FDA Issues Draft Guidance on Equity, Diversity and Individual Sponsor Financial Ability Considerations in Charging for Investigational Drugs

On August 23, 2022, the United States Food and Drug Administration (FDA or the “Agency”) published the revised draft guidance “Charging for Investigational Drugs Under an IND Questions and Answers Guidance for Industry” (the “Draft Guidance”). Potentially interested stakeholders, including industry, researchers, physicians, institutional review boards and patients, are invited to provide comments to FDA on the Draft Guidance by October 24, 2022.

The Draft Guidance addresses a number of stakeholder questions FDA has received since their publication of an earlier final guidance in 2016 that provided information about the implementation of FDA’s regulation on charging for investigational drugs under an investigational new drug application (IND) for the purpose of either. clinical trials or expanded access for treatment use (the “2016 Guidance”). Provided in a Q&A format, the Draft Guidance also updates a number of the Agency’s prior responses from the 2016 Guidance.

The Draft Guidance’s most notable provisions are outlined below:

Only Sponsor Must Request Authorization. Notably, the Draft Guidance re-iterates an important point from the 2016 Guidance—only the sponsor of an IND may request FDA’s authorization for permission to charge for an investigational drug. When the manufacturer of an investigational drug is also the sponsor of the IND, the manufacturer-sponsor must request authorization from FDA to charge for the investigational drug. When the sponsor is a different person or entity other than the manufacturer, only the sponsor (and not the manufacturer) must request authorization from FDA.

Equity and Diversity Considerations. The Agency expands its answer from the 2016 Guidance regarding whom a sponsor may charge once FDA authorizes a charge request by specifically advising that sponsors “ensure that charging for drugs in clinical trials or expanded access use does not create barriers to access that may exacerbate disparities in clinical trial participants or expanded access patients.” This aligns with FDA’s efforts to increase diversity and achieve health equity within clinical trials. Sponsors therefore would be well-advised to engage in appropriate diligence and documentation on this new factor, such as an assessment of the target population’s ability to pay for the study drug. The Draft Guidance does not comment on the possibility that a sponsor might exempt trial participants from payment obligations based on some kind of objective financial criteria, so any such design should also be well documented as part of this factor.

Independent Certified Public Accountant Requirements. Similar to the 2016 Guidance, the Draft Guidance requires that an “independent certified public accountant” review and approve certain materials (such as a sponsor’s calculation of recoverable costs). FDA’s definition of what constitutes an independent certified public accountant remains consistent from the 2016 Guidance. However, the Draft Guidance adds that this individual must be “qualified to make the required determinations for charging.” The Agency does not elaborate on what specifically makes an independent certified public accountant “qualified” for these purposes. Thus, it will be important for all sponsors to have an internal definition of what would constitute a “qualified” individual in internal company policies or procedures. Importantly, requirements involving an independent certified public accountant may consequentially require disclosure of trade secrets and other highly confidential information. Involved entities may want to ensure necessary safeguards are in place to protect confidential information when complying with these requirements.

Sponsor Recovery of Costs. The Draft Guidance supplements the 2016 Guidance’s discussion regarding authorizations to charge by noting that a “sponsor [of a clinical trial evaluating an unapproved use of its approved drug] can recover only the cost allowed under the regulations …[i.e.,] the direct cost of providing the drug for the investigational use for which FDA has authorized cost recovery. The direct cost of providing the drug may not necessarily be the same as the market price of the approved product used for an approved indication..”

  • Manufacturing Costs. The Draft Guidance also provides a number of specific examples of manufacturing costs that can be recovered by a sponsor when charging for an investigational drug in a clinical trial, including “raw materials, labor, non-reusable supplies and equipment used to manufacture the drug in the quantity needed to conduct the clinical trial for which charging has been authorized.” Though not discussed in the Draft Guidance, sponsors would be wise to have policies and procedures and thorough documentation to substantiate any and all external vendor expenses, and internal overhead cost allocations for manufacturing costs on a per-drug basis.
  • Indirect Costs. Pertaining to costs a sponsor can recover when charging for an investigational drug for the different types of expanded access use under 21 CFR part 312, subpart I, while the 2016 Guidance stated that “For individual patient expanded access, the sponsor may not charge for indirect costs, including administrative costs associated with providing an investigational drug,” and provided a number of examples of indirect costs, the Draft Guidance simply states that “the sponsor. may not charge for administrative costs associated with providing an investigational drug.” The Draft Guidance does not define either “indirect” or “administrative” costs, and it would not appear to exclude all internal overhead costs, such as those associated with actual manufacturing of the drug. If a sponsor wants to include any other internal costs, it should clearly document why such costs are not within the prohibition for “administrative” or “indirect” costs laid out in the Draft Guidance.

