Disparate Impact Likely for Early Stage Life Sciences Companies and Generic Drug Makers.

On May 19, 2010, the U.S. Food and Drug Administration's (FDA) Transparency Task Force, chaired by Principal Deputy Commissioner Joshua Sharfstein, issued a report containing 21 specific proposals to improve agency transparency across a variety of agency activities. The proposals detail specific new disclosure practices that would expand the scope of documents, information and actions subject to release by the agency. Of particular interest, FDA proposes to immediately disclose the filing of investigational drug and device applications, new product marketing applications (NDAs, ANDAs, PMAs and 510(k)s), and in some circumstances would disclose summaries of clinical data even before an application has been approved. While the proposals are more modest than some interest groups had requested, the changes, if implemented, would represent a major shift in long-established trade secret policy and would likely pose particular problems for clinical stage drug, device, and biotech companies, as well as generic drug makers.

The agency is seeking comments on the proposals and any company whose products or activities are regulated by FDA should carefully review the proposals and make their views known.

Summary of the Proposals

The report includes a number of relatively straightforward proposals dealing with the following issues:

Adverse Event Reports: The agency would publicly post adverse event reports in a searchable database.

Docket Management: The agency would post any and all "public individual" comments on regulations in the same manner as industry comments.

Enforcement Priorities and Actions: The agency would 1) issue a public notice any time the Department of Justice files a case on behalf of FDA; and 2) publicly post all Agency Workplans older than 5 years.

Import Procedures: The agency would disclose agency evaluations of importers and third-party filers working on behalf of importers.

Inspections: The agency would 1) publicly disclose details of all inspections of regulated entities and facilities; and 2) issue regular reports about common inspection findings of objectionable conditions or practices.

Recalls: The agency would 1) disclose when the agency has authority to require a company to submit information related to recovering or correcting a product in the chain of distribution; 2) assist industry in informing the public about products not subject to a recall where there is market confusion; and 3) inform the public when a recall has been terminated.

Warning and Untitled Letters: The agency would post untitled letters to the website and post the response letter if requested by the regulated entity.

However, the Task Force has also proposed significant new disclosure policies with respect to product applications, the legal and commercial implications of which have yet to be fully assessed. Specifically, the agency proposes to:

Promptly disclose the fact that that an investigational drug or device application (IND or IDE) has been filed, along with crucial details of the application, including the identity of the sponsor, the date of filing, the proposed indications or intended uses of the product, and the trade name of the product.

Disclose when an investigational application is placed on hold, terminated or withdrawn as well as when an IND hold is lifted, but without providing specific details on why the hold was placed or lifted.

Promptly disclose the fact that a marketing application for a new drug, device, or biologic has been filed, again including the identity of the sponsor, the date of filing, the proposed indications or intended uses of the product, and the trade name of the product.

Disclose that an unapproved marketing application has been withdrawn or abandoned, along with any safety-related bases for such action.

Disclose when an orphan drug application is withdrawn, and if not withdrawn due to safety reasons, issue a non-binding statement as to the potential clinical value of the drug if pursued by another applicant.

Disclose the fact of, and the reasons for, an agency decision to refuse to accept or refuse to approve a marketing application (via a "refuse-to-file" letter, a "complete response" letter, a "refuse-to-approve" or "non-approvable" letter, or an "additional information" letter).

Disclose a summary of safety and effectiveness data from pending investigational applications or market applications if FDA determines that doing so is necessary to protect public health.

Convene a panel of stakeholders to discuss potential disclosure of more detailed (non-summary) safety and effectiveness data contained in product applications.

Potential Impact on Industry

The application and data disclosure proposals in particular raise serious concerns for many regulated companies which consider product application information to constitute commercially sensitive trade secret information, the disclosure of which could give competitors significant advantages. The Task Force largely dismisses such concerns by concluding that such information is not competitively useful, and stating that even though FDA regulations have historically shielded application-related information from disclosure, "a substantial amount of [such] information…does not fall under FDA's definition of trade secrets as confidential commercial information." The Task Force also justifies the proposed disclosures by noting that historically some companies have voluntarily disclosed such application-related information on their own. While FDA's conclusions may be valid in some circumstances (e.g., a major product application by a multinational drug or device company) FDA should more carefully consider the unique commercial and competitive impact such disclosure may have on smaller early-stage companies and on generic drug manufacturers.

Development-stage life sciences companies often have only a single product candidate upon which the fate of the entire company rests, and successful development of the product is highly dependent upon maintaining an adequate flow of venture capital or public equity funding. Investors can be very fickle, and premature disclosure of certain application related information could be inaccurately construed as being highly damaging or potentially fatal to the prospects of an investigational product, leading to an unnecessary withdrawal of needed capital. Moreover, disclosure of information about product applications could induce investors not to invest in competing products or technologies, thus reducing the amount of important medical product research and development and substantially slowing the new product pipeline.

Generic drug companies face a different set of competitive concerns. Although ANDAs that include a Paragraph IV patent challenge are disclosed to innovator sponsors whose drugs are being copied, and the fact of the application's filing becomes public if patent litigation is commenced, many other generic and 505(b)(2) drugs are pursued without public disclosure. FDA disclosure of such applications could give both innovators and other generics strategically valuable competitive intelligence that could be used to counter or thwart the ultimate development and approval of cost-saving versions of brand name drugs. Citizen petitions and other "lifecycle management" strategies are already common in this space, but with the added competitive knowledge that would result from the proposed disclosures, these activities would likely come earlier and more frequently. This would also impose additional resource burdens on FDA which is already struggling to clear the backlog of generic drug applications.

Legal Considerations

The Task Force report acknowledges, with little discussion, that "changes to statutes or regulations may be needed" to meet the Task Force's goals, and Dr. Sharfstein has been quoted as saying that "we're not at the point, nor have we done the legal analysis, that we could tell you which [proposal] requires what particular legal change." These casual acknowledgments of the potential legal issues significantly understates the proposals' discordance with the current legal framework. It is likely that these proposals will require significant amendments to or reinterpretation of the disclosure restrictions contained the Federal Food, Drug and Cosmetic Act (21 U.S.C. § 331(j)), FDA's regulations on public disclosure (21 C.F.R. § 20.61), the Freedom of Information Act (5 U.S.C. § 552(b)(4)), and the federal criminal sanctions for unauthorized disclosure of confidential information by government employees (18 U.S.C. § 1905). It will be interesting to see whether, upon analyzing the necessary legal changes, the agency still feels the benefits are worth the effort.

The agency is accepting public comment on the proposals until July 20, 2010.