On November 20, 2020, the United States Department of Health and Human Services (HHS) issued a Federal Register notice to: (1) withdraw the Food and Drug Administration’s (FDA) Compliance Policy Guide (CPG) Sec. 440.100 (“Marketed New Drugs Without Approved NDAs [New Drug Applications] or ANDAs [Abbreviated New Drug Applications]); and (2) request information about drugs that may be grandfathered or generally recognized as safe and effective (GRASE), i.e., not “new drugs,” requiring FDA prior approval. The withdrawal notice is effective 30 days from publication. In addition, HHS published a Frequently Asked Questions document.

The following highlights some of the key provisions of the notice and our observations. We will not discuss the CPG, grandfathered, or GRASE drugs in detail here.

• It is significant that HHS, not FDA, issued the notice. To date, we are not aware that FDA has spoken on the issue, even though it issued the CPG, and it is in charge of the new drug approval process. This could mean that HHS issued the notice over objections from FDA. HHS noted it was posting the notice as it is spearheading efforts to reduce drug prices.

• FDA, through its Unapproved Drug Initiative (UDI), attempted to remove a number of unapproved drugs from the market by encouraging companies to obtain approval and providing incentives. The agency issued guidance in 2006 and 2011.

• The guidance described how FDA intended to exercise its enforcement discretion with regard to unapproved new drugs. FDA provided notice that it would give higher priority to enforcement actions involving unapproved drugs in the following categories:  drugs with potential safety risks; drugs that lack evidence of effectiveness; health fraud drugs; drugs that present direct challenges to the new drug approval and OTC drug monograph systems; unapproved new drugs that are also violative of the Federal Food, Drug, and Cosmetic (FD&C) Act in other ways; and drugs that are reformulated to evade an FDA enforcement action. In addition, the guidance provided that the first company to obtain approval of a previously unapproved drug would likely have a period of de facto market exclusivity before other products obtain approval, and that this period of market exclusivity would provide an incentive to firms to be the first to obtain approval to market a previously unapproved drug.

• HHS said that the notice was part of the Trump Administration’s efforts “to reduce the price of prescription drugs.” According to the notice, HHS decided to withdraw the FDA guidance based on a 2017 Yale School of Medicine and the University of Utah study that reviewed 34 drugs subject to the UDI between 2006 and 2015. The study found that: (1) Americans were paying significantly more for prescription drugs approved by FDA through the UDI than they had paid previously; (2) a number of drugs experienced shortages after FDA took enforcement actions under the UDI; and (3) the UDI failed to generate new clinical data for older drugs.

• While FDA issued the guidance, it exercised enforcement discretion against many products if they met certain conditions. That is, the agency allowed a number of unapproved (those shown to be safe but not necessarily effective) drugs to remain on the market. However, FDA could take enforcement action at any time when it thought appropriate.

• The Federal Register notice makes it clear that FDA may take enforcement action against unapproved new drugs.

• HHS expressed concern that the UDI program was issued without notice-and-comment rulemaking.

• Separate from the withdrawal of the 2006 and 2011 guidances, HHS has requested information about grandfathered drugs and GRASE drugs.

• It is not unclear what the practical effect of the HHS notice will be. FDA can continue to take enforcement action against unapproved new drugs, and FDA’s Office of Unapproved Drugs and Labeling Compliance is not eliminated. We expect the Biden Administration will follow its predecessor’s goal to lower drug prices. We also think it is likely that: (1) the Biden Administration (once a new FDA Commissioner is appointed) will either reinstate the CPG or issue a revised CPG concerning unapproved new drugs; or (2) not issue another CPG anytime soon (not a high priority given other matters on FDA’s plate), but continue to bring enforcement actions against unapproved new drugs that pose public health risks or where FDA approves competitive drug products.