[Federal Register Volume 70, Number 63 (Monday, April 4, 2005)]
[Rules and Regulations]
[Pages 17168-17192]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-6599]



[[Page 17167]]

-----------------------------------------------------------------------

Part III





Department of Health and Human Services





-----------------------------------------------------------------------



Food and Drug Administration



-----------------------------------------------------------------------



21 CFR Part 2



Use of Ozone-Depleting Substances; Removal of Essential-Use 
Designations; Final Rule

  Federal Register / Vol. 70, No. 63 / Monday, April 4, 2005 / Rules 
and Regulations  

[[Page 17168]]


-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Part 2

[Docket No. 2003P-0029]
RIN 0910-AF18


Use of Ozone-Depleting Substances; Removal of Essential-Use 
Designations

AGENCY: Food and Drug Administration, HHS.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Food and Drug Administration (FDA) is amending its 
regulation on the use of ozone-depleting substances (ODSs) in self-
pressurized containers to remove the essential-use designations for 
albuterol used in oral pressurized metered-dose inhalers (MDIs). Under 
the Clean Air Act, FDA, in consultation with the Environmental 
Protection Agency (EPA), is required to determine whether an FDA-
regulated product that releases an ODS is an essential use of the ODS. 
Two albuterol MDIs that do not use an ODS have been marketed for more 
than 3 years. FDA has determined that the two non-ODS MDIs will be 
satisfactory alternatives to albuterol MDIs containing ODSs and is 
removing the essential-use designation for albuterol MDIs as of 
December 31, 2008. Albuterol MDIs containing an ODS cannot be marketed 
after this date.

DATES: This rule is effective December 31, 2008.

ADDRESSES: Received comments, a transcript of, and material submitted 
for, the Pulmonary-Allergy Advisory Committee meeting held on June 10, 
2004, the environmental assessment, and the finding of no significant 
impact may be seen in the Division of Dockets Management, 5630 Fishers 
Lane, rm. 1061, Rockville, MD 20852, between 9 a.m. and 4 p.m., Monday 
through Friday.

FOR FURTHER INFORMATION CONTACT: Wayne H. Mitchell, Center for Drug 
Evaluation and Research (HFD-7), Food and Drug Administration, 5600 
Fishers Lane, Rockville, MD 20857,301-594-2041.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction and Highlights of the Rule
II. Background
    A. Albuterol
    B. CFCs
    C. Regulation of ODSs
    1. The 1978 Rules
    2. The Montreal Protocol
    3. The 1990 Amendments to the Clean Air Act
    4. EPA's Implementing Regulations
    5. FDA's 2002 Regulation
III. Comments on the 2004 Proposed Rule
    A. General Comments
    B. The Same Active Moiety with the Same Route of Administration, 
for the Same Indication, and With Approximately the Same Level of 
Convenience of Use
    1. The Same Active Moiety with the Same Route of Administration, 
for the Same Indication
    2. Approximately the Same Level of Convenience of Use
    C. Supplies and Production Capacity for the Non-ODS Products Will 
Exist at Levels Sufficient to Meet Patient Need
    D. Adequate U.S. Postmarketing Use Data is Available for the Non-
ODS Products
    E. Patients Are Adequately Served by the Non-ODS Products
    F. Effective Date
    G. CFCs and the Environment
    H. Comments on the Analysis of Impacts
    I. Other Comments
IV. Environmental Impact
V. Analysis of Impacts
    A. Introduction
    B. Need for Regulation and the Objective of this Rule
    C. Background
    1. CFCs and Stratospheric Ozone
    2. The Montreal Protocol
    3. Benefits of the Montreal Protocol
    4. Characteristics of COPD
    5. Characteristics of Asthma
    6. Current U.S. Albuterol MDI Market
    D. Benefits and Costs of the Final Rule
    1. Baseline Conditions
    2. Benefits of the Final Rule
    3. Costs of the Final Rule
    4. Effects on Medicare and Medicaid
    E. Alternative Phaseout Dates
    F. Sensitivity Analyses
    G. Small Business Impact
    1. Affected Sector and Nature of Impacts
    2. Outreach
    H. Conclusion
VI. The Paperwork Reduction Act of 1995
VII. Federalism
VIII. References

I. Introduction and Highlights of the Rule

    We published a proposed rule in the Federal Register of June 16, 
2004 (69 FR 33602) (the 2004 proposed rule), proposing to remove the 
essential-use designation for albuterol MDIs. Albuterol MDIs containing 
chlorofluorocarbons (CFCs) or other ODSs cannot be marketed without an 
essential-use designation. We have determined that the following four 
criteria for removing an essential use have been met or will be met by 
the effective date of the final rule:
     More than one non-ODS product with the same active moiety 
is marketed with the same route of administration, for the same 
indication, and with approximately the same level of convenience of use 
as the ODS product containing that active moiety;
     Supplies and production capacity for the non-ODS products 
will exist at levels sufficient to meet patient need;
     Adequate U.S. postmarketing use data is available for the 
non-ODS products; and
     Patients who medically required the ODS product will be 
adequately served by the non-ODS products containing that active moiety 
and other available products.
    We have also determined that the appropriate effective date for the 
removal of the essential-use designation for albuterol MDIs is December 
31, 2008.
    We will discuss our determinations on the criteria and the 
effective date in section V of this document ``Comments on the 2004 
Proposed Rule.''

II. Background

A. Albuterol

    Albuterol is a relatively selective beta2-adrenergic 
agonist used in the treatment of bronchospasm associated with asthma 
and chronic obstructive pulmonary disease (COPD). Albuterol has the 
molecular formula C13H21NO3. Albuterol 
is the name established for the drug by the U.S. Pharmacopeia and the 
U.S. Adopted Names Council. FDA uses the name albuterol, and it is the 
name commonly used in the United States. In most of the rest of the 
world, the drug is called salbutamol, which is the International 
Nonproprietary Name for the drug (the name recommended by the World 
Health Organization). Albuterol is widely used in its sulfate salt 
form, which has the molecular formula 
(C13H21NO3)2H2SO4
. We will use ``albuterol'' to refer to both albuterol base and 
albuterol sulfate, unless otherwise indicated.
    Albuterol is available in many dosage forms for the treatment of 
asthma and COPD. Syrups and tablets may be taken by mouth to be 
absorbed into the blood through the digestive tract. Albuterol drug 
products are marketed in various forms for inhalational use. Albuterol 
is available in inhalation solutions for use

[[Page 17169]]

in nebulizers, and was previously marketed in the United States in a 
compact dry-powder inhaler. Most important for purposes of this 
document, albuterol is marketed in MDIs, which are small, pressurized 
aerosol devices that deliver a measured dose of an aerosolized drug 
into a patient's mouth for inhalation into the lungs.
    Albuterol MDIs were first approved for use in the United States in 
1981, when the new drug applications (NDAs) for VENTOLIN (NDA 18-473) 
and PROVENTIL (NDA 17-559) albuterol MDIs were approved by FDA. The 
first generic albuterol MDI was approved in 1995. Albuterol MDIs have 
historically used the CFCs trichlorofluoromethane (CFC-11) and 
dichlorodifluoromethane (CFC-12) as propellants.
    Albuterol MDIs are among the most widely used drug products for the 
treatment of asthma and COPD. Because of albuterol's relatively rapid 
onset of action, albuterol MDIs are frequently used as ``rescue'' 
inhalers for treatment of bronchospasm during acute episodes. Albuterol 
MDIs can be considered lifesaving for some patients at certain times; 
they are very important for controlling symptoms in many more patients 
who suffer from asthma or COPD. We recognize and take very seriously 
our obligation to examine with particular care any action that could 
affect the availability of these important drugs.

