Continue to take as prescribed: Amid a steep slowdown in regulation, the FDA hit record highs for drug approvals while maintaining enforcement

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The FDA under Trump year one


In its first year under the Trump administration, the Food and Drug Administration (FDA) has sharply cut back on the issuance of new regulations and warning letters while approving record-setting numbers of new drugs, generic drugs and drugs for orphan diseases, an analysis by PwC’s Health Research Institute (HRI) found.

In other areas, the FDA has carried on with long-running trends in enforcement, facility inspections, the issuance of guidance documents and policy, and crackdowns on drug quality issues—strong indications that FDA Commissioner Scott Gottlieb is largely staying the course set by his predecessors.

For the pharmaceutical industry, the FDA under Gottlieb’s tenure has been predictable, stable and consistent, allowing companies to continue investments into drug research and development and existing compliance programs without fear of a major change in regulatory approach. While Gottlieb’s regulatory philosophy is perhaps more industry-friendly than past FDA commissioners, the agency’s broader approach from enforcement to approvals has not been an abrupt departure from existing trends and norms. 

Rulemaking slows, but guidance continues unabated

The FDA has slowed its rulemaking in concert with priorities laid out by President Trump during his campaign and during his first year in office. Over the past year, regulatory actions taken by the agency decreased significantly compared to any year during the Obama administration. The FDA issued just six new significant regulatory actions in 2017, compared to 30 the year before. None were related to pharmaceutical or biotechnology regulation.

However, the FDA has not slowed its creation of policy. The issuance of draft and final guidance documents by the FDA—key ways in which the regulator shapes policy—was roughly on par with prior years, according to an HRI analysis of Federal Register data.

This indicates that while the FDA isn’t issuing new regulations, it’s still using other existing statutory and regulatory authority at a similar pace. 

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Approvals soar, though part of a long-term trend

The FDA approved more new drugs—that is, new molecular or chemical entities that had never before been approved by the agency—in 2017 than in any year in its history aside from 1996, when it approved 53 new drugs, according to FDA approval data. Many of these products were submitted for approval during the Obama administration as there is typically a 10- to 12-month period between a drug application submission and approval.

The increasing rate of drug approvals, which began about six years ago, likely has been, at least in part, fueled by the passage of regulatory-focused legislation such as the FDA Safety and Innovation Act of 2012, the 21st Century Cures Act of 2016 and the FDA Reauthorization Act of 2017. These laws gave the FDA additional resources and authority to review drugs more quickly.

In 2017, the agency approved the most generic drugs in its history, thanks to a years-long effort to improve the generic drug review process. The FDA has approved more generic drug applications in each of the last four years, nearly doubling its rate of both full and tentative approvals.

As with new drug approvals, generics have benefited in recent years from the creation of a new user fee program in 2012 called the Generic Drug User Fee Act (GDUFA), which generated significant new funding for the FDA to hire additional review staff. The program was extended as part of the 2017 FDA Reauthorization Act. The increasing approvals also are partially the consequence of more drugs coming off patent that were originally approved in the late 2000s, when the FDA approved 24 new molecular entities each year on average.

Companies seeking approval for drugs treating rare diseases also have experienced recent success at the FDA. The FDA approved 64 rare disease drugs in 2017, more than any other year in its history, according to an analysis by HRI. When it comes to “orphan” disease drugs—products intended to treat fewer than 200,000 Americans—the FDA granted 476 products this designation in 2017, the most ever granted in one year. This trend is likely partially the result of more pharmaceutical companies developing specialty and oncology drugs, which typically treat smaller populations of patients.

While the orphan designation status has been historically useful for unlocking tax credits worth 50 percent of the cost of all research and development incurred for a drug, that tax credit was cut in half under the recent tax legislation, and is now only worth 25 percent of costs. 

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Fraud recoveries increase, but mostly as the result of Obama

While regulatory actions may have slowed, fraud recoveries by the US Department of Justice (DOJ) have continued, often initiated at the request of the FDA or in response to found violations of federal law over which the FDA has jurisdiction. Based on an HRI analysis of the DOJ’s public statements, the department fined pharmaceutical companies an estimated $1.63 billion in 2017, compared with an estimated $1.45 billion in 2016.

The largest recoveries for both years were False Claims Act violations, which are typically related to off-label marketing of FDA-approved products.

However, a large portion of the recoveries during 2017 occurred in the waning months of the Obama administration, and it is likely that nearly all recoveries originated in investigations launched prior to 2017. It may be another year or two before the industry begins to see if the Trump administration engages in more or fewer investigations than its predecessor and whether it will focus on new areas of enforcement, such as actions under the Controlled Substances Act or False Claims Act related to the opioid crisis.

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FDA enforcement activity sees highs and lows

When it comes to the FDA’s enforcement activities, the agency continued many long-running trends in 2017, with some exceptions. The FDA in 2017 issued significantly fewer warning letters than it did in 2016—510 compared to 650 in 2016, an HRI analysis found. This was a 21.5 percent drop from the year prior, and a 25 percent drop from 2013.

However, pharmaceutical companies have received more warning letters from a key FDA division in recent years, and in 2017 in particular. The FDA’s Center for Drug Evaluation and Research (CDER), which oversees drug regulation at the agency, issued 85 warning letters in 2017, more than the 63 letters it issued in 2016 and more than in any of the last five years, according to HRI’s analysis.

Many of the warning letters issued to pharmaceutical companies by CDER and district offices—which also oversee pharmaceutical companies in their local markets—focused on matters related to quality, and specifically current good manufacturing practices (CGMP), HRI found. These practices are upheld by the FDA as forming the foundation of quality drug manufacturing, and violations of them often indicate major issues, including issues related to contamination or potency. Drug quality has been of increasing importance to the FDA in recent years.

