This action underscores the complexities surrounding off-label use, clinical compendia, and payer coverage when an FDA-approved indication is rescinded. Despite regulatory withdrawal, patients and providers navigate intricate pathways to maintain access based on existing evidence and payer policies.

FDA’s Decision and Its Rationale

The FDA’s decision to limit the market Immuno Oncology (IO) therapies to PD-L1–positive tumors was based on post-market data indicating minimal benefit for patients with PD-L1–negative tumors. In trials such as KEYNOTE-859 and CheckMate-649, PD-L1–negative subgroups showed only an 8% reduction in death risk with Keytruda and Opdivo, respectively. These findings led the FDA to conclude that the overall survival benefits observed were primarily attributable to patients with PD-L1–positive tumors.

This action also reflects the FDA’s ongoing scrutiny of the accelerated approval pathway, emphasizing the need for confirmatory trials to validate clinical benefits.

Role of Clinical Compendia and Guidelines

An FDA label withdrawal does not automatically remove a drug from clinical compendia or guidelines. Clinical compendia or guidelines may maintain recommendations based on supporting evidence, reclassify the use as off-label, or remove it if evidence is insufficient. For instance, in previous cases, certain breast cancer indications were withdrawn by the FDA, yet compendia continued to recommend use for specific subpopulations. This underscores the importance of clinical judgment and flexibility in evidence-based care, allowing providers to consider individual patient circumstances even when regulatory approvals change.

Payer Coverage Dynamics

Medicare may continue to cover treatments as off-label use, if they are supported by clinical compendia and literature, even after FDA label withdrawal. Commercial insurance plans vary in their responses; some may deny coverage for off-label use, while others may allow continued access based on medical necessity.

A critical concern is whether payers will terminate coverage for patients already undergoing treatment Generally, payers avoid disrupting ongoing therapy unless significant safety issues arise. In such cases, medical necessity reviews or transition plans may be implemented to ensure patient safety and continuity of care.

Patient Impact and Ethical Dilemmas

For the approximately 7% of patients with PD-L1-negative tumors who respond to treatment with Keytruda or Opdivo, the FDA’s decision introduces uncertainty regarding the continuation of therapy. Loss of access due to payer decisions can have negative effects on patient outcomes.

Providers must find the right balance of evidence-based practice with individual patient needs, balancing evidence-based practice with individual patient needs. They must navigate the tension between adhering to updated guidelines and advocating for continued treatment in patients who are benefiting from therapy.

Policy and Market Implications

The FDA’s action highlights the need for greater transparency in how clinical compendia and payers respond to label withdrawals. Manufacturers have an opportunity to proactively support off-label access by providing real-world data and engaging with stakeholders to demonstrate clinical benefits.

This development also prompts consideration of reforms to the accelerated approval lifecycle management to ensure that approvals are based on robust evidence and that withdrawals are communicated effectively to all stakeholders.

The FDA’s decision to limit Keytruda and Opdivo to PD-L1-positive gastric, GEJ, and esophageal cancers underscores the evolving complexity of oncology drug approvals and access. While off-label use remains a critical pathway for patient care, it is unevenly supported across healthcare systems. Ongoing dialogue among the FDA, clinical compendia, payers, and providers is essential to ensure patient-centered care amidst changing evidence landscapes.

How Avalere Health Can Help

Avalere Health continues to monitor the adoption of this FDA decision by compendia and other key stakeholders. Our expertise in compendia, coverage, and access strategy can help manufacturers, payers, and other stakeholders analyze clinical coverage policies and access implications to off-label treatments and help develop strategies to mitigate delays in patient access to treatment. To learn more, connect with us.

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Prior to the Additional Condition for Non-prescription Use (ACNU) final rule, FDA regulations only allowed prescription (Rx) drug products to be either fully (“full Rx-to-over-the-counter [OTC] switch”) or partially (“partial Rx-to-OTC switch”; e.g., only specific strengths or indications) changed to non-prescription marketing status. This meant that a single product could not be simultaneously designated as a prescription and non-prescription product for all use cases.  

To switch a product to non-prescription status, sponsors would have had to demonstrate that the drug product was both efficacious and safe to use in a non-prescription setting and that the label contained sufficient information for consumers to use the drug safely and effectively without a healthcare professional’s supervision. The FDA provided guidance documents on label comprehension studies and self-selection studies for nonprescription drug products.  

This prior regulatory paradigm limited access to products as either prescription or nonprescription. This has been particularly impactful for certain classes of drugs for which availability via prescription and nonprescription could be considered safe and valuable.    

Provisions of the ACNU Final Rule  

On December 23, 2024, the FDA issued a final rule to broaden the types of prescription drug products that consumers can purchase OTC, and allow a drug to be marketed with both prescription and non-prescription status. The rule went into effect May 27, 2025, after its original implementation date of January 27, 2025, was postponed twice. 

The final rule offers manufacturers an approval pathway for a non-prescription drug with ACNU by allowing flexibility when labeling alone cannot convey the necessary information for consumer self-selection or appropriate actual use. Manufacturers would need to submit a new drug application (NDA) or an abbreviated new drug application (ANDA) detailing how the ACNU is operationalized and includes consumer studies. The ACNU would need to demonstrate a “meaningful difference” between the prescription drug product and its non-prescription counterpart.  

If the ACNU is accepted as a reasonable mechanism for consumer self-selection, it would be sufficient to account for a “meaningful difference” between the prescription drug and its non-prescription counterpart without any differences in the drug attributes (e.g., strength). 

Strategic Considerations for Manufacturers 

Manufacturers will need to carefully plan early if they intend to market their products with both prescription and non-prescription status. 

