progresses, companies and their trading partners must finalize implementation of electronic interoperable systems.
• In February 2024, the FDA published its final rule harmonizing its device good manufacturing practice requirements to align more closely with the international consensus standard for devices by converging with the quality management system requirements used by other regulatory authorities from other jurisdictions. The final rule will take effect February 2, 2026.
• We are continuing to monitor the evolving situation involving quality and performance issues related to certain plastic syringes manufactured in China. In March 2024, the FDA issued an updated safety communication warning of issues related to certain plastic syringes manufactured in China and issued several warning letters related to the sale and distribution of unauthorized plastic syringes made in China that have not been cleared or approved by the FDA. Since that time, the FDA has identified four companies’ plastic syringes to transition away from; recommended the use of syringes not manufactured in China, if possible; and posted recalls initiated by two companies. Follow the latest FDA updates here.

Whether Government or Commercial Payers are Willing to Pay for a Product, How Much They are Willing to Spend, and Under What Circumstances

Pharmaceuticals and Biologics

• Via our Inflation Reduction Act (IRA) webpage, we are continuing to follow how the IRA of 2022 will affect reimbursements for pharmaceutical and biologic products. This includes the continued and ongoing price negotiations for the first 10 drugs selected. We anticipate Centers for Medicare & Medicaid Services (CMS) to release the final round of “maximum fair prices” for the first 10 drugs selected for negotiation in the third quarter of 2024. With the release of this information, the industry will have a better understanding of how low CMS intends to set pricing under the drug price negotiation program, including how closely CMS adheres to the pricing of therapeutic alternatives identified for each of the selected drugs. We are also actively tracking ongoing constitutional challenges to the IRA’s drug price negotiation program. While there also continue to be a host of legislative proposals regarding the IRA, as of the third quarter of 2024, none appear likely to pass through Congress in the near term.
• We are continuing to monitor the backlash from the December 2023 National Institute of Standards and Technology proposed framework for how government agencies can implement “march-in” rights under the Bayh-Dole Act, as well as the White House statement released on the same day indicating that it plans to use such march-in rights to combat pharmaceutical pricing, signaling that the government will consider marching in and assigning drug patents to others to the extent that a particular drug has been funded by taxpayers and the government considers the price to be too high. See “‘March-In’ Rights Under the Bayh-Dole Act: Implications for Pharmaceutical and Medical Technology Companies.”
• We are monitoring any future litigation developments in the Genesis Health Care v. Becerra ruling in November 2023 that deemed the interpretation of eligible 340B patients by the Health Resources and Services Administration (HRSA) to be too narrow. In response to this case, the HRSA announced a new webpage with program policies, guidance documents, and regulations for stakeholders to assist 340B covered entities with the meaning of “eligible patient” under the 340B program. Here is a link to the webpage for 340B Patient Definition Compliance Resources.
• Congress is considering numerous proposed pharmacy benefit manager (PBM) reforms in both the House and the Senate. Legislative proposals include, but are not limited to, eliminating rebates; divorcing service fees from the price of a drug, discount, or rebate; prohibiting spread pricing; limiting administrative fees; requiring PBMs to report formulary placement rationale; promoting transparency; and many others. PBM reform and transparency measures have become a key policy topic in Washington and continue to be front and center for policy makers.
• We are continuing to monitor a proposed rule issued by CMS in 2023, “Misclassification of Drugs, Program Administration and Program Integrity Updates Under the Medicaid Drug Rebate Program (MDRP)” (the Proposed Rule). Among other topics, the Proposed Rule focuses on enhancing MDRP administration by incorporating policies that would facilitate more-accurate and -consistent drug information reporting, data collection, and operations. Relevant CMS fact sheets are available here. Although comments on the Proposed Rule were due in July 2023, CMS most recently issued an update on May 15, 2024 confirming that it is continuing to work on finalizing the rule, but that, at this time, CMS is “not finalizing the proposal regarding stacking” and instead will “pursue the collection of additional information from manufacturers related to best price stacking methodologies to better understand and inform future rulemaking.” 
• We are monitoring the implementation of Regulation (EU) 2021/2282 (the HTA Regulation) on health technology assessment (HTA), which came into force on January 11, 2022, in the EU and will apply as of January 12, 2025. An HTA is a multidisciplinary process that summarizes information about the medical, social, economic, and ethical issues related to the use of a health technology in a systematic, transparent, unbiased, and robust manner. Currently — and until the applicability of the HTA Regulation in 2025 — after obtaining the respective authorization for health technologies, a manufacturer must apply to different HTA agencies in various EU member states before new health technologies are broadly accessible. The HTA Regulation aims to harmonize various procedures and standards by ensuring health technology developers can submit only once and at the EU level any information, data, analyses, and other evidence required for the contemplated joint clinical assessment.

