Last week, the Food and Drug Administration (FDA) finalized its guidance on Determining Whether to Submit an ANDA or a 505(b)(2) Application. The final guidance provides useful tips on the differences between ANDAs and 505(b)(2) applications and the pros and cons of each submission type. But there is one significant con to 505(b)(2) applications that the guidance fails to mention: Submarine Exclusivity.
Submarine Exclusivity is a three-year exclusivity period that can appear out of nowhere and, quite literally, sink the approval prospects for an innovative drug developed under a 505(b)(2) application. It is virtually impossible to predict and, once triggered, difficult to avoid. And it thus makes submitting a 505(b)(2) application a very risky proposition.
Submarine Exclusivity is a relatively new phenomenon, making its first public appearance in 2015 in FDA’s Veloxis Decision. There, FDA refused to approve Envarsus XR, an extended-release tacrolimus product developed at great cost by Veloxis, because of the three-year exclusivity protecting Astragraf XL, a similar tacrolimus product developed in parallel but approved a few months earlier than Envarsus XR. In a decision many viewed as unprecedented, FDA determined that the 505(b)(2) application for Envarsus XR was blocked even though it did not reference or rely upon Astragraf XL for approval. FDA concluded that “[n]either the statute nor the regulation requires a 505(b)(2) NDA to rely on a drug with exclusivity for that 505(b)(2) NDA to be blocked.” Veloxis filed a lawsuit, but FDA’s decision was upheld by the district court.
Since then, Submarine Exclusivity has bedeviled more and more companies utilizing the 505(b)(2) approval pathway. And because of the growing popularity of 505(b)(2) applications – in the last three years 50% or more of all NDAs submitted were 505(b)(2) applications – the problem is only growing.
One of the biggest problems with Submarine Exclusivity is that, as the name suggests, it is often unseen until just before the attack. Because exclusivity is no longer limited to products the 505(b)(2) applicant has referenced or relied upon, a 505(b)(2) applicant may not even know about the existence of a potentially blocking product until it is approved. And even if the product is known, it is often impossible to predict whether the scope of its exclusivity will block a subsequent 505(b)(2) application. This is because, in FDA’s view, three-year exclusivity protects the “innovative change” represented by the approved product that is supported by the essential clinical trials. This is an inherently ambiguous standard. For example, would exclusivity for the first extended-release version of a drug (i.e., extended-release tablet) block approval of all subsequent extended-release versions of the drug regardless of dosage form, route of administration or indication? Or would dosage form, route of administration, indication and/or other factors limit the scope of such exclusivity? The answer is: nobody knows what differences will be deemed significant, if any, until FDA makes a decision - usually at the end of a subsequent product’s review cycle.
It is thus perhaps not surprising that this standard has not been applied consistently or predictably by FDA. In some cases the “innovative change” is interpreted surprisingly broadly, such as with MorphaBond (morphine sulfate) extended-release tablets, where FDA determined that the scope of exclusivity for abuse-deterrent labeling applied beyond MorphaBond’s approved dosage form to any morphine product with similar abuse-deterrent labeling. In other cases, the “innovative change” is applied surprisingly narrowly, such as with Dyanavel XR (amphetamine), where exclusivity was limited to the product’s specific formulation and drug release profile even though Dyanavel XR was the first amphetamine product to be approved in an extended-release oral suspension dosage form. Because of this limitation, Dyanavel XR's exclusivity did not block a subsequent amphetamine product in an extended-release oral suspension dosage form.
Making matters worse, 505(b)(2) applicants cannot even rely upon the Orange Book codes describing a product’s exclusivity, since FDA views those codes only as thumbnail sketches that may have little or no bearing on the actual scope of exclusivity. As a result, many 505(b)(2) applicants are shocked to learn that their applications are blocked by another company’s exclusivity, particularly if the two products have meaningful differences (e.g., different indications or dosage forms).
The policy justifications for Submarine Exclusivity are also difficult to discern. While FDA’s position certainly incentivizes innovation, it does so at the expense of both innovation and access. After all, most 505(b)(2) applications are submitted for innovative products, and many are supported by robust clinical programs. Blocking approval of these products via Submarine Exclusivity thus impairs innovation and stymies years of expensive research and development. Worse, it blocks patient access to innovative new treatments. This arguably is inconsistent with the careful balance Congress intended when it enacted the Hatch-Waxman Act.
Some companies have been able to employ regulatory counter-measures to avoid or mitigate Submarine Exclusivity. For example, some have converted their 505(b)(2) applications to 505(b)(1) applications in the middle of the review process, others have obtained a right of reference to the potentially blocking product or actually purchased the New Drug Application outright, while still others have reached agreements to waive exclusivity. There are even regulatory options when a labeling claim is blocked by exclusivity. For example, one company convinced FDA, based on First Amendment considerations, to allow it to actively promote certain scientific information even though, because of exclusivity, that information was not included in the approved labeling.
Unfortunately, these regulatory “work arounds” can be expensive and are not always available to companies blind-sided by Submarine Exclusivity. For small, research-based companies with limited funds, particularly those relying upon investor financing, any unforeseen delay in approval can be a death sentence for an innovative product – or even a company. Sponsors utilizing the 505(b)(2) approval pathway thus should be aware of Submarine Exclusivity and the special risks it poses.
But while the risks are real, they are not insurmountable: there are actions a company can take to minimize them. The first is simply being aware that the risk of Submarine Exclusivity exists. Second, a good competitive intelligence program may be able to predict which products are in development that might block exclusivity, providing the sponsor a chance to anticipate problems and modify or speed up the development process to avoid, or even benefit from, exclusivity. Early discussions with FDA can also help. And, as a last resort, litigation is always an option.
Speaking of litigation, for those interested in recent developments, there is an important case currently pending in the U.S. District Court for the District of Columbia. In that case, the plaintiff, Braeburn, Inc., is challenging FDA’s decision regarding the scope of a competitor’s Submarine Exclusivity. Briefing in that case has just started (see Braeburn’s Summary Judgment brief filed today). In the interest of full disclosure, Lassman Law+Policy is one of the firms representing Braeburn in that case.
Update: On July 22, 2019, the United States District Court for the District of Columbia granted Braeburn's motion for summary judgment, denied FDA's and Indivior's cross-motions for summary judgment, vacated FDA's exclusivity determination, and remanded the case back to FDA. Read all about it here.