If a consumer is unable to appropriately self-identify for use of the product based solely on the label, manufacturers can propose a variety of different ACNU methods to bridge any gap between insufficient labeling and appropriate self-selection. For example, manufacturers can propose that before purchasing the nonprescription drug product, consumers would need to take a questionnaire on a display screen at a pharmacy kiosk or via an automated telephone response system. Consumers will know there is an extra step required before purchasing the drug product from the label. Manufacturers will need to consider what data is needed to show the safety of the drug product when offered OTC with an ACNU, and what ACNU methodology will be accepted by the FDA to ensure consumer adherence, proper self-selection, and clear labeling. 

There are multiple downstream market access implications, including market share and volume changes, pricing approaches, payer coverage determination, and consumer decision making.  Even if a manufacturer is not planning to submit an ACNU non-prescription application for their drug product, manufacturers will want to carefully observe potential market dynamic shifts for an entire class of drugs if one of the products does receive ACNU non-prescription marketing status. Drug classes that may be affected include antihistamines, analgesics, topical pain or itchiness relief creams, acid reducers, oral contraceptives, and potentially other drugs for common chronic diseases.  

Potential for Added Demand to Pharmacists 

Approval of an ACNU product also has implications for pharmacies, especially if the ACNU product or state law requires intervention by the dispensing pharmacy, such as storing the product behind the counter to facilitate counseling by a pharmacist or requiring a survey to be administered by a pharmacist. Pharmacies will want to consider if there will be an added burden for pharmacists to administer these drugs, if infrastructure changes will need to be made, and if every pharmacy will be providing access to these products. 

How Relevant Parties Can Prepare for Coming Changes 

The ACNU pathway has the potential to optimize patient access to drugs via two distinct routes associated with unique costs and health plan coverage. Manufacturers, payers, and pharmacies will need to thoroughly consider the various impacts on their organizations when determining the value of the ACNU pathway.  

Avalere Health’s regulatory, payer, and market access experts can help interested parties make informed decisions regarding utilization of this new pathway, as well as with execution of strategies. To discuss how Avalere Health can help industry stakeholders navigate this new approval pathway, connect with us. 

The post ACNU Provides a New FDA Approval Pathway for Prescription-to-OTC Drugs appeared first on Avalere Health Advisory.

Drug compounding exists to fulfill an unmet medical need by providing patient access to commercially unavailable drug strengths, formulations, and combinations. Compounding pharmacies may not replicate a commercially available drug unless there is a drug shortage, and furthermore, are prohibited from compounding biologics, regardless of drug shortage status. While compounding may be sourced from a Food and Drug Administration (FDA)-approved drug or bulk drug substance of an active pharmaceutical ingredient, the final compounded product is not considered FDA-approved, as it does not undergo FDA review for safety, effectiveness, and manufacturing quality. 

Compounded GLP-1 drugs are a widely known and recent example of compounding. Due to shortages, compounding pharmacies were permitted to make semaglutide and tirzepatide copies. These permissions ended in October 2024 and February 2025, respectively, but likely had a lasting impact on industry and public views of drug compounding. 

Uncoordinated State-Federal Oversight Leads to Inconsistent Regulation Enforcement 

Compounding can occur at outsourcing facilities (also known as 503B pharmacies) or community pharmacies, physicians’ offices, and hospital pharmacies (also known as 503A pharmacies); there are key distinctions between the two types of compounding (Figure 1).  

Figure 1. Types of Compounding Pharmacies 

While the origin of compounding predates modern drug development, compounding pharmacies were not regulated until 1997 under the Food and Drug Administration Modernization Act. Outsourcing facilities did not become federally regulated until 2013, after a catastrophic fungal meningitis outbreak killed 64 people in 2012. The outbreak was linked to a batch of poorly compounded drugs, prompting the reformation of the Food, Drug, and Cosmetic Act through the Drug Quality and Safety Act to establish “outsourcing facilities” regulated by the FDA. Notably, 503A pharmacies adhere to USP 797 (sterile preparations) manufacturing standards, but enforcement lies with state pharmacy boards, leading to varied oversight and prompting many stakeholders to voice concerns over the safety risks associated with compounding and lack of standardized regulation.

Insurance Coverage of Compounded Drugs Varies

Insurance coverage of compounded drugs varies and may be billed to pharmacy and medical benefits. Compounded drug products do not have National Drug Codes; thus, payers will review the compounded drug ingredient list on a case-by-case basis to determine which ingredients will be covered in the pharmacy benefit, typically only choosing to cover ingredients that are FDA-approved.

For medical benefits, physician-administered compounded drugs may be billed using miscellaneous drug coding. Not all payers have readily available coverage policies and there is no consistency across payers, so reimbursement is not certain. Compounded drugs administered in the inpatient setting will not be reimbursed, as they will be bundled into a diagnosis-related group payment.

Future of Compounding is Uncertain

Compounding plays an important role within the pharmaceutical supply chain and distribution by streamlining and mitigating access issues during periods of drug shortages or other constraints.

The regulatory and legal environment of compounding continues is evolving. Recent FDA guidance documents indicate an increase in regulation. For example, in 2024 the FDA proposed a rule that would create Demonstrable Difficulties for Compounding Lists. These would include three categories of drug products for which compounding would not be permitted, regardless of drug shortage statues: (1) drug products produced using hot melt extrusion, (2) liposome drug products, and (3) oral solid modified release drug products that employ coated systems. Additionally, final 503B guidance released in January 2025 states that 503B facilities cannot compound using bulk drug substances while the FDA is deciding whether or not to place the ingredient on the bulk drug substance list.

