FDA releases new guidelines on investigational drug billing

Conducting a clinical trial is a notoriously expensive undertaking that is necessary not only for the final approval of a drug, but even to proceed to the next phase of investigation and development of a drug. An unfortunate consequence is that experimental drugs with the potential to improve patient outcomes often run out of funding and die on the vine before they have been properly evaluated. Drug developers are faced with the balance between the significant costs of clinical trials that could drain resources before obtaining approval and the need to complete clinical trials to obtain approval in order to meet the needs of patients and to become profitable.

One method of mitigating clinical trial expenses is through investigational drug cost recovery, a regulatory and financial mechanism overseen by the U.S. Food and Drug Administration (FDA). Below 21 CFR 312.8, the FDA may allow drug sponsors to recover the direct costs of making their investigational drugs available in a clinical trial or for expanded access use. The regulations provide general criteria for authorizing the billing of an investigational drug, the billing of an investigational drug in a clinical trial or for expanded access use, and for determining what costs can be recovered when billing a experimental drug. To qualify for cost recovery, sponsors must demonstrate to the FDA that the clinical trial cannot be conducted without billing because the cost of the drug is extraordinary to the sponsor. Additionally, if cleared by the FDA, a sponsor can only recover the direct costs of making their investigational drug available and not the indirect costs.

  • Direct Costs: Costs incurred by a Sponsor that can be specifically and exclusively attributed to providing the drug for investigational purposes for which the FDA has authorized cost recovery. Direct costs include costs per unit of manufacturing the drug (e.g., raw materials, labor, and expendable supplies and equipment used to manufacture the quantity of drug needed for the use for which the billing is permitted) or the costs of acquiring the drug from another manufacturing source, and the direct costs of shipping and handling (eg, storage) of the drug.
  • Indirect costs: costs incurred primarily to produce the drug for commercial sale (e.g., costs of facilities and equipment used to manufacture investigational drug supply, but which are primarily intended to produce large quantities drug for eventual commercial sale) and research and development, administrative, labor or other costs that would be incurred even if the clinical trial or use of the treatment for which the billing is authorized had not taken place .

As further explained in the August 2022 draft guidance, Billing Investigational Drugs under an IND Questions and Answers, to receive FDA approval to bill an investigational drug, the sponsor must do all of the following:

  1. Provide the FDA with evidence that the drug has a potential clinical benefit that, if demonstrated in clinical investigations, would provide a significant advantage over available products in the diagnosis, treatment, mitigation, or prevention of a disease or condition.
  2. Demonstrate that the data to be obtained from the clinical trial would be essential to establish that the drug is effective or safe for the purposes of obtaining initial approval, or would support a significant change in the labeling of an approved drug ( p. new indication, inclusion of comparative safety information).
  3. Demonstrate that the clinical trial could not be conducted without charging because the cost of the drug is extraordinary to the sponsor, meaning the sponsor could not conduct the clinical trial without charging for the investigational drug. The cost of a drug may be considered extraordinary to a sponsor due to the complexity of manufacturing, the scarcity of a natural resource, the large quantity of drug required (for example, depending on the size or the duration of the trial), or a combination of these factors or other extraordinary circumstances (for example, the resources available to a sponsor).
  4. Provide documentation to support its cost recovery calculation, to the extent applicable, to show that the calculation complies with the requirements of Section 312.8(d)(1). The documentation should be accompanied by a statement that an independent accountant has reviewed and approved the calculation. The CPA must be qualified to make the decisions necessary for the charge and not an employee of the company or institution seeking to charge for an investigational drug.

The FDA intends to respond to billing requests within 30 days of receipt when possible. With respect to expanded access, the guidelines state that the sponsor must do all of the following to receive FDA clearance to bill an investigational drug, among other things:

  1. Provide reasonable assurance to the FDA that the billing will not interfere with drug development. Documentation to provide such reasonable assurance must include evidence of sufficient enrollment in all ongoing clinical trials necessary for marketing approval to reasonably assure the FDA that the trial or trials will be completed as intended ; evidence of adequate progress in the development of the drug for marketing approval; and information submitted as part of the overall investigation plan detailing the drug development milestones that the sponsor expects to achieve within the next year.
  2. Provide documentation in its billing request submission to show that its calculation of the amount to be billed complies with the requirements of § 312.8(d), to the extent applicable. This documentation should be accompanied by a statement that an independent accountant has reviewed and approved the calculation.

When billing for an investigational drug used in an intermediate-sized patient population, expanded access Investigational New Drug (IND) or protocol (no expanded access for an individual patient), a sponsor may recover monitoring costs from IND or Extended Access Protocol, in accordance with the IND reporting requirements and other administrative costs directly associated with the IND Extended Access in addition to direct costs. The sponsor of a DNR or extended access protocol may also recover the cost of fees paid to a third party for the administration of a mid-sized patient population or a DNR or extended access protocol. treatment, including any profit for the third party which may be included in the fees.

One of the most important new aspects of the FDA’s policy on investigational drug billing concerns the allocation of potentially higher direct costs over the duration of the IND or protocol, rather than the first year of treatment. . The FDA acknowledges in the draft guidance that the costs associated with program oversight for an interim or treatment IND and other start-up administrative costs as well as drug manufacturing costs of an IND or protocol to extended access may be higher in the first year compared to subsequent years. To account for this, the FDA allows sponsors to amortize the cost over the expected duration of drug billing so that patients receiving the drug in the first year are not disproportionately charged more than patients in subsequent years. This policy should reduce barriers to treating patients, especially in the early stages of clinical trials.

Other notable policies in the draft guidelines include:

  • When the sponsor of an IND is a person or entity other than the manufacturer of the investigational drug (for example, a physician), the sponsor of the IND, and not the manufacturer of the drug, must obtain the prior written authorization of the FDA to bill patients for the experimental drug. under this IND.
  • The FDA anticipates that the sponsor would normally bill a patient directly or bill a third-party payer if reimbursement is available.
  • FDA clearance is not required to recover costs incurred at a clinical trial site (eg, a hospital or clinic), including pharmacy fees (eg, the cost of reconstituting medication for infusion), nursing costs (e.g., costs associated with administering a medication and monitoring study subjects), equipment costs (e.g., administration kits intravenous, infusion pumps) and costs of study-related procedures (e.g., chemistry labs, X-ray procedures).
  • Billing for an investigational drug in a clinical trial may have the potential to compromise the blinding of study participants to the treatment they received (for example, in a situation where participants who are in the arm study treatment are charged, and participants who are in the control arm are not charged). When these situations arise, the sponsor may seek advice from the appropriate review division of the New Drugs Office of the Center for Drug Evaluation and Research or the appropriate review office of the Center for Drug Evaluation and Research. biological products on how to preserve the blind.

Although charging for an investigational drug can help defray the cost of clinical trials, sponsors should carefully consider potential unintended consequences such as the rate of recruitment or the creation of access barriers that can worsen disparities among participants in clinical trials. If the cost is passed on to patients, this could exclude certain patient populations, including patients of lower socioeconomic status.

Readers are encouraged to submit their comments on the draft guidelines by October 24, 2022, to ensure they are considered by the FDA before the guidelines are finalized.

For more information please contact Jamie Ravitz, Georgia Ravitz, David Hoffmeister, Paul Gadiock, Eva Yin, or any other member of Wilson Sonsini’s FDA Regulatory, Health, and Consumer Products practice.

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