Concomitant Therapy. The Draft Guidance re-emphasizes the important point from the 2016 Guidance that if a sponsor’s own approved drug is used as concomitant therapy for an approved use during a clinical trial intended to evaluate another drug, the sponsor is not required to obtain FDA authorization to charge for the drug used as concomitant therapy. However, sponsors should still consider the potential applicability of the federal Anti-Kickback Statute (42 USC § 1320a-7b) and regulations, and the False Claims Act (31 USC § 3729) to such studies, and exercise diligence and caution in documenting the bona fide scientific rationale for any such study, to ensure that the purpose of the study is not to generate sales or usage of a currently marketed drug.

Additional One-Year Period for Authorized Charging. The Draft Guidance indicates that FDA may reauthorize charging for an investigational drug for expanded access use for an additional period that is typically a year or shorter (based on the request and the circumstances), so long as reauthorization is requested by the sponsor and all criteria. are met.

Disclosures to Patients. In alignment with the 2016 Guidance, the Draft Guidance states that the sponsor of an expanded access IND or protocol may recover the cost of the fees the sponsor pays to a third party for administering an intermediate-size patient population expanded access IND or protocol or a treatment IND or protocol. The Draft Guidance adds a recommendation “that the sponsor disclose to the patients any relationship it may have with the third party,” and states that “[i]f any costs may be the responsibility of the patient, this information must be included in the informed consent document.” The Draft Guidance does not address how to handle patients already enrolled in studies where they are charged for the study drug. Sponsors will need to assess on a case-by-case basis whether ongoing study participants should be re-consented on this financial transparency with respect to currently ongoing clinical trials.

Extraordinary Costs. Both the 2016 Guidance and Draft Guidance list a number of requirements for a sponsor to satisfy in order to obtain authorization to charge for its own investigational drug in a clinical trial. One of the requirements states that sponsors must “[d]emonstrate that the clinical trial could not be conducted without charging because the cost of the drug is extraordinary to the sponsor.” Manufacturing complexity, scarcity of a natural resource, the large quantity of the drug needed (depending on the size or duration of a trial) are examples of considerations that may be used to determine whether the cost of a drug is “extraordinary.” Further, the Draft Guidance provides that the individual sponsor’s financial condition is relevant to this consideration, so that a drug that would be an “extraordinary” cost for a small start-up company might not qualify as such for a large multinational established sponsor. Sponsors would be well advised to create an internal definition of “extraordinary” by policy, and then tailor documentation of a particular drug’s cost as “extraordinary” on a case-by-case basis. Note that the requirement to demonstrate “extraordinary” cost does not apply to charging for sponsor’s own approved drug as concomitant therapy to an investigational drug.

New Questions. In addition to the changes noted above, the Draft Guidance answers the following questions that were not included in the 2016 Guidance:

  • A sponsor of an expanded access IND who seeks to recover the cost incurred from obtaining an investigational drug from another source is not required to include in the charging request submitted to FDA a statement that an independent certified public accountant has reviewed and approved the calculation.
  • A sponsor of an intermediate or treatment IND or protocol seeking to charge for the investigational drug may distribute the costs associated with monitoring the program for the intermediate or treatment IND or protocol and other administrative “start-up” costs over the expected duration of the IND or protocol, rather than in the first year of the treatment. This ability to spread the cost over time should help sponsors design the financial aspects of the trial to decrease the impact on study participants and thereby help in satisfying the Draft Guidance’s other new requirements to ensure appropriate equity and diversity.
  • A sponsor of an expanded access IND or protocol seeking to charge for the investigational drug may distribute the higher manufacturing costs associated with manufacturing the drug in the first year compared to subsequent years, over the duration of the IND or protocol, rather than in the first year of the treatment.

Next Steps

Sponsors considering charging for investigational drugs will need to consider the Draft Guidance’s new factors on equity and diversity, proper documentation of costs and explore opportunities for financial flexibility which are enabled by the Agency’s latest thinking on this issue. We can expect significant interest in this Draft Guidance by various stakeholders, particularly patient advocacy organizations, in the current comment process.

Contact Information

If you have any questions concerning this client alert, or if you wish to provide comments to FDA on the Draft Guidance, please reach out to your relationship partner at Akin Gump or one of the authors on this alert.

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