Lastly, recent lawsuits from the Outsourcing Facilities Association alleges that the FDA’s decision to end the tirzepatide and semaglutide drug shortages violates the Administrative Procedure Act. This suit could be indicative of future hurdles that the FDA may have to overcome to increase regulation over compounding. The Trump administration’s stance on compounding remains to be seen.

Next Steps

The changing landscape of drug compounding and how it fits into the US healthcare ecosystem may create uncertainties for various stakeholders. Avalere can partner with manufacturers, telehealth companies, health plans, patient advocacy groups, provider associations, investors, and pharmacies to help navigate the evolving regulatory environment of compounding.

For more information about how compounding may affect your portfolio, how it impacts patient access, or how Avalere can assist you, please connect with us.

This Insight is the first of a series exploring GLP-1 manufacturing, coverage, safety, and product pipeline. Look out for our next Insight about GLP-1 insurance coverage of marketed and compounded products, coming  in April.

The post Navigating the Evolving World of Drug Compounding appeared first on Avalere Health Advisory.

• Clarify how innovative biotechnologies that leverage RNA are classified.
• Explore the current development landscape for RNA-based therapies.
• Address how the commercialization environment affects RNA products relative to other innovative biotechnologies.
• Offer forward-looking perspectives on patient access and policies influencing emerging therapies.
• Learn which diseases with unmet needs will benefit from Genetically Targeted Therapies (or RNA-based therapies.)

In May, Avalere produced a report focused on the future development for RNA-based therapies as a class of medications. Read more here:  Overview and Outlook for RNA-Based Therapies

Panelist views are their own – they do not represent the views or positions of Avalere or Eli Lilly. 

The post Exploring RNA-Based Therapies: Innovations and Impact appeared first on Avalere Health Advisory.

The article, authored by Practice Director Laura Housman, lists several opportunities that diagnostic manufacturers may need to reconsider.

To read the full article, visit MedTech Intelligence.

Learn More

Avalere experts in regulatory strategy, evidence, and market access can help you navigate these evolving dynamics for LDTs. If you have questions regarding how this rule will impact your organization and the diagnostics landscape, connect with us.

The post The FDA’s Final Rule on Laboratory-Developed Tests (LDTs) appeared first on Avalere Health Advisory.

In a new white paper, Avalere shares findings from a pipeline assessment of RNA-based therapies to characterize the growing RNA-based therapy landscape. In the United States, there are at least 21 Food and Drug Administration (FDA) approved, on-market, RNA-based therapies, as well as a strong pipeline of products in clinical development. More specifically, at least 131 RNA-based therapies are currently in clinical trials, with many more in pre-clinical development.

Avalere explored the ways in which regulatory classifications for RNA-based therapies can influence product development, commercialization, and patient access. Some RNA-based therapies, such as products using RNAi, are regulated as small molecule drugs under a New Drug Application (NDA), while others, such as gene therapies leveraging viral vector delivery systems and mRNA vaccines, are regulated as biological drugs under a Biologics License Application (BLA). While product development and resource investment may often be comparable among these types of therapies, differences in FDA regulatory classifications can create important distinctions during review for approval and during time on market due to exclusivities and pathways for competition.

Small molecule drug and biological drug products are affected differently by policies such as the Inflation Reduction Act’s (IRA’s) Medicare Drug Price Negotiation program. Under the IRA, biological drugs are eligible to be selected for negotiation after 11 years on the market, compared to seven years on the market for small molecule drugs. The differential treatment of RNA-based therapies that are reviewed under NDAs compared to certain gene therapy or mRNA products reviewed under BLAs may introduce new incentives to the market, which over time could influence investment decisions and pipeline strategies.

To learn more, download the white paper.

Funding for this research was provided by Eli Lilly and Company. Avalere retained full editorial control.

The post Avalere White Paper: RNA-Based Therapy Outlook appeared first on Avalere Health Advisory.

On April 29, the Food and Drug Administration (FDA) released a final rule amending federal regulation to make explicit that in-vitro diagnostics (IVDs) marketed as lab developed tests (LDTs), are now considered medical devices under the Federal Food, Drug, and Cosmetic Act (FD&C Act). This change increases the FDA’s regulatory oversight of LDTs and phases out the use of general enforcement discretion with respect to a significant number of LDTs over a four-year period. Although several changes are consistent with the proposed rule released in September 2023, additional exceptions to the phaseout policy were established based on the nearly 7,000 comments received during the public comment period.

Phaseout Policy Requirements

The FDA finalized as proposed the five-stage phase out of enforcement discretion for LDTs. The FDA also released two draft guidance documents: the first one is related to the enforcement discretion policy during a public health emergency under section 564 of the FD&C Act, and the second provides considerations in the context of an immediate response to an emergent situation, absent a public health emergency declaration. Additional targeted guidance may be released throughout the phaseout period to assist manufacturers with compliance of FDA oversight of LDTs as IVDs.

Figure 1. Phaseout Policy Sequencing and Timeline

*Unless a submission is received prior to that date, in which case, enforcement discretion will still be used during the review.
**Most low-risk IVDs are exempt from premarket review.
QS: Quality System

The final rule also expanded upon the categories of LDTs exempt from the full regulatory requirements, which reflected changes from the exemptions originally outlined in the proposed rule. The final rule adds exemptions for:

1. LDTs approved or under conditional approval by the New York State Department of Health Clinical Laboratory Evaluation Program (NYC CLEP)
2. LDTs addressing an unmet need manufactured and used within a single integrated healthcare system

Figure 2. Test Categories Exempted from the Full Phaseout of General Enforcement Discretion

*As of 5/6/2024
DoD: Department of Defense; HLA: Human Leukocyte Antigen; RBC: Red Blood Cell; VHA: Veterans Health Affairs

Although enforcement discretion still applies to certain categories of tests, laboratories will still need to register as medical device manufacturers and comply with stage I and II requirements.

