The primary legislation governing the authorisation, marketing, sale and supply of pharmaceutical products by the US Food and Drug Administration (FDA) is the Federal Food, Drug, and Cosmetic Act (the “FD&C Act”), which has been amended many times throughout the years to reflect increasing FDA mandates for the regulation of pharmaceutical products. The Public Health Service Act (the “PHS Act”) is the specific authority used to approve or license biological (including biosimilar) products.

The primary FDA regulations governing drugs and biologics are found in Chapter 21 of the Code of Federal Regulations. Controlled substances, such as opioids, are also scheduled and subject to quotas and distribution controls under the Controlled Substances Act administered by the Drug Enforcement Administration (DEA).

A drug is defined as:

• an article recognised in the US Pharmacopoeia, the Homeopathic Pharmacopoeia of the United States, or the National Formulary;
• an article intended for use in the diagnosis, cure, mitigation, treatment or prevention of disease;
• an article (other than food) intended to affect the structure or any function of the body; and
• an article intended for use as a component of a drug but not as a device (or a component, part or accessory of a device).

A biologic is defined under the PHS Act as “a virus, therapeutic serum, toxin, antitoxin, vaccine, blood, blood component (or derivative), allergenic product, protein (or analogous product), or arsphenamine or derivative of arsphenamine (or any other trivalent organic arsenic compound) applicable to the prevention, treatment or cure of a disease or condition of human beings”. Notably, a protein is any alpha amino acid polymer with a specific, defined sequence that is greater than 40 amino acids in size. Biological products also fall within the drug definition and are generally covered by most of the same laws and regulations; however, differences exist in the regulatory approach.

Medical devices are also regulated by the FDA under the FD&C Act and – although subject to similar intent standards – such products are primarily intended to act via mechanical rather than chemical or biological modes of action. Medical devices are classified by risk and may be:

• exempt from FDA review;
• subject to a “510(k)” pre-market notification process if they show substantial equivalence to a “predicate” device;
• subject to down-classification via the de novo submission process; or
• eligible for full approval via a pre-market approval (PMA) application.

Although the FDA has traditionally been given significant independence as an agency, and the Commissioner is confirmed by the Senate, the FDA is part of the Department of Health and Human Services (HHS).

The government agencies touching on pricing and reimbursement vary, depending upon the payor programme, and include the Centers for Medicare & Medicaid Services (CMS) (also part of the HHS), the Veterans Health Administration, and state Medicaid agencies. In addition, the HHS Office of Inspector General oversees laws governing fraud and abuse in the sale of biomedical products and healthcare services. The Federal Trade Commission (FTC), an independent agency, regulates the advertising of non-prescription drugs and non-restricted medical devices.

Agency decisions may be challenged either informally (via guidance-driven processes governing dispute resolution) or via more formal regulatory processes specified under FDA regulations. In addition, a general-purpose vehicle for bringing issues before the agency is the FDA citizen petition, which allows the petitioner to bring a request before the FDA and initiate a public docket in which comments can be lodged. The FDA also maintains ombudsmen in the various centres where products are reviewed, whose role is intended to facilitate the resolution of disputes. Although procedures for dispute resolution vary, depending on the specific statutory provisions at issue and the FDA centre responsible for the category of products, such processes generally follow Administrative Procedure Act (APA) standards for due process and creating an administrative record.

Once administrative processes are exhausted, parties with appropriate standing may challenge FDA decisions in court under the APA. Although administrative processes vary by category, APA legal challenges typically involve a demonstration that an agency action was arbitrary or capricious or otherwise not in accordance with governing law.

Although the default status for drug approvals is technically OTC (ie, non-prescription), most initial drug approvals specify that new drug products are subject to prescription drug controls. Prescription drugs must be labelled as such and are subject to physician prescribing, pharmacy dispensing, and substitution controls under state law.

