Life Sciences Regulatory Outlook 2017

A brief overview of the 2017 life sciences regulatory trends

This publication is part of the Deloitte Center for Regulatory Strategy Americas' annual, cross-industry series on the year's top regulatory compliance trends. The issues below provide a starting point for an important dialogue about future regulatory challenges and opportunities.

Download the full report for a deeper look at these trends.

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Pending changes to the EU regulatory requirements for medical devices

The European Union (EU) will soon be issuing new regulations for medical devices, as well as separate regulations for in-vitro diagnostic devices. These regulations will increase the compliance requirements for manufacturers. In particular, there will tougher requirements for quality systems, post-market surveillance, and device submissions. Specifically:

• All medical devices will have to undergo an independent assessment of safety and performance before they can be marketed in the EU
• There will be greater transparency of information about the patient benefits and residual risks, and a thorough assessment of the overall risk/benefit ratio will be necessary
• Additional clinical evidence will be required for new regulatory submissions, as well as for products already on the market 
• There will be a mandatory inclusion of data sourced from clinical investigations for new Class III or implantable medical device applications
• New requirements will be added for post-market surveillance reporting requirements, and companies will be given less time to report
• There will be a general strengthening of controls around traceability and transparency across the entire supply chain
• There will be additional requirements around unique device identifier (UDI) and better alignment with United States requirements
  

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Medical devices: FDA cybersecurity regulatory update

As medical devices are increasingly interconnected—via the Internet, hospital networks, other medical devices, smartphones, electronic health records, and third-party cloud solutions—there’s an increased risk of cybersecurity attacks.

Although there are clear benefits to using such connected devices, the associated cybersecurity risks are exponentially higher. Therefore, connected medical devices are becoming heavily regulated and many manufacturers are struggling to address the Food and Drug Administration’s (FDA) guidance for receiving the approvals necessary to market a device. What’s more, for connected devices that are already on the market, many manufacturers and health-care providers aren’t sufficiently incorporating the security processes outlined by the guidance.

Manufacturers today have an opportunity to develop efficient security processes that align with the guidance. This would enable them to address security issues early in the design phase and get to market more quickly than companies that retroactively address security. In addition, having a robust product security organization that aligns with regulatory guidance is a valuable differentiator that could lead to increased sales and an improved reputation.

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Use of next-generation sequencing in-vitro diagnostics

As part of the White House’s Precision Medicine Initiative (PMI), the FDA recently issued two draft guidance documents on next-generation sequencing (NGS) in-vitro diagnostics (IVDs) and the use of publicly accessible genetic variant databases.

If finalized, this guidance could:

• Simplify the submission, review, and approval process for new IVD tests that use NGS sequencing technology and/or can leverage FDA-recognized genetic variant databases
• Alter commercialization strategies, as firms may find they can get these types of products to market much more quickly in the United States than in the EU
• Reduce the cost to commercialize a product in this space, since Phase III clinical trials are typically the most expensive (and time-consuming) part of the development process
  

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Quality metrics for pharmaceuticals

The FDA plans to request data on quality metrics and has proposed guidance on data collection and submission. The proposed guidance would bring a paradigm shift in how the FDA schedules its inspections, helping to promote modernization of the pharmaceutical industry and prompting companies to use data analysis to drive process improvement.

Pharmaceutical companies should conduct an assessment of their existing systems and processes to ensure they are ready to comply with the FDA’s requirements. Areas that will likely need to be addressed include:

People

• Management responsibility and commitment to compliance—and to driving the required changes across the organization
• Organizational changes and allocation of resources to implement and run the quality metrics program
• Training to raise awareness of the issue and create an effective resource pool to support the program

Process

• Metrics identification, collection, and standardization 
• Continuous improvement and monitoring
• Validation of IT systems used for data storage and reporting

Technology

• Dealing with a complex IT environment, which includes data on multiple systems in different formats
• Automating data collection and ensuring that data is accurate and complete
• Establishing a single platform to consolidate data from multiple systems and locations
• Calculating metrics and presenting the results as a dashboard for continuous monitoring
  

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Identification of medicinal products (IDMP)

The IDMP regulation is a set of five International Organization of Standardization (ISO) standards with the purpose of facilitating the exchange of medicinal product information in a robust and reliable manner. These standards together allow for the definition, characterization, and unique identification of regulated pharmaceutical products during their entire lifecycle, from development to authorization to marketing.

The business case for IDMP implementation should extend beyond what’s normally associated with a regulatory compliance initiative. IDMP is an opportunity to implement a leaner, more integrated operating model that supports business transformation and improved patient health.

Key challenges:

• Develop and gain alignment on a product master data governance model across R&D, manufacturing, and regulatory affairs
• Define and implement efficient processes to manage the one-time collection and maintenance of IDMP data
• Select and implement the correct set of technologies to enable IDMP processes
  

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Fair market value (FMV)

FMV is a concept that applies to fee-for-service relationships with third parties, including health-care professionals and other experts, as well as third-party providers.

Engaging in such relationships isn’t just a smart business practice, it’s something regulators expect. Regulatory risks related to payments outside of FMV include kickback and illegal remuneration, bribery, and violations of the Foreign Corrupt Practices Act (FCPA).

Regulators expect manufacturers to have clearly documented methodologies for FMV and to apply those methodologies consistently around the world, as appropriate. Leading practices across the industry are prompting companies to take a holistic view of FMV—from clinical through commercial expert engagement, and from distributor through managed markets partners. With no clear prescription from regulators about what constitutes FMV, manufacturers are left to ensure that their documentation and rationale for determining, applying, and maintaining FMV is defensible and consistent.