Rule Implementation Clarifications

The FDA held a webinar on May 14 to provide an overview of the final rule, explain the enforcement discretion phaseout policy, and answer pre-submitted questions from stakeholders. The FDA plans to host additional webinars related to the final rule and has already scheduled a call on June 5 to discuss both draft guidance documents.

During the May 14 webinar, the FDA largely reiterated which tests are subject to general enforcement discretion and the compliance timeframe for each set of requirements. The FDA clarified that:

• If an IVD is manufactured and performed beyond a sole source laboratory (i.e., through a distributed model) it is not an LDT under the definition applied by the final rule, but FDA enforcement still applies.
• LDTs marketed before May 6, 2024, that have not undergone any modifications to intended use, performance, or technology will still be subject to enforcement discretion but must comply with stages I and II of the final rule phaseout policy.
• The FDA may determine when a test no longer addresses an unmet need due to increased availability of another FDA-authorized test, and it would then be subject to the full requirements of the phaseout policy.
• If a lab runs a test that is similar to a test approved by the NYS CLEP enforcement but does not meet the standards of the test approved under NYS CLEP, the similar test will be subject to the phaseout policy.
• The FDA intends to ensure sufficient resources are available for effective implementation of new requirements during user fee negotiations in 2027 and by enhancing its Third-Party Review Program.

Next Steps for Manufacturers of IVDs Marketed as LDTs

Manufacturers of LDTs on the market or in development should understand the regulations their tests are subject to under the final rule and the associated timeframe to become compliant, including any actions necessary for compliance regardless of continued general enforcement discretion. To support manufacturers with compliance, the FDA expressed its intention to issue additional guidance. During the webinar, the FDA also re-emphasized plans to pursue reclassification of Class III IVDs into Class I/II, which would result in fewer LDTs needing to seek approval through the premarket approval pathway.

The recent LDT rule follows a House Energy & Commerce Committee hearing on March 21, during which lawmakers discussed LDT regulatory reform. If a law were to pass that reforms diagnostics regulation, it would replace changes made by the final rule; however, the timeline for potential legislative action is not certain. Even without Congressional intervention, the rule is expected to face legal challenges from industry and other stakeholders.

Avalere experts in regulatory strategy, evidence, and market access can help you navigate these evolving dynamics for LDTs. If you have questions regarding how this rule will impact your organization and the diagnostics landscape, connect with us.

The post A Paradigm Shift in LDT Regulation appeared first on Avalere Health Advisory.

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Several categories of diagnostics are defined by regulators such as the Food and Drug Administration (FDA) and Centers for Medicare and Medicaid Services (CMS), among others. Specifically, in-vitro diagnostic tests (IVDTs) are subject to FDA enforcement both pre- and post-market, while laboratory developed tests (LDTs) are IVDTs that are manufactured by and used within a single laboratory and under validation purview of CMS within the Clinical Laboratory Improvement Amendments (CLIA).

These distinct regulatory frameworks for IVDTs and LDTs can create a non-standardized market, resulting in confusion around expectations for evidence generation and go-to-market commercialization strategies. The FDA is expected to issue notable regulatory changes to LDTs this spring, prompting developers to reexamine their market strategies.

Current Regulatory and Commercialization Market

Diagnostic developers are advised to consider several aspects when commercializing diagnostics, each of which has unique strategic implications depending on whether it is an IVDT or LDT under existing regulatory and market frameworks:

• FDA Regulations: Diagnostics are currently regulated within the medical device statutory framework. While IVDTs typically require FDA clearance/approval, the agency is currently applying regulatory discretion with respect to LDTs, as they are not explicitly mentioned in statute. The FDA’s final rule on LDTs is anticipated to change this.
• CMS and American Medical Association (AMA): Developers need to ensure that their diagnostic products and corresponding services can be ordered in the market via appropriate codes that facilitate utilization, payment, and reimbursement through payer claims management. Most payers would require the use of codes maintained and generated under CMS and AMA for reimbursement, such that a diagnostic’s broad access to providers and patients is highly dependent on this step.
• Commercial Payers: Once developers secure codes for their diagnostic, they need to ensure that payers deem the product reasonable and necessary for clinical care, leading to medical policy coverage for the intended use of the diagnostic. If covered under the commercial payer medical policy, the diagnostic services reimbursement rates are often negotiated to the payer’s rates as a percentage of the CMS Clinical Laboratory Fee Schedule rates.
• Molecular Diagnostic Program (MolDx)/Medicare Administrative Contractors (MACs): Select jurisdictions under individual MACs have established specific programs for evidence related to coverage and payment of molecular diagnostics. Within the MolDx program, developers must obtain Diagnostics Exchange Z-Codes as a test-specific identifier, in addition to an AMA-assigned Current Procedural Training (CPT) code, to help track utilization of a specific molecular diagnostic test. Neither coding system guarantees coverage and payment, but are necessary components for reimbursement.

Regardless of the forthcoming FDA final rule regarding regulatory oversight of LDTs, diagnostic developers will need to consider a variety of steps to obtain market access, making it imperative to consider a short, medium, and long-term strategic horizon for commercialization (Figure 1).