B. CFCs

    CFCs are organic compounds that contain carbon, chlorine, and 
fluorine atoms. CFCs were first used commercially in the early 1930s as 
a replacement for hazardous materials then used in refrigeration, such 
as sulfur dioxide and ammonia. Subsequently, CFCs were found to have a 
large number of uses, including as solvents and as propellants in self-
pressurized aerosol products, such as MDIs.
    CFCs are very stable in the troposphere, the lowest part of the 
atmosphere. They move to the stratosphere, a region that begins about 
10 to 16 kilometers (km) (6 to 10 miles) above Earth's surface and 
extends up to about 50 km (31 miles) altitude. Within the stratosphere, 
there is a zone about 15 to 40 km (10 to 25 miles) above the Earth's 
surface in which ozone is relatively highly concentrated. This zone in 
the stratosphere is generally called the ozone layer. Once in the 
stratosphere, CFCs are gradually broken down by strong ultraviolet 
light, where they release chlorine atoms that then deplete 
stratospheric ozone. Depletion of stratospheric ozone by CFCs and other 
ODSs allows more ultraviolet-B (UV-B) radiation to reach the Earth's 
surface, where it increases skin cancers and cataracts, and damages 
some marine organisms, plants, and plastics.

C. Regulation of ODSs

    The link between CFCs and the depletion of stratospheric ozone was 
discovered in the mid-1970s. Since 1978, the U.S. Government has 
pursued a vigorous and consistent policy, through the enactment of laws 
and regulations, of limiting the production, use, and importation of 
ODSs, including CFCs.
1. The 1978 Rules
    In the Federal Register of March 17, 1978 (43 FR 11301 at 11318), 
FDA and EPA published rules banning, with a few exceptions, the use of 
CFCs as propellants in aerosol containers. These rules were issued 
under authority of the Federal Food, Drug, and Cosmetic Act (the act) 
(21 U.S.C. 321 et seq.) and the Toxic Substances Control Act (15 U.S.C. 
2601 et seq.), respectively. FDA's rule (the 1978 rule) was codified as 
Sec.  2.125 (21 CFR 2.125). The rules issued by FDA and EPA had been 
preceded by rules issued by FDA and the Consumer Product Safety 
Commission requiring products that contain CFC propellants to bear 
warning statements on their labeling (42 FR 22018, April 29, 1977; 42 
FR 42780, August 24, 1977).
    The 1978 rule prohibited the use of CFCs as propellants in self-
pressurized containers in any food, drug, medical device, or cosmetic. 
As originally published, the rule listed five essential uses that were 
exempt from the ban. The third listed essential use was for 
``[m]etered-dose adrenergic bronchodilator human drugs for oral 
inhalation.'' This language describes albuterol MDIs, so the list of 
essential uses did not have to be amended in 1981 when VENTOLIN and 
PROVENTIL albuterol MDIs were approved by FDA.
    The 1978 rule provided criteria for adding new essential uses, and 
several uses were added to the list, the last one in 1996. The 1978 
rule did not provide any mechanism for removing essential uses from the 
list as alternative products were developed or CFC-containing products 
were removed from the market. The absence of a removal procedure came 
to be viewed as a deficiency in the 1978 rule, and was addressed in a 
later rulemaking, discussed in section II.C.5 of this document.
2. The Montreal Protocol
    On January 1, 1989, the United States became a party to the 
Montreal Protocol on Substances that Deplete the Ozone Layer (Montreal 
Protocol) (September 16, 1987, 26 I.L.M. 1541 (1987)), available at 
http://www.unep.org/ozone/pdfs/Montreal-Protocol2000.pdf.\1\ The United 
States played a leading role in the negotiations of the Montreal 
Protocol, believing that internationally coordinated control of ozone-
depleting substances would best protect both the U.S. and global public 
health and the environment from potential adverse effects of depletion 
of stratospheric ozone. Currently, there are 188 parties to this 
treaty.\2\ When it joined the treaty, the United States committed to 
reducing production and consumption of certain CFCs to 50 percent of 
1986 levels by 1998 (Article 2(4) of the Montreal Protocol). It also 
agreed to accept an ``adjustment'' procedure, whereby, following 
assessment of the existing control measures, the Parties could adjust 
the scope, amount, and timing of those control measures for substances 
already subject to the Montreal Protocol. As the evidence regarding the 
impact of ODSs on the ozone layer became stronger, the Parties used 
this adjustment procedure to accelerate the phaseout of ODSs. At the 
fourth meeting of the Parties to the Montreal Protocol, held at 
Copenhagen in November 1992, the Parties adjusted Article 2 of the 
Montreal Protocol to eliminate the production and importation of CFCs 
by Parties that are developed countries by January 1, 1996 (Decision 
IV/2).\3\ The adjustment also indicated that it would apply ``save to 
the extent that the Parties decide to permit the level of production or 
consumption that is necessary to satisfy uses agreed by them to be 
essential'' (Article 2A(4)). Under the treaty's rules of procedure, the 
Parties may make such an essential-use decision by a two-thirds 
majority vote,

[[Page 17170]]

although, to date, all such decisions have been made by consensus.
---------------------------------------------------------------------------

    \1\ FDA has verified all Web site addresses cited in this 
document, but FDA is not responsible for any subsequent changes to 
the Web sites after this document has published in the Federal 
Register.
    \2\ The summary descriptions of the Montreal Protocol and 
decisions of parties to the Montreal Protocol contained in this 
document are presented here to help you understand the background of 
the action we are taking. These descriptions are not intended to be 
formal statements of policy regarding the Montreal Protocol. 
Decisions by the parties to the Montreal Protocol are cited in this 
document in the conventional format of ``Decision IV/2,'' which 
refers to the second decision recorded in the Report of the Fourth 
Meeting of the parties to the Montreal Protocol on Substances That 
Deplete the Ozone Layer. Reports of meetings of the parties to the 
Montreal Protocol may be found on the United Nations Environment 
Programme's Web site at http://www.unep.org/ozone/mop/mop-reports.shtml.
    \3\ Production of CFCs in economically less-developed countries 
is being phased out and is scheduled to end by January 1, 2010. See 
Article 2a of the Montreal Protocol.
---------------------------------------------------------------------------

