By: Shashank Upadhye
Introduction
The U.S. pharmaceutical landscape stands at a transformative juncture with several key legislative initiatives currently under Senate consideration. These proposed bills seek to enhance the drug development process, streamline regulatory pathways, with wide-ranging implications for market competition, drug pricing, and patient access to affordable medication. This article document analyzes the expected industry impacts of seven critical bills: Senate Bills S.775 (relating to Q1/Q2 sameness for ANDA’s); S.1462 (relating to the suitability petition process); S.1463 (ability to obtain a Therapeutic Equivalence (TE) rating for 505(b)(2) drugs); S.1435 (related to FTC enforcement for product hopping); S.1428 (relating to pay for delay settlements); S.1425 (relating to Citizen Petition reforms that block ANDA approvals); and S.5573 (safe harbor for certain method of use patents and skinny labels).
While the author recognizes that these Senate bills have been introduced, left to another day to discuss is whether these bills are even necessary. That is, many of the bills are addressing FDA practices or procedures that are not grounded in the existing statutes. While these practices or procedures (or the other “this is way it has always been done”) may be not grounded in statute, or is untethered from regulation, it is fair to question whether the proposed legislative remedy is even necessary because a proper interpretation of the current statutes addresses the problem already. Perhaps if the FDA recognized that many of its “ways” of doing things were non-statutory or that regulations were ultra vires of the underlying statutes, FDA could cure many of its own problems, and not require legislative involvement.
A. Senate Bill S.775: Refining Q1/Q2 Standards for Generic Drug Approvals
Senate Bill S.775, titled the “Generic Drug Development and Approval Act,” addresses ambiguities in the qualitative (Q1) and quantitative (Q2) sameness requirements for inactive ingredients in generic drug formulation compared to the reference listed drug (RLDs). Approval delays often result from disputes over these standards.
The requirement for sameness in certain generic drug applications is rooted in regulatory mandates rather than statutory law. The FDA enforces these requirements under 21 C.F.R. § 314.94(a)(9), with varying degrees of strictness depending on the type of drug product.
For solid oral dosage forms, the FDA allows some deviations from strict sameness. Conversely, the requirements for parenteral drugs are more stringent. Per 21 C.F.R. §314.94(a)(9)(iii), generic injectables must closely mimic the reference listed drug (RLD), although certain exceptions apply for non-active components such as preservatives, buffers, or antioxidants. Similarly, ophthalmic and otic products fall under 21 C.F.R. §314.94(a)(9)(iv), where limited non-sameness is permitted.
In essence, the FDA’s Q1/Q2 sameness standard requires generic formulations to be qualitatively (Q1) and quantitatively (Q2) the same as the brand-name product. Q1 sameness refers to the use of identical inactive ingredients, while Q2 sameness ensures these ingredients are present in essentially the same concentrations. When a proposed generic drug fails to meet these requirements, the FDA can issue a complete response letter (CRL) denying the application outright or significantly delay the approval process. This can compel the generic manufacturer to abandon the application or reformulate the product, both of which increase costs and prolong market entry.
The complexity of Q1/Q2 sameness goes beyond mere formulation replication. Brand-name drug manufacturers often claim that the composition and specific concentrations of their inactive ingredients constitute trade secrets, despite regulatory obligations to disclose such information on certain drug labels. This practice has had tangible effects on market competition. For example, the approval of generic versions of Restasis, a blockbuster dry eye treatment, was delayed for nine years due to Allergan’s trade secret assertions. Although key patents on Restasis had expired or been invalidated, the lack of generics forced patients and payors to bear high costs until the FDA finally approved the generic versions.
To address trade secret-related formulation uncertainties, generic drug applicants must navigate the FDA’s Controlled Correspondence process, as outlined in FDA guidance for industry, including the Dec. 2020 document titled “Controlled Correspondence Related to Generic Drug Development.” This process allows manufacturers to submit up to three proposed formulations for preliminary review. If none meet Q1/Q2 requirements, manufacturers receive no substantive guidance other than confirmation of non-compliance. According to the FDA’s guidance on Q1/Q2 sameness, the agency “does not intend to provide clarification on why a formulation is not Q1/Q2 the same as the RLD.” In other words, the FDA will reject the proposed formulations but not tell the ANDA applicant why or which ingredient is problematic.
Given the vast number of potential formulation permutations, generic manufacturers often endure multiple rounds of correspondence before identifying an acceptable composition. This iterative process drains time and resources from both the FDA and the industry, further delaying the availability of cost-saving generic medications.
Compounding these challenges, the FDA’s interpretation of Q1/Q2 sameness can shift unexpectedly, even late in the review cycle. Such changes have forced some generic applicants to restart the development process entirely. Or more illogically, if the ANDA is Q1/Q2 to the RLD branded product, but the qualitative amount is outside the typical 95-105% range, the FDA will issue a Refuse to Receive (RTR) to the ANDA and the ANDA will be rejected from filing. In other words, if the RLD drug product was filed as an ANDA to itself, it would still fail FDA’s 95%-105% test. That makes no sense.
Senate Bill S.775 tries to address these issues. It has some key provisions.