Figure 1. The Diagnostics Market Is Complex, With Multiple Access Influencers and Evolving Dynamics

CDRH: Center for Devices and Radiological Health; CLFS: Clinical Laboratory Fee Schedule; CPT: Current Procedural Terminology; HCPCS: Healthcare Common Procedure Coding System; MAC: Medicare Administrative Contractor; MolDx: Molecular Diagnostics; PAMA: Protecting Access to Medicare Act

Forthcoming FDA Regulatory Changes

This spring the FDA is expected to finalize a proposed rule on LDTs that would explicitly define LDTs as a type of IVDTs and thus subject them to medical device regulation. Separately, FDA has announced plans to reclassify many infectious disease IVDTs, from Class III to Class II. The FDA has stated that Class II controls are sufficient to ensure safety and effectiveness while increasing competition in this area due to a lower burden of proof.

The LDT rule is particularly paradigm changing. As most LDTs are not currently subject to FDA regulations, this will create new strategic burdens on laboratories and partners developing these tests. Since FDA clearance/approval will be one of the first requirements in the lifecycle of an LDT, this may have downstream implications for commercialization.

Implications for Diagnostic Manufacturers and Laboratories

Stakeholders in the industry, particularly diagnostic manufacturers, will need to consider adapting current development and commercialization strategies in response to anticipated policy changes. Others, such as pharmaceutical sponsors with therapeutics that rely on biomarker identification/companion diagnostics, will benefit from considering the overall changing diagnostic landscape as part of their partnership strategies.  Considerations may include:

• Reevaluating currently marketed and pipeline diagnostics with respect to FDA requirements for safety and effectiveness to better understand new evidence requirements;
• Reassessing prioritization of products based on go-to-market evidence burden relative to the market potential;
• Establishing and expanding evidence generation plans as necessary, including developing health economics and outcomes research roadmaps;
• Capitalizing on the value of real-world data for on-market diagnostics (e.g., targeted evidence by population and intended use);
• Assessing development and/or commercialization opportunities that may arise with new targeted evidence (this may include evidence supporting use of products in diverse patient populations to facilitate equitable access);
• Considering collaboration opportunities between pharmaceutical and diagnostic sponsors to enhance treatment access.

A silver lining may be that with a clear FDA mandate over LDTs, stakeholders may see greater certainty with respect to evidence requirements and opportunities for marketing clinical claims in the future.

Next Steps

Avalere experts in regulatory, evidence, and market access strategy can help you navigate these evolving dynamics for LDTs, including potential regulatory changes in transition and the broader impact of these policies on patients, payers, and access. To learn more about how we can help your organization prepare and respond to the changes, connect with us.

The post A More Complex Future Market for Diagnostics? appeared first on Avalere Health Advisory.

In September 2023, the FDA published a proposed rule that sought to amend current regulations to make explicit that all in vitro diagnostic tests (IVDs)—including lab-developed tests (LDTs)—are medical devices under the Federal Food, Drug, and Cosmetic Act (FD&C Act). Medical device regulation has followed a risk-based, three-classification system since 1976, when amendments to the FD&C Act took effect. The proposed rule would place LDTs within this classification system and under the subsequent regulatory requirements. The FDA is also proposing a framework under which it intends to provide greater oversight of LDTs through a phaseout of its current enforcement discretion approach.

Following three months of public comments, the proposed rule is now under review by the federal government’s Office of Information and Regulatory Affairs within the Office of Management and Budget.

Preparing for Potential Regulation of LDTs

Given that the proposed rule defines LDTs as IVDs and subjects them to the FDA’s regulatory review process to assess clinical validity, clinical diagnostic manufacturers would need to re-consider both their current portfolio and go-to-market capabilities. These manufacturers would need to assess the pros and cons associated with the commercial opportunity of both in-market and pipeline assays to inform future operations. Product classifications, data expectations, and market access considerations are all elements to consider that can inform business decisions when re-prioritizing investments to support a regulated testing marketplace.

Manufacturers should prepare for shifts in oversight by developing a portfolio map of their assays which should be based on, among other factors, potential risk classification for each asset (Class I/II/III), corresponding evidentiary and transition burdens, and the expected timelines for implementation (derived from the FDA rule), weighed against the overall potential value of pursuing marketing for the assay(s).

Stakeholders With Much at Stake

The FDA is likely to encounter numerous legal and administrative challenges associated with the implementation of this rule. It will be advantageous for manufacturers to not only collaborate with the agency to support the suggested four-year phase-in process, but to proactively look to understand the path forward for transitioning their in-market or in-development LDT to an FDA-compliant IVD.  To ensure a smooth transition to long-term commercial viability, and clarity on the path forward, manufacturers can take advantage of the current window of implementation uncertainty to develop a meaningful evidentiary plan and execution process that considers their current capabilities.

Connect with Us

Avalere experts in regulatory, evidence, and market access strategy can help you navigate these evolving dynamics for LDTs, including potential regulatory changes in transition and the broader impact of these policies on patients, payers, and access. To learn more about how we can help your organization prepare and respond to the changes, connect with us or email Laura Housman at lhousman@avalere.com.

The post Forthcoming Regulatory Changes for Lab-Developed Tests appeared first on Avalere Health Advisory.

As federal and state policymakers consider policies to lower drug costs, state drug importation has been proposed as a way to increase patient affordability and access to prescription drugs. The Section 804 Importation Program (SIP) allows states to request authority from the US Food and Drug Administration (FDA) to import prescription drugs from Canada. In January 2024, the FDA authorized the first SIP, requested by Florida, opening the door to state drug importation and the possibility of other states receiving subsequent authorization.  

What Does Prescription Drug Importation Look Like Without SIPs? 