However, it is possible to seek an initial FDA approval for the sale of a drug product OTC or to seek to “switch” a prescription product to OTC status by demonstrating that the condition can be self-diagnosed and treated in accordance with labelling. Moreover, throughout the decades, the FDA has also developed OTC monographs that permit the marketing – without approval – of certain OTC drugs that meet the specific terms (eg, ingredients, dosing, and directions for use) for that class of drug and associated labelling under the relevant monograph. Such drugs remain subject to establishment registration, listing, labelling and current Good Manufacturing Practice (cGMP) requirements. Recent legislation liberalised the processes for amending OTC monographs and this could help reinvigorate OTC product development in the USA.

Additionally, the FDA has issued a final rule that permits OTC drugs with an “additional condition for non-prescription use” (ACNU). The purpose of this is to increase options for the development and marketing of safe and effective non-prescription drug products via the use of tools (such as digital apps) that support patient self-diagnosis and treatment.

Medical devices may also be assigned to non-restricted (including OTC) or restricted status, depending on their classification and the FDA’s determination as to appropriate status under clearance and approval processes.

For drugs and biologics, unless subject to specific exemptions, an investigational new drug (IND) application must be submitted to obtain FDA clearance prior to engaging in clinical research. Such submissions typically include:

• extensive pre-clinical data;
• information on chemistry, manufacturing and controls;
• prior human data; and
• the proposed protocol(s).

The FDA has 30 days either to allow the clinical study to proceed or to impose a clinical hold until outstanding issues are resolved.

Similar rules apply to medical device research and, depending upon the risk posed by the device, a device study may require the submission of an investigational device exemption (IDE) prior to initiating clinical research. Non-significant risk device studies may be conducted with just Institutional Review Board (IRB)/Ethics Committee approval. The FDA maintains an array of good clinical practice regulations governing clinical research, including study sponsor, IRB, and investigator responsibilities.

As noted in 2.1 Regulation of Clinical Trials, in addition to obtaining clearance to proceed with clinical research by filing an IND or IDE application (as appropriate), virtually all studies must be reviewed by one or more IRBs prior to initiation. FDA regulations specify the requirements applicable to the composition and activities of IRBs.

The US National Institutes of Health maintains a database at clinicaltrials.gov, where most controlled, interventional clinical investigations – other than Phase I clinical investigations – of drugs or biological products subject to FDA regulation must be registered and study results must be posted. Although there is no general requirement to publish clinical trial data in journals, the industry has pledged to seek such publications wherever possible, as a matter of practicality.

Online tools may be used as long as they comply with applicable requirements – for example, privacy, data security, auditability, informed consent and other good clinical practice requirements, as well as establishing lawful status if such tools incorporate certain regulated medical device functionalities. Particular requirements apply to recruiting subjects for clinical studies, whether online or otherwise.

The personal data resulting from clinical trials is considered protected. However, as long as any transfer of resulting data to a third party or an affiliate is consistent with contractual obligations, informed consent, and privacy protections, transfers are permitted. In certain scenarios, the sponsor and the FDA will have access to such information (including patient-identifiable information) in order to conduct and analyse the data from the study properly and ensure that subjects are protected.

A database containing personal or sensitive data may be subject both to contractual and statutory protections obliging maintenance of data security and privacy.

Such determinations are typically made by assessing the primary mode of action of the product and whether it works by chemical, biological, mechanical or other means. If the product combines chemical, biological and/or mechanical modalities, a Request for Designation may be submitted to determine how the FDA believes the product should be regulated, under definitional and pathway provisions.

Drug products are approved via New Drug Applications (NDAs). Additional indications, dosage forms, etc, may be added via NDA supplements. Biological products are approved in a virtually identical process via Biologics Licence Applications (BLAs). The standard for approval is “substantial evidence” of safety and effectiveness (technically, “safety, purity and potency” for biologics), resulting from at least one – and typically several – adequate and well-controlled clinical studies. The typical drug or biologic review process takes ten months after initial acceptance for filing (a 60-day period); however, a priority review of six months is given to certain drugs and biologics intended to treat serious or life-threatening conditions.

Substantial user fees – USD4,310,002 in fiscal year 2025 for an NDA or BLA containing clinical data – are required to facilitate a review of applications.