Medical Devices and Medtech

• We are continuing to monitor developments related to CMS’s proposed coverage regulations from 2023 that would permit earlier coverage of medical technology that has received FDA breakthrough designation. We anticipate a final rule sometime in 2024.

Companies’ Interactions with Their Customers and Other Stakeholders

• Recent Fraud and Abuse and Compliance-Related Actions:
  
  • May 29, 2024: Spinal device manufacturer Innovasis, Inc. and the company’s CEO and CFO settled Anti-Kickback Statute allegations for $12 million with the DOJ. Allegations included paying kickbacks to orthopedic surgeons in the form of consulting fees, IP acquisition and licensing fees, registry payments, travel to luxury resorts, lavish dinners, and holiday parties for surgeons and their staff, as well as allegations of paying well in excess of fair market value to acquire IP. The DOJ press release is available here.
  • April 10, 2024: The US filed a complaint against pharmaceutical company Regeneron under the False Claims Act, alleging that Regeneron “fraudulently inflated Medicare reimbursement rates for [its product] by knowingly submitting false average sales price reports to the Centers for Medicare and Medicaid Services that excluded certain price concessions.” Specifically, the government alleges that Regeneron knowingly failed to report price concessions in the form of credit card processing fees that Regeneron paid to specialty drug distributors, which the government alleges Regeneron paid so that distributors would accept credits cards for the product’s purchases while still being able to charge a lower cash price for the drug and so that customers (mostly ophthalmic practices) could receive credit card benefits for their purchases (e.g., “cash back” and other credit card rewards). As a result, according to the government, Regeneron “manipulated Medicare’s drug pricing process” and “inflated the  costs of its drug to Medicare over many years.” The DOJ press release is available here.

Companies’ Interactions with Patient Data

• With companies collecting patient data on a global basis, we closely follow the latest privacy law developments around the world. In the EU, the UK, and Switzerland, we are tracking evolving case law and guidance surrounding the EU and UK General Data Protection Regulation and the Swiss Federal Act, as well as implications for companies collecting and handling patient data. In the US, the post-Dobbs era is marked by intense regulatory focus on health data. This includes state consumer privacy legislation protecting sensitive health information; health-data-specific laws, such as the state of Washington’s My Health My Data Act that comes into force on March 31, 2024 (see Goodwin’s client alert for more information); and a wave of Federal Trade Commission enforcement actions against digital health providers. In addition, on March 18, 2024, the Health and Human Services Office for Civil Rights (HHS-OCR) revised its December 2022 Bulletin on tracking technologies, seemingly expanding the circumstances in which HHS-OCR would consider individually identifiable information concerning an unauthenticated visitor to the website of a covered entity or business associate to be protected health information (PHI) (see Goodwin’s client alert for more information). On June 20, 2024, the US District Court for the Northern District of Texas in American Hospital Association (AHA), et al. v. Xavier Becerra, et al. vacated the portion of the HHS-OCR Bulletin that states that an IP address combined with an unauthenticated visit to a website could constitute PHI while leaving the remainder of the Bulletin intact. HHS-OCR is expected to appeal the ruling. 
• On February 28, 2024, President Biden signed Executive Order 14117 on Preventing Access to Americans’ Bulk Sensitive Personal Data and United States Government-Related Data by Countries of Concern (the EO) (see Goodwin’s client alert for more information). At the same time, the DOJ issued an Advance Notice of Proposed Rulemaking (ANPRM), which set out a framework for proposed regulations that would implement the EO and solicited public comments. Together, the EO and ANPRM contemplate a framework that would regulate access to certain sensitive data categories — including, notably, health data, “human ‘omic data,” and, potentially, biospecimens — by people and entities associated with “countries of concern,” such as the People’s Republic of China (including Hong Kong and Macau), Russia, North Korea, Iran, Cuba and Venezuela. The proposed framework would ban sales of “bulk” sensitive data and disclosures of “bulk” human ‘omic data to these countries of concern while also imposing cybersecurity restrictions on access to sensitive data by vendors, employees, and investors residing in, owned by, or subject to the control of a country of concern. With the public comment period closed on April 19, 2024, an initial draft of the proposed regulations implementing the EO is expected in the next several months.
• The European Council and European Parliament have reached a provisional agreement on the European Health Data Space (EHDS). The European Commission published a proposal for the EHDS back in May 2022, and now we’re reaching the final stages. The main objectives of the EHDS are to improve individual access and control over patient health data in the EU and to facilitate cross-border research and innovation in health. The European Council and European Parliament will need to endorse the provisional agreement before it is formally adopted. See Goodwin’s blog posts here and here for further details.