    To produce or import CFCs for an essential use under the Montreal 
Protocol, a Party must request and obtain approval for an exemption at 
a meeting of the Parties. One of the most important essential uses of 
CFCs under the Montreal Protocol is their use in MDIs for the treatment 
of asthma and COPD. The decision on whether the use of CFCs in MDIs is 
``essential'' for purposes of the Montreal Protocol turns on whether: 
``(1) It is necessary for the health, safety, or is critical for the 
functioning of society (encompassing cultural and intellectual aspects) 
and (2) there are no available technically and economically feasible 
alternatives or substitutes that are acceptable from the standpoint of 
environment and health'' (Decision IV/25). Each request and any 
subsequent exemption is for only 1 year's duration (Decision V/18). 
Since 1994 the United States and some other Parties to the Montreal 
Protocol have annually requested, and been granted, essential-use 
exemptions for the production or importation of CFCs for their use in 
MDIs for the treatment of asthma and COPD (see, among others, Decisions 
VI/9 and VII/28). The exemptions have been consistent with the criteria 
established by the Parties, which make the grant of an exemption 
contingent on a finding that the use for which the exemption is being 
requested is essential for health, safety, or the functioning of 
society, and that there are no available technically and economically 
feasible alternatives or substitutes that are acceptable from the 
standpoint of health or the environment (Decision IV/25).
    Phasing out the use of CFCs in MDIs for the treatment of asthma and 
COPD has been an issue of particular interest to the Parties to the 
Montreal Protocol. Several decisions of the Parties have dealt with the 
transition to CFC-free MDIs, including the following decisions:
     Decision VIII/10 stated that the Parties that are 
developed countries would take various actions to promote industry's 
participation in a smooth and efficient transition away from CFC-based 
MDIs (San Jose, Costa Rica, 1996).
     Decision IX/19 required the Parties that are developed 
countries to present an initial national or regional transition 
strategy by January 31, 1999 (Montreal, Canada, 1997).
     Decision XII/2 elaborated on the content of national or 
regional transition strategies required under Decision IX/19 and 
indicated that any MDI for the treatment of asthma or COPD approved for 
marketing after 2000 would not be an ``essential use'' unless it met 
the criteria laid out by the Parties for essential uses (Ouagadougou, 
Burkina Faso, 2000).
     Decision XIV/5 requested that each Party report annually 
the quantities of CFC and non-CFC MDIs and dry-powder inhalers sold or 
distributed within that country and the approval and marketing status 
of non-CFC MDIs and dry-powder inhalers. Decision XIV/5 also noted 
``with concern the slow transition to CFC-free metered-dose inhalers in 
some Parties'' (Rome, Italy, 2002).
     Decision XV/5 states that no essential uses of CFCs will 
be authorized for Parties that are developed countries at the 17th 
meeting of the Parties (in autumn 2005), or thereafter, unless the 
Party requesting the essential-use allocation has submitted an action 
plan. Among other items, the action plan should include a specific date 
by which the Party plans to cease requesting essential-use allocations 
of CFCs for albuterol MDIs to be sold or distributed in developed 
countries. The action plan must be submitted before the 25th meeting of 
the Open-Ended Working Group\4\ in the summer of 2005 (Nairobi, Kenya, 
2003).
---------------------------------------------------------------------------

    \4\ The Open-Ended Working Group (OEWG) was established in 1989 
at the first meeting of the Parties to the Montreal Protocol held in 
Helsinki. The OEWG, among other duties, considers proposals for 
amendments and adjustments to the Montreal Protocol and prepares 
consolidated reports based on the reports of various scientific, 
technical, and economic panels. These proposals and reports may 
subsequently be acted on by a meeting of the Parties to the Montreal 
Protocol.
---------------------------------------------------------------------------

    In addition to fulfilling our obligations under the Clean Air Act 
and other provisions of the Montreal Protocol, this rule is intended to 
provide, for purposes of Decision XV/5, the specific date after which 
the United States will not request essential-use allocations of CFCs 
for albuterol MDIs.
3. The 1990 Amendments to the Clean Air Act
    In 1990, Congress amended the Clean Air Act to, among other things, 
better protect stratospheric ozone (Public Law 101-549, November 15, 
1990) (the 1990 amendments). The 1990 amendments were drafted to 
complement, and be consistent with, our obligations under the Montreal 
Protocol (see section 614 of the Clean Air Act (42 U.S.C. 7671m)). 
Section 614(b) of the Clean Air Act provides that in the case of a 
conflict between any provision of the Clean Air Act and any provision 
of the Montreal Protocol, the more stringent provision will govern. 
Section 604 of the Clean Air Act requires the phaseout of the 
production of CFCs by 2000 (42 U.S.C. 7671c),\5\ while section 610 of 
the Clean Air Act (42 U.S.C. 7671i) required EPA to issue regulations 
banning the sale or distribution in interstate commerce of nonessential 
products containing CFCs. Sections 604 and 610 provide exceptions for 
``medical devices.'' Section 601(8) (42 U.S.C. 7671(8)) of the Clean 
Air Act defines ``medical device'' as
---------------------------------------------------------------------------

    \5\ In conformance with Decision IV/2, EPA issued regulations 
accelerating the complete phaseout of CFCs, with exceptions for 
essential uses, to January 1, 1996 (58 FR 65018, December 10, 1993).
---------------------------------------------------------------------------

    any device (as defined in the Federal Food, Drug, and Cosmetic 
Act (21 U.S.C. 321)), diagnostic product, drug (as defined in the 
Federal Food, Drug, and Cosmetic Act), or drug delivery system-
    (A) if such device, product, drug, or drug delivery system 
utilizes a class I or class II substance for which no safe and 
effective alternative has been developed, and where necessary, 
approved by the Commissioner [of Food and Drugs]; and
    (B) if such device, product, drug, or drug delivery system, has, 
after notice and opportunity for public comment, been approved and 
determined to be essential by the Commissioner [of Food and Drugs] 
in consultation with the Administrator [of EPA].''
4. EPA's Implementing Regulations
    EPA regulations implementing the Montreal Protocol and the 
stratospheric ozone protection provisions of the 1990 amendments are 
codified in part 82 of title 40 of the Code of Federal Regulations (40 
CFR part 82). (See 40 CFR 82.1 for a statement of intent.) Like the 
1990 amendments, EPA's implementing regulations contain two separate 
prohibitions, one on the production and import of CFCs (subpart A of 40 
CFR part 82) and the other on the sale or distribution of products 
containing CFCs (40 CFR 82.66).
    The prohibition on production and import of CFCs contains an 
exception for essential uses and, more specifically, for essential 
MDIs. The definition of essential MDI at 40 CFR 82.3 requires that the 
MDI be intended for the treatment of asthma or COPD, be essential under 
the Montreal Protocol, and if the MDI is for sale in the United States, 
be approved by FDA and listed as essential in FDA's regulations at 
Sec.  2.125.
    The prohibition on the sale of products containing CFCs includes a 
specific prohibition on aerosol products and other pressurized 
dispensers. The aerosol product ban contains an exception for medical 
devices listed in Sec.  2.125(e). The term ``medical device'' is used 
with the same meaning it was given in the 1990 amendments and

[[Page 17171]]

