The 505(b)(2) new drug application (NDA) is one of the US FDA drug approval pathways. This pathway can be utilized to help avoid unnecessary duplication of studies already conducted on a previously approved medication. This abbreviated pathway can result in new, differentiated products while minimizing expenses and utilizing a quicker route to approval. Similarly, these drugs may present opportunities for cost and time savings within a health system. However, it is important to ensure that these drugs are not conflated with their reference listed drug (RLD) within the hospital setting. When looking to implement a 505(b)(2) product, there are key considerations to help ensure smooth addition to a facility’s formulary.

505(b)(2) Approval Process

The 505(b)(2) approval is like that of biosimilars, where reliance on the information from the RLD, such as toxicity and efficacy and any changes made, does not affect the RLD in a meaningful way (see TABLE).1 The pathway gives the FDA express permission to rely on data not developed by the NDA applicant.1 As such, a 505(b)(2) NDA contains full safety and effectiveness reports but allows at least some of the information required for approval, such as safety and efficacy information on the active ingredient, to come from studies not conducted by or for the applicant.

505(b)(2) is particularly valuable for pharmaceutical and generics companies looking to alleviate competitive forces in their environments while still wanting to benefit from a development process that eliminates most nonclinical studies as well as extensive safety and efficacy tests. This process allows for flexibility in the characteristics of the proposed product without having to conduct studies on what is already known about the product.2

Interchangeability

Drugs approved under the 505(b)(2) pathway are not considered therapeutically equivalent to the RLD and are not substitutable.1 Similarly, the biologics utilizing the biosimilar approval pathway are not considered generic. The products approved through the 505(b)(2) pathway are similar, but they are not generic equivalents, and often include new dosage forms, routes of administration, or new indications for already approved drugs.2

CMS updated its policies so that effective January 1, 2023, newly approved 505(b)(2) products not rated as therapeutically equivalent are assigned a unique billing and payment code. Additionally, CMS announced that it would review and revise previously approved 505(b)(2) drugs and code assignments dating to 2003. Both new and old 505(b)(2) products are now getting unique HCPCS Level II codes.

Benefits

505(b)(2) drugs present several opportunities for cost and time savings within the hospital setting. One such benefit is that the manufacturer gets a J-code and ASP unique from the RLD, which allows for control over the pricing and reimbursement. This also provides an opportunity for manufacturers to negotiate contracting and preferred product status with payers for their products in order to increase market share. Operationally, these new formulations have the potential to streamline workflows, freeing time and resources for patient care. For example, certain drugs typically compounded within the pharmacy may be available in a ready-to-use vial under a 505(b)(2) formulation.

Operationalization

Evaluating a 505(b)(2) product for usage in an organization presents unique challenges and opportunities. Once a facility determines a product will meet the needs of patients and staff, the next step is to determine if the product requires a pharmacy and therapeutics (P&T) committee review. Since these products are variations on medications that may already be on formulary, they may or may not be required to have a full committee review of the agent. However, these products are often formulated in a way that provides a perceived advantage over the RLD (ie, ready-to-use formulation, removal of excipients prone to reaction, etc), and a committee review would allow for organizational assessment of the perceived advantage.

Financial Opportunities

Regardless of whether P&T review is required, a financial assessment should be performed to understand the differences between the products in terms of cost, overall expense, and expected revenue. Likewise, it is important to assess the payer landscape to build a budgetary forecast for the change. Upon confirming payers will cover the drug, consider discussing contracting opportunities with the drug manufacturers, as negotiating a better price will serve as further impetus to adapt the 505(b)(2) product should it be well suited for a facility clinically. In our organization, initial vetting is conducted by the contracting and purchasing manager, the clinical director, and the pharmacy finance director. The finance director validates the calculations to ensure financial estimates are accurate, while the VP of pharmacy gives the final sign off to proceed with the next steps.

EMR Builds

The next step is to build the drug entry into the EMR. These medications have unique NDCs and HCPCS but may not be built as separate entries into the EMR. This prevents challenges with authorization (ie, knowing what product the site intends to administer in order to facilitate proper authorization from the payer) and with medication administration (ie, ensuring that the product that is authorized is the product that is prepared for administration).

To help mitigate financial and reimbursement risks that result from mismatches between product purchasing and product authorization, engage IT early in the implementation process. Consider building a separate entry so that it is clear the 505(b)(2) formulation is separate from its RLD. This may require discussion with drug database vendors who may see the 505(b)(2) and RLD as the same product. Similarly, communicate with the authorization team, purchasing team, nurses, and technicians to ensure each group is aware of the distinct differences between the products. It is equally important to ensure all ordering systems and automation, such as smart pumps, reflect the appropriate administration time and technique.

Lastly, as with the biosimilars, pharmacies may need to stock multiple products, which impacts already limited pharmacy space. Organizations may be able to mitigate these issues through preferred product (formulary) status and payer contracting negotiations. Consider implementing workflows, such as therapeutic interchanges or automatic substitutions, to support workflow efficiencies under the appropriate regulatory oversights.

Conclusion

The 505(b)(2) pathway has introduced a new regulatory pathway to bring innovative products to market and promote continued drug development. However, this pathway creates unique challenges that healthcare organizations must be prepared to proactively address and monitor. Engage internal and external stakeholders early and frequently to help ensure smooth adaptation.

References

1. U.S. Food and Drug Administration. Determining whether to submit an ANDA or a 505(b)(2) application—guidance for industry. www.fda.gov/media/124848/download. May 2019. Accessed December 30, 2024.
2. U.S. Food and Drug Administration. Overview of the 505(b)(2) regulatory pathway for new drug applications. www.fda.gov/media/156350/download. Beth Goldstein. Accessed December 30, 2024.

Megan May, PharmD, BCOP, FHOPA, FAPO is the clinical oncology pharmacy specialist at Baptist Health Lexington in Lexington, Kentucky. She received her doctor of pharmacy degree from Samford University’s McWhorter School of Pharmacy in Birmingham, Alabama.

Kate Taucher, PharmD, MHA, BCOP, FASHP, FHOPA, FAPO, is the system manager, oncology & infusion pharmacy services at UC Health. She received her doctor of pharmacy degree from the University of Maryland School of Pharmacy in Baltimore, Maryland.