The economic consulting group, Matrix Global Advisors (MGA), recently published findings regarding an FDA-proposed generic drug labeling rule that it claims could potentially increase annual healthcare costs by $4 billion. The FDA’s proposal, announced in November 2013, would allow generic drug manufacturers to update product labeling to reflect new drug safety information, regardless of whether the revised label is different from the reference listed drug’s (RLD’s) label. Previously, generics were required to have identical labels to their brand-name counterparts. 
 
The proposed change was in response to the Supreme Court’s call for action in PLIVA, Inc. v. Mensing. Critics of the proposed rule suggest that it would only serve to fund the plaintiffs’ bar at the expense of public safety. Erin Bosman, chair of Morrison & Foerster’s Product Liability Practice Group, shares her opinion on the topic as it relates to the pharmaceutical industry and its contract service providers. –KB
 
Contract Pharma: What are the key aspects of the proposed drug labeling rule as it relates to the industry?
 
Erin Bosman: There are several key aspects. First, the requirement that generics submit a CBE-0 to FDA and to the RLD holder will expose generic manufacturers to failure-to-warn claims, which will potentially increase confusion due to the abandonment of the “sameness” requirement under Hatch-Waxman and require generics to conduct their own safety studies. 
 
Second, the rule obligates the RLD holder to evaluate all of the CBE-0 submissions and submit its own recommendations for label changes, which will increase the burden for these companies’ regulatory and safety departments. Third, the rule could permit multiple labels at the same time, the line between “could have warned” and “should have warned” will blur, giving plaintiffs’ attorneys the ability to second-guess the safety decisions made by pharmaceutical manufacturers—brand and generic alike.
 
CP: What is the basis for the increase in costs for manufacturers under the proposed rule?
 
EB: It’s anticipated that costs for all pharmaceutical manufacturers will increase far beyond the administrative and paperwork costs that the FDA considered in its economic impact analysis. Generic manufacturers are expected to bear additional costs as a result of the rule due to increased safety monitoring obligations and product liability costs. Brand manufacturers also face increased costs resulting from the added burden of evaluating generic CBE-0 submissions and having to submit their own recommendations to FDA.
 
CP: What are the implications under the proposed changes for generic drug manufacturers?  
 
EB: First, generic manufacturers will be subject to product liability—the FDA’s response to the Supreme Court’s plea in Mensing that Congress or FDA address the disparity by which users of brand drugs can sue for failure to warn but users of identical generic drugs cannot. Second, as a result of the increased exposure to liability and heightened duty to monitor for safety, generic manufacturers will have to invest money in safety studies. Third, due to the increased costs of product liability and safety monitoring, some generics may be forced to exit the market, putting even greater upward pressure on generic pricing.
 
CP: How might the new rule impact contract service providers in the industry?
 
EB: While providers of safety testing services may initially benefit from the uptick in safety monitoring, in the long term all contract service providers will likely experience an adverse impact from the rule. Increased product liability and testing costs will put pressure on generic manufacturers to cut costs, and they will likely look to contract service providers to assist in those cost-cutting measures.
 
CP: What benefit does the FDA anticipate for this proposed rule and what are the major criticisms?
 
EB: As indicated in the Federal Register, FDA anticipates the proposed rule will “create parity” between brand-name and generic manufacturers for their labeling requirements and improve communication of important safety information to healthcare providers.  78 Fed. Reg. 67985 (proposed November 13, 2013). In reality, it is likely that FDA anticipates that the rule will alleviate pressure from the plaintiffs’ bar since the rule responds to the Supreme Court’s ruling in PLIVA, Inc. v. Mensing, 131 S Ct 2567, 2852 (2011), which preempted state law claims for failure to warn.
 
Under the proposed rule, holders of abbreviated new drug applications (ANDAs) would be permitted to update product labeling with new safety information even if the revised labeling differs from the reference listed drug.  The updated product labeling will be submitted as a “changes being effected” (CBE-0) supplement, which permits the ANDA holder to distribute the revised label at the same time as it submits the changes to FDA. This leaves generic manufacturers vulnerable to state law failure to warn claims. 
 
One criticism is that concern over product liability exposure could result in competing and conflicting CBE revisions. Moreover, while FDA estimated that the net annual costs of the rule would range from between $44,000 to $385,000, an economic consulting group recently published findings that FDA’s proposed rule will increase annual healthcare costs by $4 billion.
 
CP: What is the significance of eliminating the “sameness” requirement? 
 
EB: Eliminating the “sameness” requirement will result in different labels containing different warnings being used at the same time. This could increase exposure for generic and brand-name manufacturers for failure-to-warn claims, as they would be required not only to defend their own CBE-0 submission, but also to explain why other submissions were not adopted or incorporated. The 30-day window in which ANDA holders must update their labels will also open the door to failure-to-update claims, which have gained traction in the courts in 2013 and 2014.  
 
Brand-name manufacturers’ post-marketing surveillance burdens will increase, as they will be required to evaluate CBE-0 submissions from all ANDA holders.  FDA proposes to address this confusion by creating a website dedicated to CBE-0 label changes. Anyone can “subscribe to FDA’s free email subscription service to receive an email message each time there is an update to this proposed FDA Web page.”
 
Healthcare providers would have to evaluate differing label changes to determine what the best and most current label actually is. However, FDA insists that these concerns about “temporary differences” in labeling are outweighed by the benefit to the public resulting from all application holders being able to update drug product labeling to reflect newly acquired information regarding important drug safety issues through the CBE process.