Key Provisions of S.775
- Standardized Equivalence Criteria: The FDA must establish definitive Q1/Q2 equivalency guidelines.
- Scientific Flexibility: Deviations are permissible if evidence confirms bioequivalence and no compromise on safety or efficacy.
- Transparency Enhancements: Publication of detailed FDA guidance on Q1/Q2 evaluation procedures.
Impact on the Pharmaceutical Industry: Clearer standards will reduce regulatory uncertainty for Abbreviated New Drug Application (ANDA) filers. Generic manufacturers will experience fewer approval delays due to Q1/Q2 disputes, accelerating the entry of lower-cost generics. Enhanced predictability can stimulate investment in complex generics, further diversifying market offerings.
As an alternative to S.775, the FDA could re-interpret existing statutes. Based on existing statutes, the FDA may interpret the requirement that the NDA disclose “a full statement of the composition of such drug” (21 U.S.C. §355(b)(1)(A)) to include disclosure of the ingredient (as it already is interpreted) and the ingredient amounts (the re-interpretation). After all, given that the ingredient is already identified and hence not a trade secret, is there a rational basis assert that the quantity of that ingredient is secret? If FDA takes the position that section (b)(1)(A) requires both disclosure of ingredients and quantities, then Senate Bill S.775 is not necessary.
B. Senate Bill S.1462: Overhauling Suitability Petition Processes
Senate Bill S.1462, the “ANDA Suitability Petition Modernization Act,” addresses inefficiencies in obtaining FDA permission to submit an ANDA for products differing from their RLD in dosage form, route of administration, or strength.
Currently, if an ANDA sponsor wants to submit an ANDA that differs from the RLD with respect to a different strength, dosage form, route of administration, or active ingredient in a combination, then the ANDA sponsor first must ask the FDA for permission to file. This permission is requested through the Suitability Petition process, 21 U.S.C. §355(j)(2)(C). The plain language of the statute also says that FDA must approve or deny the petition within 90 days. FDA’s own regulations require that the Petition is denied or approved in 90 days. 21 C.F.R. §314.93(e). Despite a statutory and regulatory mandate to evaluate the Petition in 90 days, under FDA’s current timelines, 90 days usually means many years. Even without promulgating Senate Bill S. 1462, the Congress may demand that FDA explain why the 90-day deadline is routinely blown.
Because of FDA’s inability to follow the existing statutory and regulatory mandates, ANDA applicants suffer whilst the Petition languishes. ANDA sponsors ultimately give up, thereby depriving ANDA applicants of economic benefit and depriving patients of new drug product forms. Senate Bill S.1462 helps address these problems.
Key Provisions of S.1462
- Statutory Review Deadlines: FDA action required within 180 days of petition submission.
- Data-Driven Decision Transparency: FDA must provide detailed, science-backed rationales for petition outcomes.
- Dispute Resolution Framework: A streamlined process to minimize litigation.
The Bill amends current section (j)(2)(C) by allowing ANDA sponsors to file different dosage form or strength, which are two most popular petitions. That means ANDA sponsors can file these alternate forms without pre-authorization from the FDA. And that means those sponsors do not have to wait the years for the Suitability Petition to be decided (if at all). And adjudication of the different dosage form or strength is done during the regular review cycle at the filing stage (i.e., does the ANDA contain the necessary details to be “received”). And if FDA questions the new form or strength, the FDA bears the burden of providing the details and science backed rationale for its decision.
Again, had FDA respected the 90-day deadlines in the statutes and regulations, Senate Bill S.1462 may have been unnecessary. But because the proposed Bill allows for automatic filing of the two most common types of Suitability Petitions (dosage forms and strengths), the FDA cannot delay those ANDA’s and those sponsors can obtain some relief.
Industry Impact: The proposed reforms will reduce the uncertainty and time lag associated with suitability petitions, expediting access to generics addressing unmet needs. Shortened approval cycles may incentivize manufacturers to innovate alternate formulations, enhancing market competition and patient choice.
C. Senate Bill S.1463: Assigning Therapeutic Equivalence Ratings for 505(b)(2) Drugs
It is well-known that approved ANDA’s are generally therapeutically equivalent (TE-rated) with the RLD and thus substitutable under state pharmacy substitution laws. This is because the ANDA is a bioequivalent version of the RLD. The substitutability is a foundation of generic drug marketing and hence provides lower costs for payors. Drugs approved via the 505(b)(2) pathway lack therapeutic equivalence (TE) ratings, impeding pharmacist-level substitution. This is because an approved (b)(2) application is a new drug application, not a generic equivalent. But there are times when the (b)(2) approved drug is functionally the same as the RLD or an ANDA. Historically, (b)(2) sponsors wanting the TE rating had to petition the FDA for such designation. And as with many Petitions filed at the FDA, these TE petitions languish at the FDA. Meanwhile, (b)(2) sponsors must pay the PDUFA annual fees, which are very expensive.
Key Provisions
- Mandatory TE Ratings: FDA assignment of TE ratings for applicable 505(b)(2) products within a specified timeframe.
