S 415, narrowing the scope of new chemical entities, is now law: Implications for innovator companies

President Joe Biden has signed into law S 415, amending the Federal Food, Drug, and Cosmetic Act to address the scope of what constitutes a new chemical entity (NCE). 

The new law, signed by the President on April 23, narrows the scope of drug compounds that qualify as an NCE.

Under the Hatch-Waxman Act, the Food and Drug Administration (FDA) grants five years of market exclusivity to drug products determined to be an NCE.  The intent of this portion of Hatch-Waxman was to encourage investment in known but under-commercialized drug compounds, which would likely be ineligible for patent protection, by providing a valuable incentive for drug companies.  Before S 415, an NCE was limited to any drug with a new “active ingredient (including any ester or salt of the active ingredient)” that had not been approved by the FDA in any previous drug application.  With the passage of S 415, an NCE must now have a new “active moiety” in order to garner exclusivity, rather than simply a new active ingredient.

Requiring a new “active moiety,” rather than a new active ingredient, has the practical effect of narrowing the number of drug products which qualify for market exclusivity. Per 21 CFR § 314.3, the FDA defined an active ingredient as any component that is intended to furnish pharmacological activity or other direct effect in the diagnosis, cure, mitigation, treatment, or prevention of disease, or to affect the structure or any function of the body of humans or other animals. The term includes those components that may undergo chemical change in the manufacture of the drug product and be present in the drug product in a modified form intended to furnish the specified activity or effect. 

Conversely, under the new law, an active moiety is the molecule or ion, excluding those appended portions of the molecule that cause the drug to be an ester, salt (including a salt with hydrogen or coordination bonds), or other noncovalent derivative (such as a complex, chelate, or clathrate) of the molecule, responsible for the physiological or pharmacological action of the drug substance.  In most drugs, there is not a substantial distinction between a new active ingredient and a new active moiety, especially if there is either a single molecule or an entire mixture is treated as a single molecule.  However, under this new interpretation, the FDA can withhold exclusivity from esters or salts of a previously approved molecule, but also other derivative molecules that it concludes are insufficiently innovative to merit five-year exclusivity.

While the FDA had been interpreting “active ingredient” to mean “active moiety,” a 2015 case found that the statute’s “text, structure, and purpose [did] not encompass or permit the construction the Agency [had] given it.” Amarin Pharms. Ireland Ltd v. FDA, 106 F. Supp. 3d 196 (D.D.C. 2015).  The passage of S 415 codifies the former FDA policy that the court ruled against in Amarin. 

Proponents of S 415 argued that the loosely defined “active ingredient” terminology encouraged innovator biopharmaceutical companies to game the system by simply making small tweaks to old drugs as a way to block or delay competition and that the legislation provides earlier access to generic competition without having a chilling impact on innovation.  However, this new law will likely disincentivize some investments in compounds that might provide better outcomes for the patient.  Indeed, there may be derivative drugs that perform better for one set of patients than the original formulation, but there is now less of an incentive to develop those derivatives because the innovator company will not be able to recoup its investment through NCE exclusivity. 

Learn more about the implications of S 415 by contacting any of the authors or your DLA Piper relationship attorney.