The agency obtained new legislative authority under the FDA Safety and Innovation Act of 2012 that allows it to more aggressively inspect domestic and foreign facilities, and the formation of a specific CDER unit dedicated to drug quality has brought further attention and resources to the issue. The agency also received new power under the Drug Quality and Security Act of 2013 to oversee certain compounding pharmacies, some of which were found to have major quality issues. The increase is likely due to increased emphasis on drug quality during FDA inspections, and not that the pharmaceutical industry is experiencing increased drug quality issues.

The FDA also has been placing a similar emphasis on data integrity issues in recent years. Data integrity refers to measures meant to ensure that data about the drug manufacturing and testing process are accurate, specific, original and tamper-proof. Lapses in data integrity practices can be a strong indicator of fraud, and regulators have won major felony cases against companies found guilty of data integrity problems in recent years.

FDA records indicate that the agency’s interest in data integrity continues to grow, and that the majority of this interest remains focused on drug companies, including pharmaceutical manufacturers and clinical investigators. 

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Inspection data shows little change

The FDA’s inspections database indicates that the FDA issued 11.5 percent more Form 483s—reports indicating deficiencies found during an inspection that need to be remediated—in 2017 than in 2016, according to an HRI analysis. However, reports to drug and biologics companies remained almost unchanged in number in the last five years. 

An analysis by HRI found that failing to have procedures written down, or failing to follow written procedures, was cited in 26 percent of all reports to drug companies in 2017. Other common issues included failing to scientifically validate testing procedures (18 percent of all reports) and failing to fully investigate discrepancies or failures in the drug manufacturing or testing process (14 percent of all reports).

Another notable decline found by HRI relates to the issuance of so-called “untitled letters,” which are used by the FDA to call attention to perceived violations of advertising and promotion regulations. The use of these letters has been in decline since at least 2012, but 2017 marked a new low. This may potentially be the result of a disadvantageous legal environment following the FDA’s loss in several landmark cases regarding whether companies have the legal right to make off-label claims—that is, claims without explicit FDA approval—about their products. It may also be the result of companies’ increasing adherence to the FDA’s advertising regulations and standards.

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Year ahead

If history is any guide, the pharmaceutical industry could see the FDA increase the pace of regulation in 2018. Based on an analysis of economically significant regulations released by the FDA, the administration of President George W. Bush saw a 100 percent increase in FDA rulemaking in its second year, while the Obama administration saw a 15.4 percent increase in FDA rulemaking.

Already, the pharmaceutical industry knows some of what to expect in the near future, including new regulations on Institutional Review Boards, patient safety labeling and changes made to approved products. An analysis by HRI of information submitted by the FDA to the Office of Information and Regulatory Affairs (OIRA) as part of its fall 2017 regulatory agenda shows 18 pharmaceutical regulations under various stages of development. It should be noted, however, that some documents have been under development for years and may not be published in 2018.

The FDA has already published its guidance agenda for the pharmaceutical sector, indicating 98 guidance documents planned for release in 2018 spanning 18 categories. The industry can expect a large number of guidance documents dealing with procedural changes to the regulatory process, with a strong focus on pharmaceutical quality, the generic drug industry and clinical trials.

HRI impact analysis

Anticipate continued reliance on guidance: As the Trump administration continues to push for reduced rulemaking, the FDA could continue to rely on guidance documents, which outline non-binding policy preferences and interpret existing regulatory authority. Commissioner Gottlieb has started to use guidance documents to reform how generic drugs are overseen at the agency, and companies could see this approach extend to other areas as well. While the stakes may be lower for guidance than they are for regulation, companies should assess their capacity to offer comment on these documents to ensure changing FDA policy pronouncements don’t put them at a disadvantage. Companies should also identify administrative priorities and determine what impact they might have on their business.

Year two may bring a greater shift: If historical trends hold, pharmaceutical and life sciences companies could see an uptick in regulation and policy documents coming out of the FDA, with potentially more consequence. Larger regulations often take more than a year to develop. The industry remains optimistic about where the state of the FDA seems headed. In an HRI survey, 53 percent of pharmaceutical executives surveyed by HRI said they believe the FDA will accelerate its review times for new drugs, and 51 percent said the same will happen for generic drugs. Just 5 to 7 percent of respondents said they thought review times were likely to slow.

The industry also stands to benefit from FDA Commissioner Gottlieb, whose regulatory philosophy has been to provide regulatory relief where appropriate, introduce competitive policies and eliminate restrictive ones, and to promote innovation and the exchange of information. That philosophy may be conducive to the regulatory streamlining that pharmaceutical executives surveyed by  HRI said they would like to see take place. 

Take heed of action in the nation’s statehouses: Even as the federal government has at times shown little appetite for tackling pharmaceutical issues like drug pricing, states are stepping up. An ever-expanding web of state compliance and reporting obligations may prove challenging to companies from an operational, accounting and commercial pricing perspective. Companies should ensure they have adequate systems in place to track and report data to the appropriate state agencies, and to make sure they do not fall afoul of any pricing clawback mechanisms baked into some state laws. Companies may also want to examine pricing strategies to stay under reporting thresholds or avoid public scrutiny. Twenty-three percent of pharmaceutical executives surveyed by HRI in 2017 indicated that their organizations would limit the growth of drug prices during the next fiscal year. 

Contact us

Benjamin Isgur

Health Research Institute Leader, PwC US

Trine K. Tsouderos

HRI Regulatory Center Leader, PwC US

Tel: +1 (312) 241 3824

Alexander Gaffney

Senior Manager, Health Research Institute, PwC US

Tel: +1 (202) 836 1604

Ben Comer

Senior Manager, Health Research Institute, PwC US

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