By Phil Crooker, Vice President - Technical, Regulatory & Access, Parexel
On August 6, 2020 the president of the United States signed an Executive Order (EO) on Ensuring Essential Medicines, Medical Countermeasures, and Critical Inputs Are Made in the United States. The EO will eventually be published in the Federal Register but until then you can find a copy on the White House website here - https://www.whitehouse.gov/presidential-actions/executive-order-ensuring-essential-medicines-medical-countermeasures-critical-inputs-made-united-states/.
The EO creates several new requirements aimed at building reliable, long-term domestic production of essential drugs and devices, including their components and input materials. These include:
- Within 90 days, the FDA must create a list of “essential medicines” and “medical countermeasures” that are “medically necessary to have available at all times in an amount adequate to serve patient needs.” The list must also include “critical inputs,” which includes active pharmaceutical ingredients (API), API starting materials, and medical device components that the FDA determine to be “critical.”
- The FDA will need to examine supply chains to assess potential vulnerabilities and reliance on foreign sources of supply.
- The EO imposes a new “Buy American” requirement using a two-part test determine whether something actually is “produced in the United States.”
- The government is directed to help “mobilize” research and manufacturing facilities that produce essential medicines and medical countermeasures, including accelerating FDA approval of domestically produced medicines and countermeasures.
Here is a brief overview of the EO and its potential impact on drug development:
The legal effect of an EO
- Executive orders are formal actions that are binding on non-independent executive agencies (not private industry) when they are written in mandatory language and draw upon legitimate source(s) of authority. An executive order is, for many purposes, a form of presidential law. Sherley v. Sebelius, 776 F. Supp. 2d 1, 22 (D.D.C. 2011).
- According to the Supreme Court’s 1965 opinion Udall v. Tallman, courts should defer to agency interpretations of executive orders if they are “reasonable.” Tallman v. Udall, 324 F.2d 411, 414 (D.C. Cir. 1963. But courts inconsistently apply Tallman, if they do at all, and instead often decide interpretation cases on alternative grounds.
Limited Scope of the EO Despite Headlines
- There have been many labels applied to shifts in the pharmaceutical supply chain in the wake of COVID-19, and the term “re-shoring” has become popular.
- But it’s important to keep in mind that the scope of the EO is very limited – it only affects purchasing by government agencies. The EO alone is not likely to implement widespread tumult in private sector pharmaceutical and biotechnology companies that are not engaged in government purchasing.
- And even for companies that are involved in government purchasing, the EO is not clear whether dual sourcing is required or preferred in addition to the drugs and countermeasures being produced in the United States.
Resolving conflicts with existing case law
- On February 10, 202o the U.S. Court of Appeals for the Federal Circuit issued a decision in the case Acetris Health LLC v. United States. The court held that a drug product formulated in the United States (U.S.) with an API that was manufactured outside the United States could be considered as made in the United States. The court’s decision changed the country of origin analysis for the pharmaceutical industry by holding that processing API into a finished dosage form in the U.S. is enough to constitute manufacturing and qualify the drug product for U.S. government procurement.
- The EO appears to have implemented a different standard for pharmaceuticals that has been established in the case law.
Implications for regulated industry
- Once the FDA has published its list of “critical” drugs, compare that with the drugs that fall within the definition of critical drugs and the report from the National Academy of Sciences (NAS) that will help identify critical drugs that was included in Sec. 3001 of the CARES Act. If the drugs that FDA identifies as critical for the purposes of the EO also fall into the category of critical drugs resulting from the CARES Act, then firms will also need to be prepared to develop risk management plans based on Sec. 3112 of the CARES Act for each of the manufacturing facilities that are involved with the production of these drugs. FDA was also given the authority to inspect these risk management plans.
- Firms will need to be prepared to take a deep dive into their entire supply chains to map where all the inputs, components and finished articles are manufactured to meet the test of whether they are manufactured in the U.S.
- Since it is an open issue at the moment whether redundant supply is mandatory or preferred, firms may need to do some feasibility planning for how it can at least have plans in place to execute the implementation of alternate suppliers. This is another extensive due diligence exercise that would involve every step in the process from identification of potential suppliers, business qualification of suppliers, contracting, technical qualification including facility design and technology transfer, completion of mock FDA audits and regulatory submissions.
- Be fully aware of the many caveats and exemptions in the EO that could affect the impact of any changes, the timing of the implementation, and how different federal agencies will react.
- Once the FDA has published the list of critical drugs, expect that the government can begin to take immediate action (including facility inspections and expedited approval of regulatory submissions). Firms should make every effort to be fully prepared to implement their supply chain changes as quickly as possible to align with the implementation of the EO’s terms for production in the U.S.
Parexel’s Regulatory & Access team encompasses more than 1,000 consultants, including over 80 former regulators / inspectors from around the globe. Our deep understanding of regulatory guidelines and in-depth GxP/cGMP compliance experience means that we are well equipped to assist companies in the identification, evaluation, expansion and compliant-ready manufacturing operations.