Acetris Trade Agreement Interpretation Win a Boon for Generics

From Health Care Blog

By Dana Elfin | July 23, 2018

Generic drugmakers with U.S. manufacturing facilities could see increased government contracting opportunities after a recent decision from the U.S. Court of Federal Claims.

The decision found Acetris Health LLC’s hepatitis B drug entecavir is a “U.S.-made end product” eligible for the Department of Veterans Affairs to purchase under the Buy American Act. It upended a previous VA interpretation that generic drug products manufactured in the U.S. containing active pharmaceutical ingredients (APIs) sourced from foreign countries weren’t eligible for government purchase under the Trade Agreements Act (TAA) even if the product otherwise qualified as a domestic product under the Buy American Act.

Judge Margaret M. Sweeney said Acetris’ entecavir tablets that contained APIs sourced from India were a U.S.-made end product eligible for VA purchase, not an ineligible product of India.

The generic drug industry—which includes companies like Teva Pharmaceutical Industries Ltd., Sun Pharmaceutical Industries Ltd., Mylan Inc., and Novartis AG’s Sandoz Inc. unit—obtains a significant percentage of imported pharmaceutical chemicals for generic drugs finished in the U.S. from countries like India and China.

The court decision interpreted the interplay of how the TAA, enacted in 1979, overlaps with the 1933 Buy American Act, which requires the U.S. government to prefer U.S.-made products in its purchases. The TAA provides exceptions to the Buy American Act by allowing the president to identify designated countries that can also provide goods sold to agencies.

And the decision applies not just to single award government contracts but also to generic drug companies’ ability to offer products on the Federal Supply Schedule (FSS) contracts, Donna Lee Yesner, senior counsel at Morgan Lewis & Bockius LLP in Washington, told Bloomberg Law. The FSS is the primary vehicle through which the federal government buys drugs. The VA wasn’t adding generic drugs to the FSS if the API came from India or China even if they qualified as domestic products, Yesner said.

Morgan Lewis represented Acetris, a subsidiary of Rising Pharmaceuticals, in the litigation.

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