Ann-Marie (00:02)

Welcome to the fifth season of State AG Pulse. In this season, we’ll be digging into the weekly state AG news to bring you our insights on the impact of state attorneys general across a broad range of industry sectors. From technology to healthcare and telecommunications to consumer financial services, state AGs continue to wield extraordinary influence, not only in their own states, but also on the national stage. Now onto this week’s episode.

Keturah Taylor (00:30)

Hello and welcome to the eighth and final episode of season five of the State AG Pulse. My name is Keturah Taylor. I’m a partner in the State Attorneys General Practice here at Cozen O’Connor. Today we’re talking about increasing state AG activity in a hot area of enforcement that has traditionally been handled by the Food and Drug Administration. For this conversation, I’m very excited to welcome two expert guests, Danielle Sapega and Rick Van Buren.

Danielle is a partner in Cozen’s Healthcare and Life Sciences group who advises clients on FDA regulatory and compliance matters, focusing on the regulations governing the approval, compliance, and marketing of drugs and medical devices. Danielle, thank you so much for joining us.

Danielle Sapega (01:16)

Thanks for having me.

Rick Van Buren is the Director of Health Policy at Cozen Public Strategies. He advises clients on issues related to healthcare access, coverage, and reimbursement policies. Rick, welcome to the podcast.

Rick Van Buren (01:28)

Thank you. Happy to be here.

Keturah Taylor (01:30)

As I mentioned, we’re here to talk about a hot issue that is really at the intersection of the FDA and state AG enforcement authority, and that is GLP-1 drugs, particularly as they’re used for weight loss treatment. So Danielle, I’m hoping that you can help set the groundwork here a little bit about what’s going on at the FDA. Maybe if you could please share what the current state of FDA enforcement and regulation has been like under the current administration to kick us off.

Danielle Sapega (01:57)

Sure. I mean, we’re very much still seeing how things are unfolding. A lot of positions were cut from their office of inspections and investigations. Staffers were eliminated from the Division of Drug Information. And then you have people who are just leaving because of early retirement or just quitting. And this has all been in a very, very short period of time. I mean, it feels like this has been going on for a while, but it really has only been a couple of months. So I think…just naturally you’re going to see fallout and some, I guess,  bumps in the road, for lack of a better word, just based upon all of that. And that’s not even mentioning the turnover of individuals who are in high positions within the FDA. A couple of weeks ago, Marty Makary, who’s now the commissioner, gave a report and said everything is business as usual, the train is on time, but anecdotally we’re hearing rumblings of missed deadlines, the inability to get even a response from reaching out to the FDA on certain things and missed inspections.  So again, it could just be a temporary adjustment, but I think it’s still very much TBD.

Keturah Taylor (03:06)

Helpful to understand Danielle. So are those staffing changes particularly affecting their enforcement and oversight functions or the impacts spread out across the agency more evenly?

Danielle Sapega (03:18)

I mean, it’s definitely spread out across the agency. It’s not like the cuts were to one specific division of the FDA. But as I mentioned, there have been missed inspections, which is a large part of how the FDA does, conducts its oversight. And then those will lead to enforcement actions. If the FDA is going to issue a warning letter or another regulatory action or something, that’s typically going to be after an inspection.

FDA is responsible for oversight of so much that I think it’s, I don’t know how they’re going to do it all. I really don’t. And frankly, they’ve actually had to hire back some staff that they let go. And at least reportedly, they have had to hire contractors to fill the void  and I guess help some of the brain drain that’s been happening there. So again, it’s still early days. We’ll, we’re just going to have to see what happens.

Keturah Taylor (04:01)

Yeah, one trend that we have seen over many, many years in the state AG space is that when federal agencies that are responsible for certain fields of enforcement are dialing back, whether for staffing reasons or for policy reasons, state AGs often see that as an opportunity and even a mandate to step in and fill perceived enforcement gaps.  It sounds like there’s been some dialing back of FDA enforcement. And unsurprisingly, we’ve seen AGs stepping into that space a little bit more than previously. So in the realm of GLP-1s, there was a recent Attorney General Alliance meeting just a week or so ago,  where there was a panel on GLP-1 Medications, Safety and the Law. And they were discussing that while there’s this increasing demand for GLP-1 medications like Wegovy and Mounjaro, when that demand surges, there’s an opportunity for fraud and abuse that surges alongside it. And the AGs collectively are very concerned about this. Rick, turning to the legislative side of this issue, how much activity are you seeing at the state or the federal level relating to GLP-1s or perhaps more broadly relating to governing what kinds of drugs insurers are required to cover?

