US President Donald Trump signed a pair of appropriations bills into law on December 20, including bipartisan legislation intended to facilitate the development of generic and biosimilar products. The bill, previously known as the CREATES Act (H.R. 965/S. 340), allows developers of 505(b)(2) New Drug Application (NDA) and Abbreviated New Drug Application (ANDA) products, as well as biosimilar products, to sue companies holding NDAs or Biological License Applications (BLAs) (each, a License Holder) that refuse to provide “sufficient quantities” of an approved reference drug or biologic on “commercially reasonable, market-based terms.” “Sufficient quantities” are those the developer determines it needs to conduct testing and other regulatory requirements to support an application. “Commercially reasonable, market-based terms” are defined as (1) the nondiscriminatory price at or below the most recent wholesale acquisition cost (WAC) for the product, (2) a delivery schedule that meets the statutorily defined timetable, and (3) no additional conditions on the sale.

Products on FDA’s drug shortage list are exempt from this new statute unless the product has been on the list for more than six continuous months or FDA determines that the supply of the product will help alleviate or prevent a shortage.

To bring an action under the statute, a product developer must take certain statutorily enumerated steps to request the reference product, which, in the case of products covered by a Risk Evaluation and Mitigation Strategy (REMS) with Elements to Assure Safe Use (ETASU), include obtaining authorization from FDA for the acquisition of the reference product. If the product developer does bring an action for failure to provide a reference product, there are certain affirmative defenses available to the License Holder, which must be proven by a preponderance of evidence.

If the product developer prevails in litigation, it is entitled to a court order directing the License Holder to provide, without delay, sufficient quantities of the applicable product on commercially reasonable, market-based terms, plus reasonable attorney fees and costs. Additionally, the law allows the court to award the product developer an amount “sufficient to deter” the License Holder from refusing to provide sufficient product quantities on commercially reasonable, market-based terms if the court finds, by a preponderance of the evidence, that the License Holder did not have a legitimate business justification to delay providing the product or failed to comply with the court’s order.

The statute is one more step taken by Congress and the administration to attempt to slow the rise of drug prices by increasing marketplace competition. While the statute’s effects are yet to be seen, NDA and BLA holders should take particular note of the law’s provisions, and especially requirements around the timing of responding to a request for product, given the vague statutory authorization for courts to impose penalties on companies that do not have a legitimate business justification for delaying the provision of product.