Currently, the importation of prescription drugs is subject to varying levels of federal oversight, depending on whether it is classified as commercial or personal importation. Shipments deemed to be for commercial use are subject to all labeling and quality requirements under US statute for the approval and sale of that product. Shipments deemed to be for personal use are not subject to the same level of FDA scrutiny. Without clear health risks or evidence of intent for commercial sale, the FDA permits the importation of select prescription drugs that meet the following criteria: 

• The intended use is for a serious condition that lacks available effective treatments in the United States 
• There is no known commercialization or promotion to patients in the United States 
• The product is not considered to represent an unreasonable risk 
• The individual seeking to import the product affirms it is for their own use (i.e., <3 months’ supply) 

• • The patient provides the US doctor overseeing their treatment, or 
  • The patient provides evidence that the product is for the continuation of treatment begun in a foreign country 

The current oversight of personal importation, which is not tracked, has generated uncertainty about the legitimacy of prescriptions drugs allowed into the United States through alternative sourcing methods. It also makes quantifying the level of importation that takes place via these means difficult to estimate. 

How are SIPs Structured? 

In 2020, the US Department of Health and Human Services released a final rule on the importation of prescription drugs from Canada under a SIP, which changes FDA’s authority over importation. The change allows states to develop and submit SIP proposals to the FDA. A state, acting as the SIP sponsor, must demonstrate that the SIP would reduce prescription drug costs to patients and pose no increased risk to the public’s health and safety. Not all medical products are eligible to be imported under a SIP. Ineligible products include controlled substances, biologics, medical products with requirements that track patient safety concerns, or any drugs administered intravenously, intrathecally, or intraocularly.  

Ultimately, the FDA has authority over SIPs and it is responsible for the review of proposals, their authorization, and subsequent oversight. The manufacturer or importer is responsible for quality testing to confirm that the prescription drug can be used in the United States. The importer must also confirm that the labeling complies with US specifications or undergo relabeling to meet those requirements.  

Recent Actions, Implications, and Future Outlook 

In January 2024, the FDA authorized Florida’s SIP proposal. Seven other states are engaged in SIP proposal preparation or submission (see Figure 1).  

There are several FDA requirements that Florida must satisfy before implementing the SIP. First, it must submit pre-import requests and confirm supply chain compliance. Additionally, the state must ensure that all participating pharmacies and wholesalers meet the stringent FDA track-and-trace requirements. Furthermore, Florida must also demonstrate that the program will pose no additional risk to the public’s health and safety, and that it will result in a significant reduction in the cost of covered products to the American consumer.  

Florida’s program may encounter other challenges that could hinder implementation. There is the potential for litigation by stakeholders in opposition to the program, which could further delay implementation of Florida’s SIP. There are also uncertainties regarding Canada’s participation in the program. Canadian health officials have expressed opposition to SIPs, citing that Canada’s market for pharmaceuticals is too small to have any real impact on US drug prices and that its supply chain cannot accommodate the prescription drug volumes that would be exported to the United States.  

Figure 1. Status of State Importation Efforts as of January 2024​

While there is uncertainty regarding the next steps for SIP operationalization, this recent activity is likely to draw greater attention to SIPs from states that have yet to consider legislation or formalize their proposals. Additionally, updates on SIP authorization introduce a series of considerations for drug manufacturers operating in the United States. In particular, manufacturers should consider their demand projections and how the volume of certain prescription drug sales may shift due to SIP implementation. This could necessitate re-calibration of US commercialization strategies to accommodate for added risk from a demand perspective.  

To learn more about how Avalere can assist you in thinking through policy and access implications of state importation programs and the Section 804 process, connect with us.  

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Drugs approved by the Food and Drug Administration (FDA) as new molecular entities (NMEs) are granted regulatory and patent exclusivity, which protect the product from market competition and patent infringement for set periods of time. These protections help sponsors recoup their initial research and development investment before the product faces direct competition in the market. However, once market protections expire, generic versions of those drugs can enter the market and introduce new competitive dynamics.  Generic drugs are approved through abbreviated new drug applications (ANDAs) and obtain the exact label language, dosage forms, and strengths as the reference product that received NME approval. Products approved by ANDA are considered therapeutically equivalent to their reference products and can be substituted by pharmacies or prescribing physicians, usually at a lower price than their branded counterparts.

Shifts to Generics Are Not Immediate

In theory, once regulatory and patent protections are lifted and generics can launch, a product market could undergo rapid economic shifts due to availability of new supply. However, in practice, shifting from brand to generic involves multiple stakeholders in the value chain, including wholesalers, pharmacies, payers, and prescribers. This means that in some cases, the shift to generics does not occur overnight or automatically. Once generics are FDA-approved, there remain important considerations at the point of sale and at the point of prescribing that could provide reasons to continue using the brand for a period of time.

Dispense as Written (DAW) codes, used at the point of prescribing, are instructions on a prescription that indicate what the pharmacist should dispense. DAW codes could be used for various reasons (Table 1), including concerns about making changes in the middle of a patient’s treatment, uncertainty in supply, or because of other economic factors.

Table 1. DAW Code Descriptions

Source: Centers for Medicare & Medicaid Services Research Data Assistance Center

Analysis Results

Avalere analysis on Medicare claims shows that following entrance of generics, the use of DAW codes for prescriptions increases, and may be triggered by prescribers, patients, or payers to ensure that their preferred version of the product is ultimately filled in the prescription. Avalere has examined the 30-day scripts in both retail and specialty pharmacies across multiple therapeutic areas. The data suggest that in some cases, DAW code use shows prescribers or patients still requesting the brand one year following availability of generics. However, this DAW code use does vary by therapeutic area.

