Republicans Scrutinize FDA's Vouchers, Generic Drug Approvals

  • Lawmakers cite Shkreli's KaloBios purchase in voucher review
  • FDA asked to explain what it's doing to protect vouchers

House Republicans are seeking information about priority vouchers awarded to makers of drugs for rare diseases, asking whether the Food and Drug Administration program is being taken advantage of.

House Oversight Committee Chairman Jason Chaffetz and 12 committee members wrote a letter to Acting FDA Commissioner Stephen Ostroff on Tuesday seeking the documents and data as part of an investigation into recent price hikes on older drugs. The lawmakers are also seeking information on the FDA’s process for reviewing generic drug applications.

Priority review vouchers are awarded by the FDA to companies that successfully win approval for treatments for rare diseases. The vouchers can then be used to speed approval of another drug. Some companies sell the vouchers rather than use them themselves.

The lawmakers asked whether the voucher program has the potential to be exploited, citing the booming market for resold vouchers and the recent purchase of KaloBios Pharmaceuticals Inc. by Martin Shkreli, the former hedge-fund manager who has become the poster child for sharp drug-price increases.

Chagas Disease

Shkreli is notorious for buying a decades-old anti-parasitic treatment and increasing the price to $750 a pill from $13.50. He’s also the new chief executive officer of KaloBios, after leading an investor group that bought a majority of the near-bankrupt biotechnology company. KaloBios has since agreed to acquire a treatment from another drugmaker for Chagas disease, which is caused by a parasite found in the Americas.

The medicine isn’t yet approved in the U.S., but it would be a candidate for a priority review voucher upon clearance. That could produce a lucrative return for Shkreli.

“Over the past year, resale prices of priority review vouchers have climbed from $67.5 million to $350 million,” the lawmakers wrote.

They said the rising resale prices and the KaloBios deal raise questions about potential exploitation of the voucher program by those applying “not to develop new therapies but rather solely to capitalize on the PRV resale market.”

Representatives of KaloBios and the FDA didn’t immediately reply to requests for comment.

Price Hikes

The Republicans are also seeking documents and data that will help the panel determine whether declining competition is driving recent price hikes.

Generic-drug reviews have long taken a back seat at the FDA, where funding and resources have largely been aimed at getting new treatments to market. To devote more attention to generics, the agency and the generic-drug industry reached an agreement implemented in 2012 that charges copycat drugmakers fees to fund application reviews, hire new staff and increase inspections.

The program is similar to one instituted for new drugs in 1992 and will bring in $1.5 billion over five years from generic-drug industry fees. The program requires the agency this year to complete reviews of 60 percent of new applications in 15 months. By 2017, the goal becomes 90 percent in 10 months.

Cranking Up

It hasn’t been smooth sailing since the fee program started. The FDA didn’t have to meet review deadlines while it got the program up and running in fiscal 2013 and fiscal 2014. Instead it focused on a backlog of about 2,900 new generic-drug applications that were pending as of Oct. 1, 2012.

“Now the machine is built and we’re cranking it up,” Keith Flanagan, director of the FDA’s Office of Generic Drug Policy, said in an October interview. “We’re going to keep getting better over time.”

Chaffetz has said the committee will holding a hearing early next year on drug pricing. Shkreli’s Turing Pharmaceuticals LLC as well as Valeant Pharmaceuticals International Inc. have been under scrutiny for raising the prices of older medications. Valeant raised the prices of two heart drugs, Nitropress and Isuprel, by 212 percent and 525 percent the day the drugmaker acquired the rights to sell them.

Representative Elijah Cummings of Maryland, the top Democrat on the House Oversight Committee, has also been looking into Turing and Valeant as has the Senate Special Committee on Aging.

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