There is no mandatory re-authorisation process for approved products. However, the FD&C Act and FDA regulations include processes for the withdrawal or revocation of an approval based upon a significant safety or effectiveness issue or non-compliance with approval requirements. These processes can be expedited in certain scenarios, such as an applicant’s failure to confirm the efficacy of an accelerated approval product in a post-market study, or where there is an imminent hazard. In general, a marketing authorisation may not be revoked merely because the product has not been placed on the market ‒ although a failure to market an orphan drug could result in a loss of orphan exclusivity.

As noted in 3.2 Granting a Marketing Authorisation for Biologic Medicinal Products, the pathways for approval of drugs consist of:

• the submission of an NDA (including a 505(b)(2) NDA relying on data for which the applicant does not have a right of reference); and
• the Abbreviated New Drug Application (ANDA) for generic products, which demonstrates equivalence to a reference listed drug.

A biologic is licensed via the submission of a BLA; however, that process is largely the equivalent of an NDA submission. A biosimilar application demonstrates that, based on the totality of the evidence, the biosimilar is either “highly similar” to ‒ or interchangeable with ‒ a reference biologic.

The FDA is authorised to require paediatric studies of drugs or biologics when other approaches are insufficient to ensure that the products are safe and effective for use in children. The agency may also issue a written request for paediatric research and, if the sponsor fulfils the data request, it may obtain six months of paediatric exclusivity.

As noted, changes to an existing marketing authorisation may be obtained through supplements or amendments to existing applications. As regards medical devices, the submission of additional 510(k) submissions can result in the clearance of significant changes to previously cleared device products. A PMA may also be supplemented or amended. In many cases, the transfer of a clearance or approval without manufacturing site or significant product changes requires only fairly simple notifications to the FDA.

The FDA maintains regulations permitting expanded access to investigational products. Such expanded access to INDs and IDEs may relate to an individual patient (often called a “compassionate use”) or may allow broader use by patients not eligible for controlled clinical trials, depending upon the seriousness of the disease and the availability of alternative treatments. Sponsors of such INDs may not charge patients for the investigational drug without specific authorisation from the FDA permitting cost recovery only.

In addition, the 2018 “Right to Try” Act permits certain eligible terminally ill patients to have broad access to eligible investigational drugs in certain circumstances when manufacturers are willing to supply. To date, most companies have shown a reluctance to permit their products to be used via this pathway in lieu of the more traditional IND pathway.

There is also a very limited Humanitarian Device Exemption (HDE) pathway for approval of a Humanitarian Use Device (HUD) intended to benefit patients in the treatment or diagnosis of a disease or condition that affects ‒ or is manifested in ‒ not more than 8,000 individuals in the USA per year.

Virtually every drug, biological or device product is subject to ongoing requirements relating to establishment registration, product listing, compliance with cGMPs/quality systems, track-and-trace requirements, and safety reporting/adverse-event reporting regulations. In certain cases, the FDA may require closer, ongoing oversight of a drug or biologic under a risk evaluation and mitigation strategy (REMS) or may mandate post-market studies or trials.

While the FDA does release approval letters and – after review for redaction of confidential and trade-secret information – summary review and approval documents, it does not currently publish “complete response letters” that reject an application under review. Available information on approved products may be obtained via the FDA’s Drugs@FDA website. Often, extensive information about pending applications is released in the form of briefing papers and presentations used at FDA Advisory Committee meetings. The FDA does not reveal the existence of pending INDs or IDEs unless the sponsor has publicly acknowledged the filings.

Third parties may submit requests for information under the Freedom of Information Act (FOIA); however, there are a variety of exceptions from disclosure, as well as a major FDA backlog of requests. Most importantly, the FDA has an obligation under the FOIA to refrain from publication of trade secrets or confidential commercial or financial information. Sponsors/applicants are afforded an opportunity to review potential releases of information and request confidential treatment under those FOIA exceptions.