includes drugs as well as medical devices.
5. FDA's 2002 Regulation
    In the 1990s, we decided that Sec.  2.125 required revision to 
better reflect our obligations under the Montreal Protocol, the 1990 
amendments, and EPA's regulations, and to encourage the development of 
ozone-friendly alternatives to medical products containing CFCs. In 
particular, as acceptable alternatives that did not contain CFCs or 
other ODSs came on the market, there was a need to provide a mechanism 
for removing essential uses from the list in Sec.  2.125(e). In the 
Federal Register of March 6, 1997 (62 FR 10242), we published an 
advance notice of proposed rulemaking (the 1997 ANPRM) in which we 
outlined our then-current thinking on the content of an appropriate 
rule regarding ODSs in products FDA regulates. We received almost 
10,000 comments on the 1997 ANPRM. In response to the comments, we 
revised our approach and drafted a proposed rule published in the 
Federal Register of September 1, 1999 (64 FR 47719) (the 1999 proposed 
rule). We received 22 comments on the 1999 proposed rule. After minor 
revisions in response to these comments, we published a final rule in 
the Federal Register of July 24, 2002 (67 FR 48370) (the 2002 final 
rule) (corrected in 67 FR 49396, July 30, 2002, and 67 FR 58678, 
September 17, 2002).
    Among other changes, the 2002 final rule, in revised Sec.  
2.125(g)(3), set standards that FDA would use for determining whether 
the use of an ODS in a medical product is no longer essential. The 2002 
final rule provided that to remove an essential-use designation, FDA 
must find that:
     At least one non-ODS product with the same active moiety 
is marketed with the same route of administration, for the same 
indication, and with approximately the same level of convenience of use 
as the ODS product containing that active moiety;
     Supplies and production capacity for the non-ODS 
product(s) exist or will exist at levels sufficient to meet patient 
need;
     Adequate U.S. postmarketing use data is available for the 
non-ODS product(s); and
     Patients who medically required the ODS product are 
adequately served by the non-ODS product(s) containing that active 
moiety and other available products.
    To remove the essential-use designation of an active moiety 
marketed in an ODS product represented by one NDA, there must be at 
least one acceptable alternative, while for an active moiety marketed 
in ODS products and represented by two or more NDAs, there must be at 
least two acceptable alternatives.
    Because there are multiple NDAs for albuterol MDIs containing an 
ODS, the rule requires that there must be at least two acceptable 
alternatives available for us to remove the essential-use designation 
for albuterol. We have determined that there are two acceptable 
alternatives for albuterol MDIs containing an ODS.
    FDA approved the NDA for PROVENTIL HFA, albuterol sulfate MDI, on 
August 15, 1996 (NDA 20-503), and the product was introduced into the 
U.S. market later that year. PROVENTIL HFA is manufactured by 3M Co. 
(3M) and marketed by Schering-Plough Corp. (Schering). VENTOLIN HFA, 
albuterol sulfate MDI, was approved on April 19, 2001 (NDA 20-983), and 
it was introduced into the U.S. market in February 2002. VENTOLIN HFA 
is manufactured and marketed by GlaxoSmithKline (GSK). Both of these 
products use the hydrofluoroalkane HFA-134a as a replacement for ODSs. 
HFA-134a does not affect stratospheric ozone. We will use the phrase 
``albuterol HFA MDIs'' to refer to both of these products in this 
document. IVAX Corp. (IVAX) has recently begun marketing an albuterol 
HFA MDI, but the short period of time that the IVAX MDI has been on the 
market prevents us from considering the drug an alternative to 
albuterol CFC MDIs for purposes of this rulemaking (see our response to 
comment 14 of this document). Albuterol HFA MDIs are the subject of 
patents, listed in our publication Approved Drug Products with 
Therapeutic Equivalence Evaluations (the Orange Book), which will, 
presumably, block the marketing of generic albuterol HFA MDIs until 
they expire. See our response to comment 36 of this document for a 
discussion of the patent issues that were raised in this rulemaking.
    There is a separate essential-use designation for metered-dose 
ipratropium bromide and albuterol sulfate, in combination, administered 
by oral inhalation for human use, Sec.  2.125(e)(2)(viii). This 
essential use was added to the list of essential uses (Sec.  2.125(e)), 
even though albuterol and ipratropium bromide were already separately 
included in the list of essential uses. (See 60 FR 53725, October 17, 
1995, and 61 FR 15699, April 9, 1996.) The only drug product marketed 
under the essential-use designation for metered-dose ipratropium 
bromide and albuterol sulfate, in combination, is Boehringer Ingelheim 
Phamaceuticals' product COMBIVENT. Because COMBIVENT has two active 
ingredients, it is not subject to Decision XV/5, which concerns MDIs 
with albuterol as the sole active ingredient. This rule will not affect 
the essential-use status of COMBIVENT.

III. Comments on the 2004 Proposed Rule

    On June 10, 2004, we held a meeting of the Pulmonary-Allergy Drug 
Advisory Committee (the PADAC meeting) to discuss the issues involved 
in removing the essential-use designation for albuterol MDIs (see the 
Federal Registers of May 11, 2004 (69 FR 26169), and June 2, 2004 (69 
FR 31126)). Presentations were made by 13 speakers representing patient 
advocacy groups, medical professional organizations, an industry 
organization, an environmental advocacy group, an economics consulting 
firm, GSK, Schering, Honeywell Chemicals (Honeywell), and IVAX. We 
address the comments made in written material submitted to the 
committee and oral comments made during the open public hearing and 
committee discussion portions of the meeting in addition to the written 
and electronic comments submitted to the docket in response to the 2004 
proposed rule.\6\
---------------------------------------------------------------------------

    \6\ Fran Du Melle, Executive Vice President of the American Lung 
Association, submitted a citizen petition on behalf of the U.S. 
Stakeholders Group on MDI Transition on January 29, 2003 (Docket No. 
2003P-0029/CP1) (Stakeholders' petition). The Stakeholders' petition 
requested that we initiate rulemaking to remove the essential-use 
designation of albuterol MDIs. Several comments were submitted in 
response to the petition. All of the opinions and information in 
those comments, with one exception (see comment 39 of this 
document), were also contained in testimony at the PADAC meeting or 
in comments on the proposed rule. In nearly every case, parties 
submitting comments on the petition also testified at the PADAC 
meeting, submitted comments on the proposed rule, or both. 
Accordingly, with the exception of comment 39 of this document, we 
will not be directly responding in this document to the 
Stakeholders' petition or the comments on the petition.
---------------------------------------------------------------------------

    We received over 75 written and electronic comments in response to 
the 2004 proposed rule. They were submitted by patients, health care 
providers, patient advocacy groups, professional groups, manufacturers, 
a law firm, an economics consulting firm, and industry organizations. 
Most of the parties who spoke at the PADAC meeting also submitted 
written comments.

A. General Comments

    (Comment 1) We received several comments that expressed general 
approval for the 2004 proposed rule.

[[Page 17172]]

    We appreciate the effort that the people who submitted these 
comments, and all other comments, made in expressing their opinions on 
this important rulemaking.
    (Comment 2) We received several comments that expressed a general 
opposition to the phaseout of albuterol CFC MDIs, without giving any 
reasons for the opposition.
    We cannot address these general comments. Comments that gave 
specific reasons why the person submitting the comment opposes the 
elimination of the essential-use designation for albuterol CFC MDIs 
will be discussed in the appropriate sections of this document.
    (Comment 3) A few comments seemed to be based on a perception that 
this rulemaking would remove all albuterol MDIs from the market.
    The perception is inaccurate. This rulemaking is based on the fact 
that there will be at least two different albuterol MDIs that are 
acceptable alternatives under Sec.  2.125(g) available after the rule 
goes into effect.
    (Comment 4) Several comments were made advocating an expeditious 
phaseout of albuterol CFC MDIs. A few comments recommended we proceed 
slowly and cautiously.
    We believe this final rule provides for the phaseout of albuterol 
CFC MDIs with a speed that is consistent with our duty to protect the 
public health and our legal obligations.
    (Comment 5) One comment requested we publish this rule by December 
31, 2004.
    We did not publish this rule by December 31, 2004, because it 
involves complicated and sensitive issues that required extensive 
consultation and deliberation within FDA and the Department of Health 
and Human Services (HHS), and with EPA and other Federal agencies. We 
have issued this rule in the most expeditious manner, consistent with 
the complexities and sensitivity of the issues involved.
    (Comment 6) One comment asked that we consider in this rulemaking 
the availability of CFC drug products that do not have a non-CFC 
substitute, the availability of generic albuterol MDIs, and the impact 
that higher priced drugs may have on the public health.
    As we discuss in several places in the 2004 proposed rule and this 
document, issues of price and generic competition were major concerns 
to us. However, because this rulemaking deals exclusively with the 
essential-use designation for albuterol MDIs, we did not examine the 
availability of non-CFC substitutes for drug products other than 
albuterol CFC MDIs.
    (Comment 7) One comment stated we did not adequately communicate to 
the medical community the details of our policy regarding CFC MDIs. The 
comment expressed concern that we did not give a timeframe for the 
phaseout of albuterol CFC MDIs.
    We believe we have done a good job of keeping the public and the 
medical community informed on our policy regarding the elimination of 
essential-use designations for medical products. We first discussed our 
general policy on the issue in the 1997 ANPRM. We received nearly 
10,000 comments in response to the 1997 ANPRM, which demonstrates that 
this document received wide publicity. We received additional comments 
in response to the 1999 proposed rule, which proposed changes in Sec.  
2.125 to provide a mechanism for eliminating essential uses. A citizen 
petition was submitted on behalf of the U.S. Stakeholders Group on MDI 
Transition (stakeholders group) on January 29, 2003 (Docket No. 2003P-
0029/CP1), essentially requesting that we initiate this rulemaking. 
This stakeholders group consists of both patient advocacy and 
professional organizations. These groups were aware of our policies. 
FDA staff has spoken several times before professional medical 
organizations, patient advocacy groups, and the National Asthma 
Education and Prevention Program Coordinating Committee of the National 
Institutes of Health. FDA staff have also answered countless telephone 
calls and correspondence on the subject. We have provided press 
releases and opportunities for interviews to the general, trade, and 
professional media. We believe we have done what can be reasonably 
expected to inform the public and the medical profession. However, we 
were not able to provide a timeframe for eliminating the essential-use 
designation for albuterol MDIs. We specifically solicited comments on 
an appropriate effective date for the elimination of the essential-use 
designation for albuterol MDIs. The effective date could not be 
established until we had finished our evaluation of the comments 
submitted in response to the 2004 proposed rule, prepared a draft of 
this document, and consulted with EPA and other Federal agencies.

