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Vaccines: Liability, reimbursement and adjuvants
December 21, 2006
FDA Alert

The intersection of various regulatory initiatives, guidances, proposed and newly enacted legislation, and increased government funding has propelled the vaccine industry into the biotech spotlight since June 2005. Vaccines are no longer used only for protection against infectious diseases, but also as therapeutic approaches to fighting disease. The development of DNA vaccines, adjuvants, and combination vaccines currently available is revolutionizing the vaccine market and may provide the basis for additional patent protection for these products.
By Jill Alvarez and Teresa Kelton

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On September 28, 2006, the FDA issued a guidance, “Guidance for Industry: Characterization and Qualification of Cell Substrates and Other Biological Starting Materials Used in the Production of Viral Vaccines for the Prevention and Treatment of Infectious Diseases,” for cell-based viral vaccine manufacturers using cell cultures to produce licensed vaccines. The guidance updates recommendations in a 1993 guidance, “Points to Consider in the Characterization of Cell Lines Used to Produce Biologics,” and provides information to help manufacturers determine (a) the suitability of a cell culture for manufacturing, (b) how to test and validate the safety and purity of the cells used in development and production, and (c) quality-control test methods for cell substrate and adventitious agent issues.

Vaccine developers and manufacturers will need to understand and incorporate comments in this guidance into proposed vaccine research and development bids or proposals soliciting government funds and other federal grants, as well as consider requirements for participation, if appropriate, by a network of academic centers organized by the National Institutes of Health (“NIH”) for expediting certain vaccine clinical trials.

Adjuvants

Adjuvants are synthetic additions to vaccine antigens that often confer increased or enhanced vaccine activity, in comparison to the vaccine administered without an adjuvant. Research has established various potential benefits of adjuvants, which include: heightened immune response, lengthened effectiveness, and triggers to a different set of protective responses beyond the traditional antigen/antibody approach. These benefits also make adjuvant vaccines more attractive commercial opportunities and support arguments for the premium prices emerging in the vaccine industry.

However, an important role of adjuvants in the growth and profitability of the vaccine may be their ability to confer commercial protection on the vaccine products themselves. As chemically modified, synthetic compounds, adjuvants are better suited for intellectual property protections than traditional vaccine components. Specifically, a product containing an adjuvant holds out the potentially patentable proprietary position never afforded current vaccines and, thus, may provide a new level of proprietary protection.

Regulatory hurdles

The numbers of patients required for vaccine pre-licensure trials are significantly larger than Phase III trials for traditional drugs. The increase in the number of subjects needed for a vaccine clinical trial may present barriers to entry to the vaccine industry for certain developers and manufacturers, due to increased time, costs and other regulatory requirements associated with conducting large multisite clinical trials.

Currently, the FDA’s Office of Vaccines Research and Review approves adjuvants solely as a component within the context of the agency’s review of an individual biologics license application (“BLA”). As such, vaccines are licensed as two components: the antigen itself, and the adjuvant, based on the premise that adjuvants are part of the finished vaccine product and must be viewed as an integral part of the individual vaccine product application. Thus, an adjuvant alone is not licensed, but rather a specific antigen/adjuvant formulation is licensed, which may have a negative impact on additional intellectual property protection.

Reimbursement

Medicare and private insurers often base coverage decisions on the counsel of the Advisory Committee on Immunization Practices (“ACIP”) at the CDC. Whether a vaccine will be covered by Medicare or other private insurers has a significant impact on whether patients will seek, and ultimately receive, a particular vaccine product.

Several vaccines, including those for pneumonia, flu, and other illnesses targeting the elderly population were already covered under Medicare Part B (“Part B”). Under Part B, physicians are generally paid a fee for administering (“administrative fee”) the vaccine, in addition to being reimbursed for the vaccine itself.

However, newer vaccines targeting the over-65 population will be eligible for coverage under Medicare Part D (“Part D”). Under Part D, individual private insurance plans (“payors”) set prices. Therefore, each payor’s coverage for a particular vaccine may vary substantially among thousands of Part D plans available nationwide. Moreover, under Part D, each payor’s reimbursement rate for the same vaccine product and the billing requirements for the physician’s services to administer the vaccine will likely vary according to each payor’s requirements, which further complicates billing for physicians.

Finally, the Part D payment for the vaccine is the responsibility of each payor, and Centers for Medicare and Medicaid Services (“CMS”) will not reimburse prescription drug plans for a physician administration fee. CMS issued a clarification in May 2006, stating that vaccines are generally preventive and not necessary for diagnosis or treatment of a condition. As such, CMS also refused to allow reimbursement under Part B because vaccines do not fall under its definition of “reasonable and necessary” treatments.

Conclusion

Factors such as FDA regulations, intellectual property, and reimbursement will influence the success of companies - including pharma, biopharma, adjuvant manufacturers, and academic medical centers—pursuing federal grants and various other government contracts. Adequate and timely coverage and reimbursement are also critically important to the vaccine industry. Therefore, any company investing significant resources should coordinate and implement parallel strategies to pursue and secure federal funding, explore and gain patent protection, carry out well-designed and compliant clinical trials, address pricing and reimbursement, and develop commercialization and marketing strategies in step with the vaccine product-approval process.


The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.