There is an array of expedited programmes for the registration of medicines and medical devices. These programmes include:

• fast track designation for drug and biological products for serious conditions where said products demonstrate the potential to address an unmet medical need;
• designation as a breakthrough therapy in the case of drugs for serious conditions where preliminary clinical evidence indicates that the drug may demonstrate substantial improvement on a clinically significant endpoint over available therapies, or in the case of the breakthrough devices programme that applies to designated devices that provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating human disease or conditions, among other criteria;
• accelerated approval for products that treat a serious condition, provide a meaningful advantage over available therapies, and demonstrate a significant impact on a surrogate endpoint that is reasonable likely to predict clinical benefit or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality – although the clinical effectiveness of such products must be confirmed in post-market studies; and
• priority review for drugs that treat a serious condition and, if approved, would provide a significant improvement in safety or effectiveness (or if the FDA is presented with a priority review voucher).

Each of the above-mentioned programmes provides various benefits that may accelerate approval, ranging from additional agency input to rapid review.

If a company has already obtained authorisations (whether product-related or establishment-related) from internationally recognised jurisdictions, the FDA does not expedite the issuance of its own authorisations. However, there are frequent interactions between the FDA and other jurisdictions – in particular, Canada, the UK, and the EU - concerning issues such as establishment inspection priorities and product safety.

In general, manufacturing plants are not subject to a separate authorisation from the related product approvals ‒ although they must be registered with the FDA (and the products produced at the facility must be listed as associated with the establishment). Moreover, in most cases, the FDA will review extensive manufacturing information in the product application and conduct a pre-approval inspection of the facility before approving a drug or device. Such establishments are also subject to both routine (typically every two years) and for-cause (eg, in response to a product defect and recall) inspections.

In general, wholesale activities are subject to licensure requirements at the state level and registration as distributors at the federal level. The requirements and length of such licences vary by state.

The FDA may inspect any facility holding drugs for shipments ‒ although state inspection activities and fees vary greatly. Significant additional requirements administered by the DEA and states apply to wholesale trade in controlled substances.

The authorisation to trade in pharmaceuticals varies greatly by state; however, most pharmaceutical distributors must hold a state licence. Such requirements often do not apply to entities that are not physically handling drug products.

Drugs may be either prescription ‒ ie, as defined under state law, generally subject to prescription by a designated healthcare practitioner and dispensing by a licensed pharmacist ‒ or OTC (permitting sale without intervention by a healthcare practitioner or pharmacist). Certain products (eg, pseudoephedrine) must be kept behind the pharmacy counter, owing to specific statutory requirements. The FDA has issued a proposal that could expand direct OTC availability of drug products – for example, through the use of mobile apps, as well as via kiosks in pharmacies that permit education and diagnostic screening.

The FD&C Act and general import and export administration laws govern the import/export of pharmaceuticals and medical devices. Typically, imported medicines and medical devices must be subject to an approval or clearance (if applicable) in the USA. Only the original manufacturer of a drug may re-import a drug product back into the USA, subject to limited programmes ‒ aimed at demonstrating how the importation of certain drugs can be accomplished in an attempt to reduce prices ‒ that may nor may not proceed in the coming years. The importation of even an identical drug produced at a facility that is not inspected in the course of the US approval would be considered unlawful. Limited exceptions are permitted for individuals to engage in personal, physical importation of foreign products for their own use, if based upon a prescription from a healthcare professional and a lack of alternatives in the USA.

Note that a developing potential exception to these rules is the FDA’s decision to authorise Florida’s drug importation programme from Canada for a period of two years pursuant to a 2020 final rule establishing this pathway, with the goal of lowering drug prices in the USA. Additional steps must be implemented before such importation occurs, and the products at issue have yet to be disclosed. Moreover, the success of this pathway is highly uncertain, given that Health Canada has made clear in a statement that it will take “all necessary action to safeguard the drug supply and ensure Canadians have access to the prescription drugs they need”, arguing that “bulk importation will not provide an effective solution to the problem of high drug prices in the US[A]”.