Rick Van Buren (05:21)

Sure. So I think the important thing about GLP-1s is,  at least when I think of them, there are kind of two factors. The first is they are generally seen as a very effective part of helping folks with weight loss. The other factor is they can be very expensive. They can cost over a thousand dollars a month. That puts them out of range for most folks without insurance coverage. So the realm of legislation we’ve seen at the state and federal level has really been aimed at addressing one or both of those factors. We’ve seen states that have passed coverage mandates for their state employee health benefits program or have required their state Medicaid programs to cover one or all of these medications. At the federal level, what we’ve seen last Congress was legislation that would have required Medicare Part D, the Medicare drug benefit, to cover these medications. So expanding access has really been a focus at the same time, and this sort of goes hand in hand, but efforts to control costs have also been a focus. And we’ve seen states, especially with their employee benefit plan,  institute additional prior authorization or the use of pharmacy benefit managers or restrictions around who is eligible for these medications.

And that’s really where we are at right now. It’s  been very scattershot. States, we’ve only seen maybe about a dozen or so states legislating on this. The federal government hasn’t really moved forward with any legislative efforts, even though bills have been introduced. So, it’s early stages, but that seems to be the trend that we’re seeing.

Keturah Taylor (07:31)

Curious what direction you see that trend going, particularly at the state level. If we’re seeing around a dozen bills introduced this session, would you expect the next session for that to increase or does that remain to be seen?

Rick Van Buren (07:43)

I think it’s, it’s really remains to be seen. You know, I think there was some initial flurry of legislating around this that seems to have cooled off. I think we probably saw the states that wanted to act on this immediately, act on it.  States also have a lot of fiscal pressure on them. They have, I think every state has a balanced budget amendment and there can be concerns about how covering these drugs can drive state spending. So I think, you know, right now as states and the federal government’s going through a period of uncertainty about, you know, what are going to be the economic consequences of tariffs, what are going to be the economic consequences of the tax reform that may or may not happen, about significant cuts to Medicaid at the federal level that would be passed on to states. I suspect that they are in kind of a wait-and-see mode while they figure out what their fiscal situation is going to look like going forward.

Keturah Taylor

Yeah, so certainly, I think as you are alluding to, a very complex issue with countless stakeholders involved that all have kind of competing priorities in this space. So it’ll be really interesting to see where that goes. So, Danielle, I really appreciated you laying the groundwork on, you know, the current status at the FDA. I wonder if you would do us the favor of laying some more groundwork on GLP-1s in particular and what’s been going on with how the FDA has been handling those products over the last year or so.

Danielle Sapega (09:22)

Sure. So as you mentioned, there’s been a meteoric rise in popularity of GLP-1s, all the various glutides and then tirzepatide.  And of course, with the increase in demand comes some, sometimes anyway, shortages. And I know Wegovy and Ozempic were put on the shortage list in 2022. So this goes back a bit.

And I believe at one point all or most of the more popular ones were placed on the shortage list. And so what this means from an FDA standpoint is when you have consumer demand that’s not being met by the brand name manufacturers, this basically allows compound pharmacies to kind of step in to fill that need. So compound pharmacies, under regular circumstances are not allowed to mass produce  drugs that are essentially copycats of name brand drugs. But when there’s a shortage and the FDA officially declares a shortage, there is a special section of the Drug Quality and Security Act that basically says, hey, compound pharmacies, we want you to step in and help meet the need. And so that’s what happened when those drugs were put on the shortage list. They stepped up.

And for a couple years, they were able to mass produce these copycat drugs. So of course, in, I think it was sometime in mid-to-late 2024 is when they started, when the FDA started taking these drugs off of the shortage list. They were given, the compound pharmacies were given grace periods.  But essentially, once the drug is off the shortage list, the compound pharmacy has to stop making it unless they are making a customized or personalized version of the drug. And that’s basically what compound pharmacies do. They make customized medications that are tailored to a specific patient. I haven’t specifically seen what the manufacturers of these drugs are going to do to make sure that consumer demand continues to be met.  But I know that a lot of patients may potentially be driven, if they haven’t already been driven, to online pharmacies where they have access to counterfeit or illegal products. And the state AG is asking the FDA to start cracking down on some of these bad actors.