B. The Same Active Moiety with the Same Route of Administration, for 
the Same Indication, and With Approximately the Same Level of 
Convenience of Use

1. The Same Active Moiety with the Same Route of Administration, for 
the Same Indication
    We did not receive any comments disagreeing with our tentative 
conclusions stated in the 2004 proposed rule, or addressing the 
conclusions in any substantive way, that albuterol HFA MDIs have the 
same active moiety with the same route of administration for the same 
indications as albuterol CFC MDIs. We therefore finalize our tentative 
conclusion that albuterol HFA MDIs have the same active moiety with the 
same route of administration for the same indications as albuterol CFC 
MDIs.
2. Approximately the Same Level of Convenience of Use
    (Comment 8) One comment asserted that the VENTOLIN HFA MDIs were 
not an adequate alternative for albuterol CFC MDIs because the VENTOLIN 
HFA MDI requires more force to operate.
    Although we do have some data on the force needed to operate the 
various albuterol MDIs, because that information comes from different 
sources using different measuring techniques and apparatus, we are not 
able to meaningfully compare the amounts of force needed to operate 
albuterol HFA MDIs compared to the force needed for albuterol CFC MDIs. 
However, of the approximately 20 comments we received that indicated 
that the person submitting the comment had some experience using 
albuterol HFA MDIs, only one complained that the albuterol HFA MDIs 
required excessive effort to operate. None of the thirteen comments 
from health care providers indicated that their patients had problems 
operating the albuterol HFA MDIs. The PROVENTIL HFA MDI is somewhat 
shorter and wider than the VENTOLIN HFA MDI. Patients who find it 
difficult to apply adequate pressure to the VENTOLIN HFA MDI may wish 
to try the shorter PROVENTIL HFA MDI or other albuterol HFA MDIs that 
may come onto the market.
    (Comment 9) One comment said that the VENTOLIN HFA MDIs were not an 
adequate alternative for albuterol CFC MDIs because the VENTOLIN HFA 
MDI needs to be primed before use.
    The approved labeling for both PROVENTIL HFA and VENTOLIN HFA 
recommend that patients prime the MDI before using it for the first 
time and in cases where the MDI has not been used for more than 2 weeks 
by releasing four

[[Page 17173]]

test sprays into the air, away from the face. The approved labeling for 
PROVENTIL CFC MDIs and Warwick brand albuterol CFC MDIs contain a 
similar instruction about priming, but recommend priming if the MDI has 
not been used for 4 days, as opposed to the more convenient 2 weeks for 
the albuterol HFA MDIs. The approved labeling for VENTOLIN CFC MDIs, 
and for the generic albuterol CFC MDIs which refer to the VENTOLIN CFC 
MDI, contain an essentially identical recommendation, but refer to the 
operation as ``test sprays'' rather than priming. These test sprays are 
recommended if these albuterol CFC MDIs have not been used for more 
than 4 weeks. Therefore, priming is recommended for all of the 
albuterol CFC MDI products affected by this rulemaking. The only 
difference between albuterol CFC MDIs and albuterol HFA MDIs that would 
inconvenience patients is the shorter period of non-use before priming 
is recommended for the albuterol HFA MDIs compared to VENTOLIN CFC MDIs 
and the generic albuterol CFC MDIs which refer to the VENTOLIN CFC MDI. 
We consider this difference to be at most a minor inconvenience, and 
not a ``significant [variation] in convenience that materially 
impede[s] patient compliance.'' (See the 2002 final rule (67 FR 48370 
at 48377).) When we compare the albuterol HFA MDIs to PROVENTIL CFC 
MDIs and Warwick brand albuterol CFC MDIs, the albuterol HFA MDIs are 
actually more convenient, because of the longer period of non-use 
before priming is recommended.
    (Comment 10) One comment stated that the VENTOLIN HFA MDIs were not 
an adequate alternative for albuterol CFC MDIs because the float test 
cannot be used to determine whether the VENTOLIN HFA MDI is empty.
    The float test is a widely described, but inaccurate, method of 
ascertaining whether an MDI is empty by seeing if it floats. In 
addition to being an inaccurate method to ascertain whether an MDI 
still contains usable quantities of the drug, the float test can damage 
the MDI (See Refs. 1 and 2). The float test is not recommended in the 
approved labeling of any albuterol CFC MDI. The only accurate way to 
determine whether an MDI still contains usable quantities of the drug 
is to keep track of the number of actuations. This is true for both 
albuterol CFC and HFA MDIs. Therefore we cannot view the inability to 
perform the float test on the albuterol HFA MDIs as a ``significant 
[variation] in convenience that materially impede patient compliance.'' 
(See the 2002 final rule (67 FR 48370 at 48377).)
    We find that albuterol HFA MDIs have approximately the same level 
of convenience of use as albuterol CFC MDIs.