At the border, the primary regulators are the FDA (administering the FD&C Act for potential violations) and US Customs and Border Protection (administering the broad array of US laws governing customs matters). Other agencies ‒ for example, the Department of Commerce and the Department of Agriculture ‒ may have responsibilities as well, depending on the nature of the imported article.

Importers of record may be designated by the manufacturer or distributor and they have specific responsibilities. A US importer of record (ie, the owner, purchaser, or licensed customs broker designated by the owner, purchaser or consignee) files entry documents for the goods with the port director at the goods’ port of entry. It is the importer of record’s responsibility to arrange for the examination and release of the goods. Initial importers may also be responsible for meeting registration and listing requirements. US Customs and Border Protection requires the importer of record to file an importation bond that is typically equal to at least three times the invoice value of the goods.

In order to be lawfully imported, a drug or medical device must be either:

• cleared or approved (and the product properly listed in association with a registered establishment); or
• the subject of an active IND or IDE.

Exceptions are made for importation of a very limited amount of a product for personal use. The FDA will also work with potential importers in certain situations (eg, compassionate use or short supply) to expedite the satisfaction of regulatory requirements.

Upon entry into the USA, declarations and information must utilise the Customs Harmonised Tariff Schedule codes according to the Harmonized Tariff Schedule of the US (HTSUS) and FDA product codes. Such declarations are subject to specific regulations issued by US Customs and Border Protection and the FDA. A failure to classify a product properly may result in an improper payment of customs duties and, consequently, associated penalties.

The USA is a member of the WTO and has free trade agreements in effect with 20 countries. Some are bilateral agreements, but others are multilateral in nature. The USA is also party to Trade and Investment Framework Agreements that provide frameworks for governments to discuss and resolve trade and investment issues at an early stage, as well as bilateral investment treaties that help protect private investment, develop market-oriented policies in partner countries, and promote US exports. Additionally, the FDA is party to various Memoranda of Understanding and mutual recognition agreements aimed at facilitating global discussions and risk assessments with regard to, for example, inspections.

Until recently, the USA had little in the way of pricing limitations on pharmaceutical products and medical devices. Therefore, in most cases, the manufacturer of a product sets the initial price and adjusts prices (including rebates and other price concessions) over time in response to market conditions. However, in a major shift, the Inflation Reduction Act 2022 (IRA) incorporated provisions to lower prescription drug costs for those covered by Medicare and reduce drug spending by the federal government. Among others, the IRA includes the following provisions.

• The federal government is in its second round of negotiating pricing for certain drugs chosen for inclusion in the programme. Such negotiations establish a “maximum fair price” for certain drugs covered under Medicare Part B and Part D with the highest total spending (excluding specific categories of drug). Under this Drug Price Negotiation Programme, the number of drugs subject to price negotiation included ten Part D drugs for 2026, another 15 Part D drugs for 2027, another 15 Part D and Part B drugs for 2028, and another 20 Part D and Part B drugs for 2029 and later years. The drugs are chosen from the 50 drugs with the highest total Medicare Part D spending and the 50 drugs with the highest total Medicare Part B spending. A prohibitive excise tax will be levied on drug companies that do not comply with the negotiation process.
• Drug companies are now required to pay rebates to Medicare if prices rise faster than inflation for drugs used by Medicare beneficiaries.
• Out-of-pocket spending is capped for Medicare Part D enrollees and other Part D benefit design changes.
• Monthly cost sharing for insulin is now limited to USD35 for people with Medicare.

Various aspects of the IRA have been quite controversial, including provisions that disadvantage certain orphan drugs, as well as small molecules relative to biologics. The IRA drug-pricing provisions are currently being challenged in multiple lawsuits under a wide variety of theories.

There are also other federal laws that cap pharmaceutical prices for certain purchasers or require minimum rebate levels in the following ways.