Oral Oncology Drug:  In this example, data shows a steady amount of DAW1 and DAW2 code use even one year following the availability of generics, signaling prescriber and patient request for the brand. Additionally, use of DAW9 code usage in the first year after LOE may reflect payers requiring the brand for a period during an ongoing plan year, before re-evaluating for coverage of generic alternatives.

Figure 1. Brand Oral Oncology Drug 30-Day Script by DAW Code as a Percentage of Volume

Cardiovascular Drug: In this example, the data similarly shows increased use of DAW codes in the first year of generic availability, especially DAW2, indicating patient preference for the branded options in this therapeutic area. The use of DAW9 similarly signals some payers preferred the brand in the first few months.  Overall, the prescriptions with DAW codes account for most of the remaining brand volume, though by month 9, most of the volume has transitioned to generics.

Figure 2. Brand Retail Cardiovascular Drug 30-Day Scripts by DAW Code as a Percentage of Volume

Immunology Drug: Compared to the two other examples, the immunology example had more use of DAW1 codes by prescribers before generic entry. This may be due to higher payer management in this therapeutic area.  The data shows that post LOE, use of DAW codes is higher than the other examples, including DAW2 (patient requested).  This could be because of the chronic nature of the drug and stable patients not wanting to make changes.

Figure 3. Brand Immunology Drug 30-Day Script by DAW Code as a Percentage of Volume

Conclusion

The analysis of DAW codes used across therapeutic areas shows that payers, prescribers, and patients may have reasons to prefer a brand for several months following the availability of generics in the marketplace.  In most cases, generic adoption exceeded 80% of Medicare prescriptions one year after LOE, though in some cases, the use of DAW codes contributed to higher volume remaining on the brand.

Methodology

Avalere performed this analysis using 100% Medicare Fee-for-Service (FFS) claims, accessed by Avalere via a research collaboration with Inovalon, Inc., and governed by a research-focused Center for Medicare & Medicaid Services data use agreement. This includes the 100% sample of Medicare Part A and Part B Medicare FFS claims data and the 100% sample of Part D encounter data for all Part D plans (including Medicare Advantage Part D plans).

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What Does it Mean When a Manufacturer Receives a CRL?

A complete response letter (CRL) is a notice issued by the Food and Drug Administration (FDA) indicating that an application will not be approved in its present form. This can be issued in response to a New Drug Application (NDA), Abbreviated New Drug Application (ANDA), or Biologics License Application (BLA). The CRL explains why the submission was deemed inadequate and often includes the FDA’s recommendations on how the sponsor can address those deficiencies.

Importantly, receipt of a CRL is not a rejection of an application. Instead, it is the method that the FDA uses to provide sponsors with an opportunity to course-correct an application so that it may be approved in a subsequent review. It is also not an unusual occurrence: In the 2018–2022 cycle of Prescription Drug User Fees, 37% of BLAs and NDAs received a CRL.

Importantly, sponsor re-submissions in response to CRLs do not guarantee approval.  The FDA will evaluate the resubmitted application based on its regulatory authority and will determine whether it meets the benefit-risk assessment required for approval.

CRL Response Timeline Impacts Product Access Planning

The timeline for reconciling a CRL begins when the FDA sends the letter, which can occur at any point during an accepted review of a product application. The reconciliation timeline will depend on the severity of the deficiencies and the sponsor’s capacity to address them quickly.

Resubmissions fall into two categories:

• Class I resubmissions: If the FDA determines that additional information or data from the sponsor can easily address minor deficiencies in their application, it is classified as a class 1 resubmission. Upon resubmission, the FDA has two months to review these applications.
• Class II resubmissions: If the FDA determines that significant changes or new data are needed to address sponsor deficiencies in their application, it is classified as a class 2 resubmission. Upon resubmission, the FDA has six months to review these applications.

Based on the resubmission type, the sponsor will need to consider the types of data that must be generated and collated for a new submission. While the extent of the deficiencies will influence the resubmission timeline, the manufacturer is not required to adhere to any specific resubmission timeframe. Figure 1 illustrates the resubmission and review process for a hypothetical product that receives a Class II resubmission CRL, followed by a Class I resubmission CRL. Due to timing shifts associated with reconciling application deficiencies, the launch planning timeline shifts relative to the number of review cycles that the product undergoes to get approved.

Figure 1. Illustrative FDA Review Cycles and Shifts in Market Access Timeline

*10-month review is the review period for standard applications; priority review can be sought with the FDA, which reduces the first cycle review period to six months.

Post-CRL Access Strategy Planning

After receiving a CRL, the sponsor is tasked with evaluating the cost-benefit dynamics of two potential paths. One path involves swiftly addressing the deficiencies in their application to expedite resubmission. The other path involves a more measured approach to reconciliation, which, while resulting in a delayed launch, may allow the sponsor to capitalize on evolving commercial opportunities. The choice between these paths hinges on the relative costs and potential upside of each. Several factors may shape sponsors’ decision, including the:

• Reason for rejection: If the product or data has fundamental flaws that cannot be feasibly addressed, it may render further development unviable.
• Costs associated with resubmission: Sponsors should rigorously weigh these costs against their commercial access goals when determining the appropriateness of resubmission.
• Likelihood of success: The class of resubmission and the CRL’s content offer guidance on the potential for subsequent approval or lingering uncertainties.
• Competitive landscape: Sponsors should also consider on-market and pipeline competitors and shifts to market share as a more saturated competitive market may alter the value proposition for the product at launch.