C. Supplies and Production Capacity for the Non-ODS Products Will Exist 
at Levels Sufficient to Meet Patient Need

    (Comment 11) At the PADAC meeting a representative of GSK stated 
GSK was currently producing approximately 300,000 albuterol HFA MDIs 
annually at their Zebulon, NC, plant. She further stated the current 
installed capacity at Zebulon is 15 million albuterol HFA MDIs 
annually, but that it would take GSK 6 to 12 months after a final 
decision on an effective date in this rulemaking to hire staff and 
reconfigure existing space to take full advantage of the installed 
capacity. She stated it would take GSK 12 to 18 months after a final 
decision on an effective date in this rulemaking to install additional 
manufacturing equipment and secure required component supplies to 
enable GSK to manufacture 30 to 33 million albuterol MDIs.
    A representative of Schering stated at the PADAC meeting that 3M 
would be able to manufacture enough albuterol MDIs to meet Schering's 
``share of the expected demand'' for approximately 50 million albuterol 
HFA MDIs (transcript of PADAC meeting at p. 130). Answering a question 
from a committee member, the Schering representative clarified that his 
statement regarding Schering's and 3M's share of the manufacturing 
capacity was consistent with the earlier statements made on behalf of 
GSK.
    In a subsequent written comment (2003P-0029/C20), GSK revised its 
production estimates and stated they would begin increasing production 
before the publication of this rule, and that they currently 
anticipated having the capacity to produce 30 million albuterol HFA 
MDIs annually by December 31, 2005. GSK further said they will also 
begin building up their inventory at least 3 months before the 
effective date of this rule. GSK also said they would reevaluate their 
expansion plans if the effective date of this rule were substantially 
beyond December 31, 2005.
    Schering also revised their projections on increasing production 
capacity in a written comment submitted after the PADAC meeting (2003P-
0029/C31). Schering said they will have adequate production available 
to meet demand for albuterol HFA MDIs by December 2005. Schering also 
said they would reevaluate their expansion plans if the effective date 
of this rule were substantially beyond December 2005. 3M, which 
produces the albuterol HFA MDIs Schering markets, confirmed Schering's 
comment by stating that they will have the capacity to manufacture 30 
million albuterol HFA MDIs annually by December 31, 2005.
    These projections were major considerations we took into account in 
establishing the effective date for this rule. We discuss our rationale 
for setting a December 31, 2008, effective date in our response to 
comment 32 of this document.
    (Comment 12) A comment from a manufacturer of HFA-134a stated there 
would be more than adequate supplies of HFA-134a for albuterol MDIs if 
the essential-use designation is removed.
    We appreciate this confirmation that adequate supplies of HFA-134a 
will exist to meet the increased demand for the propellant.
    (Comment 13) A few comments from patients expressed concerns that 
shortages of albuterol MDIs may result from the elimination of the 
essential-use status of albuterol MDIs. Comments from a trade 
organization and a chain drug store expressed concerns about whether 
production capacity for albuterol HFA MDIs would be in place as quickly 
as had been discussed in the 2004 proposed rule.
    The issue of adequate supply and production capacity has been key 
to this rulemaking. We regard the statements by GSK, Schering, and 3M 
that they will have adequate production in place as the best evidence 
on the availability of production capacity. When we chose December 31, 
2008, as the effective date of this rule, we did so with every 
reasonable expectation that adequate supplies and production capacity 
would be in place by December 31, 2008.
    (Comment 14) A representative of IVAX stated at the PADAC meeting 
that IVAX had submitted an NDA for an albuterol HFA MDI in January 
2003, and received an approvable letter\7\ from FDA for the NDA on 
November 28, 2003. He also said IVAX had submitted a separate NDA for 
an albuterol HFA breath-actuated inhaler in August 2003. He said he 
expected the products to be on the market in the near future. He stated 
that IVAX would soon have the capacity to manufacture 50 to 60 million 
HFA MDIs a year at IVAX's Waterford,

[[Page 17174]]

Ireland, plant, although he did not specify what proportion of that 
capacity would be allocated to albuterol HFA products or to products 
for the U.S. market.
---------------------------------------------------------------------------

    \7\ An ``approvable letter'' is a written communication to an 
applicant from FDA stating that we will approve the NDA if specific 
additional information or material is submitted or specific 
conditions are met. An approvable letter does not constitute 
approval of any part of an NDA and does not permit marketing of the 
drug that is the subject of the NDA (21 CFR 314.3).
---------------------------------------------------------------------------

    We did not consider this information in making our decision on the 
essential-use designation for albuterol MDIs. The IVAX albuterol HFA 
MDI was approved on October 29, 2004, and introduced into the market in 
December 2004. Because this product has been on the market for such a 
short time, the available U.S. postmarketing use data is inadequate for 
purposes of Sec.  2.125(g)(3)(iii). IVAX's albuterol HFA breath-
actuated inhaler has not been approved or marketed. Section 
2.125(g)(4)(i) requires alternative products to be marketed. In 
addition, because the product has not been marketed, there can be no 
U.S. postmarketing use data available to allow us to evaluate whether 
the breath-actuated inhaler will be an acceptable alternative to 
albuterol CFC MDIs.
    (Comment 15) One comment asserted the entire supply of albuterol 
HFA MDIs for the United States would be produced at one GSK facility 
and one 3M facility. The comment concluded that adequate supplies of 
albuterol HFA MDIs were insufficient because it was unclear whether one 
facility could supply the entire market if the other facility were 
forced to close.
    We appreciate the concerns expressed in this comment; however, the 
factual premise for the comment is misstated. We believe that a switch 
to albuterol HFA MDIs will improve the security of the U.S. supply of 
albuterol MDIs. Immediately after the phaseout of albuterol CFC MDIs, 
we will have one GSK facility and two 3M/Schering facilities supplying 
the U.S. market for albuterol MDIs. This compares favorably to the 
current situation with albuterol MDIs, where one Schering facility and 
one IVAX facility supply 95 percent of the U.S. market for albuterol 
CFC MDIs (comment from NERA dated August 13, 2004 (2003P-0029/C25)), 
exhibit 4; and corrected comment from GSK, dated August 25, 2004 
(2003P-0029/CR1). IVAX's recently approved albuterol HFA MDI, although 
not considered an alternative product for purposes of this rule (see 
our response to comment 14 of this document), gives additional 
assurance that there will be adequate supplies of albuterol HFA MDIs if 
there is an interruption of production at one of the GSK or 3M approved 
manufacturing sites. We also would like to point out that GSK and 3M 
have overseas production facilities that are not listed as authorized 
manufacturing facilities in the approved NDAs for PROVENTIL HFA and 
Ventolin HFA. These facilities may be able to export albuterol HFA MDIs 
to the United States in an emergency shortage situation.
    In our rulemaking establishing the criteria for eliminating an 
essential-use designation, we considered requiring multiple production 
sites to ensure a secure supply of non-ODS drug products (see the 1997 
ANPRM (69 FR 10242 at 10245), the 1999 proposed rule (64 FR 47719 at 
47723), and the 2002 final rule (67 FR 48370 at 48377)). We chose not 
to require multiple production sites for the alternative products as a 
criterion for eliminating the essential-use designation. In any case, 
albuterol HFA MDIs can be manufactured at three or more sites, which 
will provide a high degree of security for continued supplies of 
albuterol HFA MDIs, compared to the supply of other drugs intended for 
treatment of serious or life-threatening diseases, many of which are 
only manufactured in one facility.
    (Comment 16) One comment recommended we delay the effective date 
for this rule until albuterol MDIs from IVAX and Sepracor Inc. 
(Sepracor) are on the market to ensure adequate supplies and provide 
price competition. Another comment recommended we establish an earlier 
effective date if the albuterol MDIs from IVAX and Sepracor Inc., are 
approved.
    The IVAX albuterol HFA MDI is already approved (see our response to 
comment 14 of this document). Sepracor's levalbuterol tartrate\8\ MDI 
XOPENEX HFA was approved on March 11, 2005, but has not been marketed 
by the time this document was published. Because XOPENEX HFA has not 
been marketed, we cannot consider it an alternative to albuterol CFC 
MDIs (see our response to comment 14 of this document). While we 
believe that the presence of additional suppliers of non-ODS albuterol 
products would be desirable for the reasons given in the comment, we do 
not believe they are necessary for the purposes of this rulemaking. 
Based on statements from GSK, Schering, and 3M, we expect that adequate 
production capacity for alternative products evaluated under Sec.  
2.125(g) will exist by the effective date of this rule. As we discuss 
in our responses to comment 18 and in section V of this document, we 
also believe that anticipated prices for albuterol HFA MDIs will not 
prevent patients from being adequately served by the albuterol HFA 
MDIs, even without the downward price pressure of additional 
competition.
---------------------------------------------------------------------------

    \8\ Levalbuterol tartrate is the tartrate salt of levalbuterol, 
the single R-enantiomer of albuterol, which is the active ingredient 
in both CFC and HFA MDIs as a racemic mixture of the two 
stereoisomers (R and S) at a 1:1 ratio. We have not determined 
whether we will, in the future, consider products whose active 
ingredient is a stereoisomer to be alternatives to drug products 
whose active ingredient is the corresponding racemic mixture.
---------------------------------------------------------------------------

    We find that supplies and production capacity for albuterol HFA 
MDIs will exist at levels sufficient to meet patient needs by December 
31, 2008.