- Uniform Criteria for TE Evaluations: Harmonized standards aligning with ANDA evaluations.
- Public Disclosure of TE Ratings: Inclusion in the Orange Book.
Specifically, the bill would amend the statute’s Orange Book provisions FDC Act § 505(j)(7)(A) to require that FDA make a TE Code determination for a 505(b)(2) NDA “at the time of approval of such application or not later than 30 days after the date of such approval, provided that the sponsor requests such a determination in the original application, in a form prescribed by the Secretary.”
Industry Impact: By clarifying interchangeability, this bill will open new markets for 505(b)(2) products, enabling broader competition. Pharmacists and prescribers will gain clarity, driving down prices through substitutability.
D. Antitrust Provisions in Senate Bill S.1435 and Senate Bill S.1428
Product hopping involves slight drug modifications to extend patent monopolies, delaying generic competition. A typical ANDA refers to a specific RLD, in terms of the dosage form, strength, route of administration, and indication. An ANDA can be approved and substitutable with the RLD. A product hop happens when the underlying RLD changes, thus rendering the ANDA as not substitutable. For example, the first RLD may be to a tablet and the ANDA is filed against the tablet form. But before the ANDA can be approved, the brand company switches the RLD to a capsule form. The ANDA to the tablet cannot be approved because it is to a tablet not a capsule. Accordingly, there is a life cycle extension in play. S.1435 empowers the FTC to act against such tactics, enhancing fair market access.
Senate Bill S.1428 proposes treating pay-for-delay agreements as presumptively anticompetitive. This shift will curtail practices that artificially prolong brand exclusivity, accelerating generic availability.
Industry Impact: Tightened antitrust measures will increase competitive pressures on brand manufacturers, reducing barriers for generic entries and fostering price competition.
E. Senate Bill S.5573: Establishing Safe Harbor Provisions for Method of Use Patents
Much discussion involves the so-called “skinny label” or “carve-out” of patented indications from generic drug labels. That discussion involves inducement to infringe based on generic drug labels. Certainly, there are cases where the courts found induced infringement based on the label itself, but also based on other non-label evidence. The generic industry complains that such court cases and cases nullify the effect of the Section viii Statement. Senate Bill S.5573 aims to correct or level-set inducement to infringe. This bill provides a safe harbor for activities related to method-of-use patents, facilitating preparatory steps toward generic market entry without infringement risks.
Key Provisions
- Protection for Regulatory Preparations: Allows marketing application submissions without liability.
- Redefines Infringement: The Bill redefines the Section viii statement activities as not-infringement versus providing a defense to infringement. That is, such activities are classified as non-infringement at the outset, not that it can be infringement but a defense is provided.
Industry Impact: By lowering litigation risks, S.5573 will ease generic and biosimilar development, furthering market penetration and price reductions for consumers.
The Bill could be improved by addressing the illegality of FDA’s current administration of the Section viii Statement process. First, with respect to the patent listing aspect, the listing statute only requires the patent number and expiration date. Yet FDA illegally imposes a requirement that a Use Code (a narrative) be also created. Second, for ANDA sponsors filing a Section viii statement, the FDA then requires that the Section viii Statement language be found in the Use Code and the label. Neither is statutorily required. Third, FDA requires that Section viii Statement language be shown in redacted mode in the ANDA label, that is, actually show a carve-out of such language. None of this is required by statute and needlessly causes anguish for ANDA sponsors. The proper methodology is that an ANDA sponsor file a Section viii Statement that states the sponsor does not seek approval for the patented method. And that’s it. Requiring the sponsor to do a side-by-side comparison showing redacted language in the label or requiring “congruence” with a Use Code is actually not required.
Further, much of the method of use patent infringement analysis has degenerated into a strict liability inquiry. Inducement to infringe requires a specific intent to induce infringement; that is, a fair evaluation of the state of mind of the inducer. Yet, the current inquiry is simply a strict liability test of what the generic drug label says and there is never any inquiry into the state of mind requirement. Indeed, generic companies are liable for inducement simply because the ANDA product is put atop of the distribution chain irrespective of how the ANDA product is used in the actual marketplace.
If the Bill sponsors are serious about settling this area, the Bill sponsors should: (i) emphasize that the listing statute only requires the patent number and expiration date and does not require any Use Code or other narrative that summarizes the method of use; (ii) not require that any proposed ANDA label show a side-by-side comparison identifying the omitted language; (iii) eliminate the Use Code from the Orange Book; and (iv) emphasize that all the Section viii statute requires is a Statement that the ANDA sponsor does not intend to market the ANDA product for a patented method of use.
F. Conclusion About Pending Legislation
The legislative proposals analyzed here signify a concerted effort to modernize FDA regulations, combat anticompetitive practices, and enhance market dynamics in favor of generics. The collective impact on the pharmaceutical industry will be profound, promoting innovation, lowering costs, and broadening access. Stakeholders must stay proactive to leverage new opportunities and navigate compliance efficiently. But as briefly discussed above, certain legislative changes may not be necessary given existing statutes. Or the proposed statutes can be improved to eliminate FDA’s ultra vires actions that are outside of statutory or regulatory mandates.
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