Dive Deeper

Avalere’s team of experts in competitive marketplace dynamics, regulatory strategy, and commercial viability assessments assist clients with understanding pathways for mapping clinical and regulatory processes to broader access strategies. To learn more about how Avalere can support you, connect with us.

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Figure 1. Timeline of Key Drug Supply-Chain Milestones

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Figure 1. Diagnostic Market: LDTs vs. FDA Cleared or Approved Companion Diagnostics

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Additionally, policy changes such as the Inflation Reduction Act (IRA) may create new market pressures for product lifecycles and certain therapeutic areas, driving companies to revise their R&D pipeline decisions. Some stakeholders expect these pressures to impede overall R&D pipeline innovation, with particular impacts on rare and ultra-rare disease drug development.

To support continued investment in rare disease treatments, the FDA, advocates, industry, and lawmakers have identified novel approaches that aim to enhance the success rate of rare disease clinical development programs.

Rare Disease Endpoint Advancement Program

The FDA launched the Rare Disease Endpoint Advancement (RDEA) Pilot Program at the beginning of 2023 to support novel endpoint efficacy development for drugs that treat rare diseases. The FDA will select up to three manufacturers per year between 2023 and 2027 to participate in the program. Manufacturers must submit a proposal with the type of data they intend to collect, the novelty of the endpoint, and its ability to establish evidence of effectiveness. Sponsors benefit from up to four focused meetings with the FDA to discuss endpoint development, in addition to regular investigational new drug-related milestone meetings.

The agency held an RDEA workshop in June 2023 to discuss novel endpoints in rare disease drug development. The workshop offered a glimpse into successful cases for endpoint collaboration between the FDA and the industry, highlighted challenges to endpoint selection and validation for rare diseases, and provided examples of innovative ways to determine clinically meaningful effects. Several types of endpoints were discussed, including surrogate endpoints, clinical outcome assessments, and multicomponent endpoints, along with an overview of the strategic rationale for leveraging one type over another (Table 1).

Other FDA Activity to Promote Rare Disease Treatments

In the past 5 years, the FDA has released three draft guidance documents focused on common issues in rare disease drug development. In September 2023, FDA announced availability of the Support for Clinical Trials Advancing Rare Disease Therapeutics pilot program, focused on offering an even greater level of communication between the FDA and the sponsor on related issues including study design, patient populations, controls, and endpoint selection.

Looking forward, the FDA is required to hold two more public RDEA workshops prior to September 30, 2026, and to provide a final report of its findings. Additionally, the FDA must issue draft guidance on best practices for development of efficacy endpoints by September 2026.

While these activities indicate the agency’s prioritization of rare disease drug development, areas of uncertainty remain regarding future clinical development and product approvals in this space.

Dive Deeper

Avalere applies our expertise in FDA regulatory strategy and evidence generation planning, access strategies for rare disease treatments, and strategizing impacts of IRA implementation to help healthcare stakeholders meet their strategic business objectives for approval and lifecycle management. To learn more about how Avalere can help you with clinical development planning, value, and access strategies for rare and ultra-rare disease assets, connect with us.

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As combination products have become increasingly prevalent, the term has grown to encompass a wide range of product types. Even defining the term “combination product” can become challenging depending on the audience present. Clinically, a combination product consists of any two or more products within the same treatment regimen. According to the Food and Drug Administration (FDA), “a combination product is a product comprised of two or more different types of medical products (i.e., a combination of a drug, device, and/or biological product with one another).” The FDA defines nine categories of combination products and further distinguishes them based on several factors, such as how they are packaged. As a result, drug and device manufacturers have a multitude of options for the development of a single combination product, and each option will have implications for commercialization.

Combination Product Lifecycle Management

Due to the variability in the types of combination products that can be launched, manufacturers need to understand the upstream and downstream effects to ensure key decision points are identified early. Stakeholders should consider impacts across several periods of the product lifecycle.

• Coverage and Market Dynamics: The type of combination product that is developed, filed at the FDA, and launched has a significant and nuanced influence on market success.
• Reimbursement: Decisions regarding an FDA application and regulatory strategy for the combination product not only affect downstream coding but also provider or pharmacy reimbursement by payers, particularly if multiple formulations of a product are available on the market.
• Coding and Pricing: The type of FDA application filed may be a defining factor in the eligibility for unique coding and pricing for the product.
• FDA Filing: The design of clinical trials and evidence generation strategy and existing on-market formulations of an active ingredient will determine the pathways available for approval or licensure of a combination product (and, as a result, the regulations that apply to the combination product).
• Clinical Development: The targeted type of combination product may influence the design of clinical trials and the type of data that will be required by the FDA.

As outlined above, the factors influencing market differentiation demonstrate the need for sponsors to consider downstream commercialization factors early during clinical development.

Policy Impacts on Combination Product Lifecycle Decisions

Over the past decade, interest in combination products may have increased due to the clinical effectiveness and differentiation they offer relative to single-agent drugs and devices. Future investment in the space may be bolstered by the recent policies of the Inflation Reduction Act (IRA), particularly the Medicare drug price negotiation. The risk for Medicare negotiation later in a product’s lifecycle will change manufacturers’ approach to early clinical and FDA decisions. The development of combination products may simultaneously offer both improved patient access and a delay of negotiation pressures, though the extent of the IRA reprieve will be determined by further rulemaking and monitoring of the Centers for Medicare and Medicaid Services’ actions.

How Avalere Can Help

Avalere experts in regulatory strategy, drug pricing, market access, and the IRA can help you evaluate lifecycle management decisions, including understanding how policy changes impact your organization and your industry. To better prepare for and shape the changing healthcare landscape, connect with us.

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