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340B Drug Pricing Program pending regulatory changes

A number of federal programs have a direct impact on what drug manufacturers can charge for their products. In 2017, the program likely to face the most significant change and uncertainty is the Section 340B Drug Pricing Program (340B). This program requires drug manufacturers to provide outpatient drugs to qualified and participating health-care organizations at significantly reduced prices. As a condition for participation, a drug manufacturer must enter into an agreement with the secretary of Health and Human Services to provide these discounted drugs to eligible entities.

The Health Resources and Services Administration (HRSA), which administers the program, continues to focus on integrity and enforcement activities for both manufacturers and participating health-care organizations (“covered entities”). In 2016, which was a very active year for HRSA, the agency proposed several key regulations and guidance targeted for finalization by year-end. The government may extend the timelines into 2017. But once the regulations and guidance are finalized, they will have a direct and significant impact on drug manufacturers.

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FDA’s Office of Prescription Drug Promotion (OPDP) and off-label

Pharmaceutical and medical device manufacturers face new and evolving challenges as they consider the issue of off-label promotion (promoting products using information that doesn’t align with the FDA-approved label and product indication). The key legal issue is whether companies must strictly adhere to government agency guidance and opinions or whether their promotional activities are protected by the first amendment right to free speech.

Many companies have recently been challenging the FDA’s authority over off-label promotion and have even taken the agency to court. And in at least one case (Amarin v. FDA), the court granted the company an exception to use off-label materials.

Such outcomes could lead to more FDA challenges, and they could make companies more willing to take on the risks of producing promotional materials once considered off-label. Also, they could expand companies’ ability to use medical and clinical information that isn’t part of a product’s approved indication. This has the potential to benefit patients and health-care providers (HCPs) by bringing additional safety and efficacy information to their attention, leading to better use of prescribed therapies.

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Pricing and market access

Product pricing and market access programs have been grabbing headlines lately, especially for high-priced specialty products. Major issues include significant price increases on existing products and questions about the mechanisms manufacturers use to support patient access and reimbursement.

Market access programs that provide free product to otherwise uninsured or under-insured patients are under increasing scrutiny. So are programs that help patients with the burden of copayments.

Global regulatory participation is another potential issue for manufacturers. In particular, there’s a risk that reference pricing will come to the United States. For medical devices, increased transparency could affect the relationship between manufacturers and health-care providers. Doctors often provide funding for device development.

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Global and US transparency

The outcome of the 2016 election—and strongly voiced campaign promises to repeal the Affordable Care Act (ACA or “Obamacare”)—has fueled much talk and speculation about health care and health insurance. However, two important affected areas that have not received much attention are the Sunshine Act and FDA pharmaceutical sample disbursement reporting.

The Sunshine Act (Open Payments)
Open Payments (commonly known as the Sunshine Act) is part of ACA, as amended by the Health Care and Education Reconciliation Act of 2010. On August 1, 2013, "applicable” manufacturers were required to begin collecting detailed information about payments and “transfers of value” to health-care professionals and health-care organizations—with the first federal reports due on March 31, 2014.

If the ACA is repealed, it remains to be seen if the Sunshine Act will be carved out and remain in effect.

FDA sample disbursement reporting
Section 6004 of the ACA amended the Social Security Act to require the submission of certain drug sample information to the FDA no later than April 1 of each year, beginning on April 1, 2012. In particular, section 6004 requires manufacturers and authorized distributors of record (ADRs) for applicable drugs to annually report the identity and quantity of drug samples that were requested and distributed under the Federal Food, Drug, and Cosmetic Act (FD&C Act).

Similar to the Sunshine Act, if the ACA is repealed in its entirety, companies would no longer be required to collect information on pharmaceutical sample disbursements and report that information to the FDA.

Global transparency
Globally, transparency requirements are increasing for life sciences manufacturers that interact with HCPs and health-care organizations (HCOs). Evolving privacy laws and regulatory guidance around consent management affect a variety of areas, including:

• Obtaining consent
• Maintaining records of consent decisions
• Aggregate versus individual reporting
• Evergreen contract terms

In the United States, the Centers for Medicare and Medicaid Services (CMS) has requested industry comments and feedback on a number of changes. These changes could increase the burden on manufacturers to identify, track, and report information to CMS. They could also increase the need to manage interactions appropriately from the start (via documented needs assessments, standardized and accurate FMV rates for payments to HCPs, and contracts for services) and to retain supporting documentation for future retrieval and use.

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Simplify compliance, focusing on strategic risks

Quality and compliance organizations are under pressure to add more business value by:

• Shifting from after-the-fact checks to real-time detection and resolution of compliance and quality events 
• Providing the business with predictive risk insights
• Increasing visibility into non-United States activities and quality events 
• Empowering markets outside the United States to take ownership of quality and compliance

In life sciences, compliance organizations have traditionally focused on ensuring quality and compliance after the fact. But this approach is costly and no longer sustainable.

That’s why, more and more, compliance is being embedded into business processes so that issues are detected in real time and fixed before they can continue downstream.

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Look again

In today’s rapidly evolving marketplace environment, key business issues are converging with impacts felt across multiple industry sectors. What are the key trends, challenges, and opportunities that may affect your business and influence your strategy? Look for more perspectives and insights from some of Deloitte’s forward thinkers.

Discover more Industry Outlooks.

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