Keturah Taylor (11:44)

I wanted to just hone in on that. Perhaps, I don’t want to call it a pipeline exactly, but that  transition from the end of a shortage or the end of a grace period into periods of increased counterfeit or illicit products entering the market. In your experience in the FDA world, is that something that we’ve seen with other drugs outside of GLP-1s? Is that kind of a known trend or is this something that’s particularly happening in this space just given the incredibly high demand for these products.

Danielle Sapega (12:16)

With GLP-1s specifically, there have been all along the so-called bad actors because as Rick noted, these drugs can be extraordinarily expensive, right? So even if you’re getting them from a compound pharmacy, which arguably may not be as expensive as getting it from Novo Nordisk, it’s very expensive and it’s completely out of reach for some people. So some of these people do turn to, again, these online pharmacies that are typically internationally based. So the FDA’s ability to really do anything about it… I mean, the FDA does work with other federal agencies. They work with the DEA, they work with Department of Homeland Security, and sometimes they’ll work with an international agency like Interpol. But I mean, frankly, when you have this online pharmacy that’s based out of, you know, Turkey or Russia or wherever, there’s really only so much they can do. You know, they put out consumer information warning people: “Do not use these pharmacies”, but it’s not as though they have a network of secret agents that can go out and find exactly where these pharmacies are.

Keturah Taylor (13:24)

That makes complete sense. And I think the way that you describe the actions taken by federal agencies to try and crack down on these illicit or counterfeit products, it seems to me that state AGs are basically borrowing that playbook. We’ve seen state AGs issuing warning letters to medical spas and other retailers for, you know, suggesting that compounded versions are approved by the FDA or stating that they are just as safe and effective as brand name medications.

Those were the particular concerns expressed in some recent letters issued by Ohio Attorney General Yost. Connecticut Attorney General William Tong also recently issued some warning letters, again, to medical spas. He has also sued two online distributors of what he called, quote unquote, research grade GLP-1s, which, what he articulated in the AG’s press release is that those research grade drugs are not FDA approved.

And he sued those distributors under their state consumer protection act for making those representations. AG Tong has been very busy in this space. He also issued a civil investigative demand to a Chinese international trade platform recently that sells those same quote unquote research grade GLP-1s to US customers. So we’re definitely seeing a lot of AG activity here, very much in parallel or along the lines of how you described state enforcers approaching these counterfeit or illicit products. So what do you think, and this can be a question for Danielle or Rick, and I’m interested to hear your perspectives, but what are the implications for legitimate companies that are operating in this space when there’s so much concern, legitimate concern about counterfeit products or dangerous products on the market? How can legitimate companies distinguish themselves from that and continue to flourish in this space?

Danielle Sapega (15:10)

Just really taking any steps you normally would to make sure you’re within the confines of the law, you know, whether it’s an internal or external audit, reviewing and updating your policies, doing mock surveys or mock investigations. I mean, really anything you can do to try to prepare yourself as best as possible for a potential inspection of a state AG or if the federal government comes knocking at your door and making sure to document all of it. Show your work. Show them that you really are trying to be compliant with these laws.

Keturah Taylor (15:44)

That sounds a lot like our advice that we give to clients who are near the crosshairs of a state AG investigation. So Rick, is there anything on the public strategies front for these more legitimate market participants to do to engage with state or federal policymakers or the FDA on these issues to try and get ahead of them.

Rick Van Buren (16:01)

Yeah, sure. I mean, I think that we’re talking about the drug industry here, but really the issue of bad actors kind of tainting an entire field is something that a lot of industries deal with. And I think there’s an expression, you’re either at the table or on the menu. I think if you are a good actor and want to distinguish yourself from some of these other folks, engagement is really important and whether it’s engaging with your congressional delegation, your governor’s office, the regulatory bodies, because what you don’t want to happen is if there’s a regulatory action or legislative action or congressional investigation or what have you, you don’t want to be caught in the blast radius of targeted investigation. You want to be distinguishing yourself, rightfully so. And the only way to do that is through  engagement and education and outreach. So really just being engaged early and often, I think, can be really helpful to folks down the road.

Keturah Taylor (17:16)

Hearing from both of you is that getting ahead of this issue is absolutely critical for any companies who are operating in this space, whether it’s buttoning things up internally or engaging with your regulators externally and having those important discussions. Rick, I’m going to put you on the spot a little bit and dig into that further. If you had to choose at this juncture between outreach at the state government level versus the federal level on these issues, what would you advise our clients to prioritize if they are seeking to engage?