D. Adequate U.S. Postmarketing Use Data is Available for the Non-ODS 
Products

    We did not receive any substantive comments about whether adequate 
U.S. postmarketing use data is available for the albuterol HFA MDIs. We 
therefore finalize our tentative conclusion that adequate U.S. 
postmarketing use data is available for PROVENTIL HFA and VENTOLIN HFA, 
the albuterol HFA MDIs that we considered as alternatives in this 
rulemaking.

E. Patients Are Adequately Served by the Non-ODS Products

    (Comment 17) A representative of GSK speaking at the PADAC meeting 
described GSK's Bridges to Access program. Bridges to Access provides 
GSK drugs at very low cost to lower-income individuals and families. 
She also mentioned GSK's Orange Card Program and the Together Rx 
program in which GSK participates. Both of these programs allow 
eligible Medicare patients to purchase drugs at significantly reduced 
prices. She added that GSK intended to annually distribute 2 million 
VENTOLIN HFA MDIs to physicians as samples. She also said GSK expected 
that many physicians would primarily provide these samples to their 
lower-income patients.
    A subsequent written comment from GSK provided additional 
information on the Bridges to Access, Orange Card, and Together Rx 
programs. The comment also describes a Ventolin HFA Savings Check 
program which will distribute at least 3 million $10 coupons for use in 
purchasing VENTOLIN HFA MDIs.
    A representative of Schering speaking at the PADAC meeting said 
Schering's SP Cares program, which is similar to GSK's Bridges to 
Access program, distributes free drugs, including PROVENTIL HFA, to 
low-income uninsured patients.
    A written comment asserted that the Bridges to Access program 
provided albuterol HFA MDIs to only approximately 1.4 percent of the 
uninsured patients who need albuterol MDIs, and that the program would 
have to be expanded to an extreme degree to

[[Page 17175]]

provide meaningful supplies of albuterol MDIs to all uninsured 
patients. This comment also asserted that GSK's commitment to annually 
provide 2 million free albuterol HFA MDIs would have a limited benefit 
to the uninsured population because large numbers of uninsured patients 
receive medical care in the emergency departments of hospitals rather 
than in a physician's office, and it is unlikely that the free 
albuterol HFA MDIs will be distributed to the emergency departments. 
This comment was submitted before GSK's comment describing the Ventolin 
HFA Savings Check program.
    Another comment stated that any patient assistance program must be 
targeted to those most in need, particularly low-income children and 
minority populations, while yet another comment stressed the importance 
of patient assistance programs in the transition to albuterol HFA MDIs.
    We took these comments into consideration in determining that 
patients would be adequately served by albuterol HFA MDIs. These 
patient assistance programs have the potential to alleviate 
difficulties that lower income patients may have in obtaining the 
higher-priced albuterol HFA MDIs.
    We agree with the comment that stated that these programs must 
carefully target the populations most in need of financial assistance 
in procuring needed albuterol MDIs, and we strongly recommend that GSK 
and Schering take all reasonable steps to ensure that their programs 
serve patients with the greatest needs, regardless of whether those 
patients are treated in a physician's office, clinic, or hospital 
emergency department. This targeting is particularly important in 
distributing free albuterol HFA MDIs.
    We believe that many of the concerns expressed by the comment 
critical of GSK's Bridges to Access are valid, but that the comment 
underestimates the positive effect that Bridges to Access and other 
patient assistance programs can have. The estimate in the comment did 
not factor in the 2 million free albuterol HFA MDIs GSK has committed 
to distribute to physicians as samples and whatever free albuterol HFA 
MDIs Schering may distribute. The comment also could not factor in the 
effect of GSK's Ventolin HFA Savings Check program. With successful 
targeting, these free albuterol HFA MDIs and $10 coupons should have a 
beneficial impact; with less successful targeting the impact could be 
very limited (see section VII.D.2 of this document). The comment also 
ignores the potential impact of Schering's SP Cares program, which is 
similar to GSK's Bridges to Access program. We recognize that the 
Bridges to Access and SP Cares programs will have to expand to reach 
all uninsured low and moderate income patients who will need albuterol 
HFA MDIs, but the degree of expansion required would be smaller than 
that described in the comment critical of the Bridges to Access 
program. We also believe that GSK and Schering understand the need to 
expand these programs, and that this understanding was implicit in 
their testimony at the PADAC meeting and written comments (see pp. 5-6 
of GSK's corrected comment of August 25, 2004 (2003P-0029/CR1) and p. 4 
of Schering's comment of August 13, 2004 (2003P-0029/C31)).
    (Comment 18) A speaker at the PADAC meeting said because albuterol 
HFA inhalers retail for $20 more than generic albuterol CFC MDIs, an 
early phaseout of albuterol HFA MDIs could result in a total $5 billion 
in additional treatment costs until HFA inhalers come off patent. The 
speaker also said the economic burden would fall most heavily on those 
Americans least able to pay the price, with a disproportionate effect 
on minorities, inner-city children, elderly patients on fixed incomes, 
and the rural poor. The speaker asserted that eliminating the 
essential-use designation before lower-priced generic albuterol HFA 
MDIs are on the market would force many lower-income patients to 
discontinue use of albuterol MDIs. The speaker also referred to a 
recent study in JAMA: The Journal of the American Medical Association 
indicating that increasing copayments can reduce prescription drug use 
up to 32 percent. She further stated this would result in a cascading 
increase in total health care costs, as patients who discontinue their 
albuterol are admitted to emergency rooms and hospital wards.
    A speaker representing an economics consulting firm under contract 
to GSK stated at the PADAC meeting that patients would be adequately 
served by albuterol HFA MDIs. He projected the average price per MDI 
would increase by $9.87 and the yearly average cost per patient would 
rise by $16.02. He also said adequate programs were in place to 
minimize the adverse impact on lower-income patients.
    Several comments from patients, health care professionals, and 
other parties stated the elimination of lower-priced generic albuterol 
MDIs that would result from this rule would force many patients to 
discontinue the use of albuterol MDIs, with significant adverse impact 
on their health, increased hospitalizations, loss of time at work, and 
a worsening quality of life. Many of these comments recommended the 
essential-use status of albuterol MDIs not be removed until after 
generic albuterol HFA MDIs are approved and marketed.
    Other comments agreed with our tentative conclusion stated in the 
2004 proposed rule that patients will be adequately served by albuterol 
HFA MDIs.
    While we do not agree with the statement from the speaker from the 
contract economic consulting firm that the average price per MDI would 
only increase by $9.87 and that the yearly average cost per patient 
would only rise by $16.02, we do agree with the conclusion of the 
speaker that the price of albuterol HFA MDIs will not prevent patients 
from being adequately served. As discussed in more detail in section V 
of this document, we estimate that the retail cash price per MDI would 
increase by $27 and the average yearly cost to uninsured patients would 
rise $95. While higher drug prices are undesirable, we do not believe 
that asthma and COPD patients will be forced to stop using albuterol 
MDIs because of price increases. We believe that the programs discussed 
in comment 17 of this document can, if properly utilized, provide a 
safety net for lower-income patients who otherwise could not afford 
this very important drug. Section V of this document contains a fuller 
discussion of the economic issues presented by this rulemaking. While 
we recognize that sales of albuterol MDIs may decline by approximately 
1 or 2 percent as a result of this rulemaking, this decline in sales 
does not necessarily equate to patients having to forgo appropriate 
treatment of their asthma or COPD because of price increases. There are 
many ways patients may modify their behavior in order to minimize the 
impact of elimination of generic albuterol MDIs, including: increasing 
their use of other asthma and COPD drugs, including non-albuterol 
bronchodilators (and thereby decreasing their need for albuterol); 
buying fewer MDIs to keep in different locations because they have 
chosen to limit the number of MDIs they have beyond the one patients 
generally carry on their person. Patients with infrequent bouts of 
bronchospasm may also choose not to purchase albuterol HFA MDIs that 
the patients believe they might not use, even though the patients are 
financially able to do so.
    (Comment 19) A speaker at the PADAC meeting said an FDA policy that 
removed lower priced generic drugs from the market was contrary to the 
intent of the Drug Price Competition and Patent Term Restoration Act of 
1984