• Subject to ongoing litigation concerning the scope and terms of the programme, manufacturers sell their outpatient drugs to “covered entities” (typically, certain clinics and hospitals believed to serve safety-net functions) at or below a statutorily set ceiling price under the 340B Drug Pricing Programme.
• Manufacturers must sell brand name drugs to four federal agencies (the Department of Veterans’ Affairs, the Department of Defence, the Public Health Service, and the Coast Guard) at or below a “federal ceiling price” determined by a statutory formula.
• Manufacturers must pay a rebate set by a statutory formula on each unit of their outpatient drugs paid for by the Medicaid programme. This is not literally a “price control” programme because it only controls the rebate paid to Medicaid after the drug has been dispensed or administered. As such, the price that Medicaid pays upfront to the dispensing pharmacy or to a physician’s office or clinic that administers a drug is not affected by the Medicaid rebate programme.

In the USA, companies typically set their prices based on a wide range of factors, and the price level of a pharmaceutical product or medical device does not depend on the prices for the same product in other countries. Although reference-pricing schemes have previously been proposed in the USA, the provisions of the IRA described in 8.1 Price Control for Pharmaceuticals and Medical Devices are currently the primary vehicle for industry/government price negotiations under US law.

The largest healthcare programme in the USA today is the Medicare programme, which provides healthcare coverage for people who are 65 and older, are disabled (for two years or more), or have end-stage renal disease. Medicare accounts for roughly 20% of US health spending. Most pharmaceutical products are eligible for some form of Medicare coverage, either through:

• Part B (Medicare’s traditional outpatient benefit, which covers a small but important set of drugs, including physician-administered drugs);
• Part D (the Medicare drug benefit, which has provided broad coverage for pharmacy-dispensed oral drugs since 2006); or
• Part A (Medicare’s inpatient benefit, which covers drugs provided as part of covered inpatient hospital stays and in certain other inpatient settings).

The second-largest healthcare programme today – accounting for roughly 17% of US health spending – is the Medicaid programme, which is a joint federal–state programme providing coverage for certain low-income individuals (with the specific eligibility criteria varying by state). Medicaid is run chiefly by states, with federal government oversight, and state Medicaid programmes generally provide broad coverage for prescription drugs. Medicaid programmes have sometimes imposed on high-cost drugs coverage restrictions that arguably conflict with Medicaid’s statutory obligations.

At present, it is likely that there will be significant cuts to the Medicare and Medicaid programmes under the second Trump Administration.

The process and evidence that US payors use to make decisions about pharmaceuticals and medical device coverage varies widely by payor (and is not always entirely transparent). These variations can include:

• the criteria considered appropriate for evaluation (eg, whether a product’s cost or cost-effectiveness is taken into account in coverage decisions);
• the scientific rigour of the evidence considered and the weight placed on the types of evidence considered;
• the decision-making body and the processes for making coverage decisions; and
• the legal standards that apply to the coverage decision-making process and the resulting package of covered products and services.

Many organisations are engaged in developing value-assessment tools of various sorts and the CMS has experimented with outcome-based models. Essentially, these tools are designed to help payors, healthcare providers, and patients assess outcomes of competing pharmaceuticals on a systematic basis and thereby reach conclusions about their value in a more systematic and rigorous way than is currently usual. The future of such programmes is uncertain under the Trump Administration.

Pharmacists are paid for dispensing prescriptions by the patient’s insurer (assuming the patient is insured and the product is covered) and the patient. The circumstances in which pharmacists may dispense a substitute for the prescribed product without obtaining the prescriber’s authorisation are governed by state law. State laws on this issue can vary but, in general, they permit pharmacists to substitute a product approved by the FDA as a generic equivalent for the prescribed product (unless the prescription specifically states “dispense as written” or a similar phrase indicating no substitution).

There has also been a recent regulatory focus and extensive litigation relating to pharmacy compounding of approved weight loss drugs in the USA, which was permitted in bulk only when such products were in shortage.

During the past several years, the standards for permitting pharmacists to substitute a “biosimilar” product for a prescribed biological product have been a topic of considerable debate. The provisions of these laws vary but often only permit biosimilar pharmacy-level substitution if:

• the substituted product has been designated as “interchangeable” with the prescribed biological product by the FDA;
• the prescriber and the patient are both notified of the substitution; and
• the pharmacist maintains records of the substitution.