Rick Van Buren (18:16)

I think the legitimate answer is both. You want to be talking to your federal agencies. You want to be talking to Congress. The time to start building those relationships is now, not whenever the flood is coming. But  I think that as you alluded to earlier, there are states that are really moving forward quickly and aggressively at this point, and at least for the next couple months at least I think those factors that I talked about at the federal level are going to inhibit some of the movement there.

Keturah Taylor (18:27)

Well, that’s really helpful. appreciate it. And I think our listeners will appreciate that,  that assessment. On the point about the, about the state level, there’s engagement with legislators for sure. And there’s also engagement with the ultimate enforcers, which are going to be the attorneys general. And I think particularly with a complicated issue like this,  one that requires some degree of expertise to really understand, this is the type of issue where education is more important than ever.

So if you have an opportunity to engage with an attorney general’s office before you ever get an investigative demand, if you have the opportunity to sit and talk with them about: What are these drugs? What are the issues in the marketplace? What are good actors in the space doing to protect their consumers and to educate their consumers? And how are they different than the bad actors that we hear so much about? All of that proactive outreach and education with the AG offices can go a really long way in protecting your company from a potential investigation or an inquiry letter.

So I very much appreciate the expert analysis from both of you. And I’m wondering if you have any final thoughts or recommendations to our listeners who are thinking about these issues as to how to move forward if they operate in this space or anything else you’d like to share.

Danielle Sapega (20:18)

From my perspective, don’t know how much we really talked about it, but compounding pharmacies have been in the news a lot, as I mentioned, because they’ve sort of been cut off. The hose has been turned off and they are no longer allowed to mass produce these drugs. But state boards of pharmacy have oversight over pharmacies in the state. I mean, candidly, I haven’t really been looking to see whether those boards have themselves been either partnering with state AGs or other agencies or even just conducting their own investigations because they’re very much invested in making sure that the medications being produced are safe and effective and not contaminated.  So it may be worth also looking into seeing whether there’s been any enforcement or activity on the state board of pharmacy side.  But just an additional thought because the FDA doesn’t regulate pharmacies. They  kind of cross paths, but they don’t directly regulate them.

Keturah Taylor (21:12)

That’s a great point and the work that our state AG practice has done in this space, we understand that the relationships between state boards of pharmacies and the attorney general differ from state to state. So your AG office may have a larger kind of advisory role to a board of pharmacy in one state and then in another they may be completely independent and really don’t talk to each other. That can benefit companies. Say you have a an issue with the state board of pharmacy. If those agencies aren’t really talking to each other, then it could remain siloed in that state board of pharmacy, which could be a benefit. But it can also cut the other way where if there’s a close relationship, you may end up with a state board of pharmacy inquiry or discussion evolving into an AG investigation or other adverse action. So it’s really state specific how the interplay there works, but that’s a great point that you raised Danielle about staying attuned to the state Board of Pharmacy actions and how they’re treating this issue. Rick, any last pearls of wisdom for our listeners?

Rick Van Buren (22:16)

I think that… we’re talking about GLP-1s today. They’re obviously a really hot topic.  But I think it’s a great case study for the dynamics that we are seeing across the drug industry, really.  There have been a number of breakthrough therapies that have come to market, that are in the pipeline. And the tension between access, cost, state federal legislation and the of downstream effects that we’ve been alluding to about bad actors and what market incentives might emerge are not going to be unique to GLP-1s and certainly are not unique to them. And I think, you know, sometimes it can be daunting  when you’re staring out at that kind of vast minefield and tempting to really go into a bunker mentality, but I really think that if you’re in an industry that is going to be implicated by this, it really does pay to fight that impulse and really start building relationships, start setting yourself up for success early and that can pay dividends down the road.

Keturah Taylor (23:38)

Thank you both so much for lending your expertise on this issue. It’s been a great conversation and I hope that we perhaps all get to work together on some of these matters going forward.

Danielle Sapega (23:49)

Thanks so much for having me.

Rick Van Buren

Thank you.

Keturah Taylor

And thank you so much to our listeners for tuning in to another episode of the State AG Pulse. As I mentioned, this is our last episode for season five, but we look forward to bringing you lots of quality content about state AGs and their priorities, both in future State AG Pulse seasons and on our State AG Report blog. In particular, I would recommend to all of our listeners to tune into our most recent episode in which my colleagues Chuck Slemp and Grace Garver talked about the Virginia Democratic primary, which has now passed and [in] which Jay Jones emerged the victor. So tune into that episode to get a preview of what will happen in November in that matchup.

So thank you again for listening to season five of the State AG Pulse, and we look forward to bringing you further AG insights across all of our platforms in the future.