[[Page 17176]]

(Public Law 98-417) (Hatch-Waxman amendments). A written comment 
asserted the real intent of this rulemaking was to remove generic 
albuterol MDIs from the market.
    We recognize that one of the consequences, although not one we 
desire, of this rulemaking will be the removal, for a period of time, 
of generic albuterol MDIs from the market. We agree with the speaker at 
the PADAC meeting that one of the general intentions of the Hatch-
Waxman amendments is to encourage the entry of lower-priced generic 
drug products into the market. However, another key purpose of the 
Hatch-Waxman amendments is to encourage significant innovations in 
human drugs (see generally 130 Cong. Rec. H9113-14 and H9121-22 (Sept. 
6, 1984) (statements of Rep. Waxman)). The development of HFA inhalers 
represents large investments of time and money by innovator firms. This 
investment resulted in innovative products that significantly serve the 
public health by protecting the stratospheric ozone. While the 
provisions of the Hatch-Waxman amendments do not directly apply to this 
rulemaking, the underlying general policy of encouraging innovation and 
protecting investment in research and development does apply as much as 
the policy of encouraging the availability of lower-priced generic 
drugs. Most importantly, there is no specific provision in the Hatch-
Waxman amendments that prohibits us from removing generic albuterol 
MDIs from the market. There is, however, specific language in the Clean 
Air Act (42 U.S.C. 7671) that requires us to evaluate whether a use of 
an ozone-depleting substance in a drug product is, or remains, an 
essential use. We are obligated to follow the specific mandate Congress 
gave us in the Clean Air Act, rather than one of two general policies 
underlying another piece of legislation.
    (Comment 20) One comment suggested we approve generic albuterol HFA 
MDIs immediately, to lower expenses incurred by asthma patients.
    Albuterol HFA MDIs are the subject of patents that may affect the 
availability of generic albuterol HFA MDIs until they expire. FDA's 
ability to approve generics is constrained by the patent and 
exclusivity protections afforded by the Hatch-Waxman amendments. FDA 
may not approve generic albuterol HFA MDIs before permitted by law.
    (Comment 21) One comment expressed concern that the removal of the 
essential-use designation for albuterol MDIs would lead to higher costs 
to the Federal Government as a result of the Medicare prescription drug 
benefits that will go into effect on January 1, 2006 (see Title I of 
the Medicare Prescription Drug Improvement and Modernization Act of 
2003 (Public Law 108-173, December 8, 2003)). The comment recommended 
that the essential-use designation for albuterol not be removed until 
generic albuterol HFA MDIs come on the market, to minimize spending by 
the Federal Government.
    Although cost to the Federal Government is not a criterion under 
Sec.  2.125(g), the availability of prescription drug benefits under 
Medicare does affect whether patients are adequately served by the non-
ODS products. In fact, the prescription drug benefits will reduce the 
impact of higher prices for albuterol MDIs on Medicare-eligible 
patients, who would not otherwise have prescription drug insurance 
benefits. This will help ensure that patients are adequately served by 
albuterol HFA MDIs.
    (Comment 22) A few comments suggested that prices for albuterol HFA 
MDIs would increase after the rulemaking. A GSK spokesperson at the 
PADAC meeting stated that GSK had committed to a price freeze on 
VENTOLIN HFA until December 31, 2007. The commitment was repeated in 
GSK's subsequent written comments.
    We believe that GSK's price freeze will be effective in keeping 
prices at the current level through much of the transition period 
before the effective date of this rule. Although Schering has not made 
a similar commitment, it seems unlikely that they will raise their 
prices knowing that one of their two competitors is committed to a 
price freeze. The presence of both GSK and Schering in the market 
should provide downward pressure on prices for albuterol HFA MDIs that 
will continue after the effective date of this rule (see pp. 13-20 of 
the National Economic Associates' comment of August 13, 2004 (2003P-
0029/C25), and section V.D.1 of this document). Even if this pressure 
does not result in price decreases, it may prevent price increases. A 
representative of IVAX indicated at the PADAC meeting that IVAX's 
albuterol HFA MDI would be priced lower than PROVENTIL HFA and VENTOLIN 
HFA. IVAX's entry into the albuterol HFA MDI market and the potential 
market entry of additional albuterol HFA MDIs will provide additional 
downward pressure on prices even before the entry of generic albuterol 
HFA MDIs.
    (Comment 23) One comment objected to the elimination of the 
essential-use designation for albuterol MDIs, saying the price of 
albuterol HFA MDIs is more than $100 per MDI compared to generic 
albuterol CFC MDIs, which cost less than $10 per MDI.
    The issue of the impact of higher prices for albuterol HFA MDIs is 
one that we have given a great deal of thought, but the difference is 
not nearly as great as this comment states. The weighted average 
(across all payer types) of retail prescription price for generic 
albuterol CFC MDIs during the first half of 2004 was about $13.50 per 
MDI and the weighted average retail prescription price for albuterol 
HFA MDIs was about $39.50 per MDI (see section V.C.6 of this document). 
As we discuss in our response to comment 18 and section V of this 
document, we do not believe that this price difference prevents 
patients from using albuterol HFA MDIs.
    (Comment 24) One comment recommended that we perform a cost-benefit 
analysis using Medical Expenditure Panel Survey (MEPS) data from the 
Agency for Healthcare Research and Quality (AHRQ).
    The analysis of impacts described in section V of this document 
uses the MEPS data. While the analysis does look at both the costs and 
benefits of this rulemaking, we would not characterize the analysis as 
a full cost-benefit analysis because we are unable to fully quantify 
the public health costs and environmental benefits in dollar terms; 
however, we do quantify these costs and benefits to the extent we are 
able.
    (Comment 25) One comment asserted that, while our analysis in the 
2004 proposed rule of the economic impact of this rulemaking on 
patients was appropriate to the extent the analysis focused on whether 
higher prices would deter patients from using albuterol MDIs, those 
portions of the economic analysis that dealt with more general societal 
costs were inappropriate and contrary to the provisions of Sec.  2.125.
    We are required to examine the broader societal costs and benefits 
of any rulemaking. Executive Order 12866 directs us to assess all costs 
and benefits of available regulatory alternatives and, when regulation 
is necessary, to select regulatory approaches that maximize net 
benefits. The Regulatory Flexibility Act (5 U.S.C. 601-612) requires 
agencies to analyze regulatory options that would minimize any 
significant impact of a rule on small entities. Section 202(a) of the 
Unfunded Mandates Reform Act of 1995 (Public Law 104-4) requires that 
agencies prepare a written statement that includes an assessment of 
anticipated costs and benefits before proposing any rule that includes 
any Federal mandate that may result in significant expenditure by 
State, local,

[[Page 17177]]

and tribal governments, or the private sector.
    (Comment 26) A few comments stated albuterol HFA MDIs were 
unacceptable alternatives because they did not propel the drug with 
adequate force into the lungs. Other comments stated that they had to 
use an albuterol HFA MDI several times to get the same effect they had 
received from significantly fewer uses of an albuterol CFC MDI. Several 
comments from patients stated that their experience indicated albuterol 
HFA MDIs were less effective than albuterol CFC MDIs, while other 
comments from patients stated that they had found albuterol HFA MDIs to 
be more effective than albuterol CFC MDIs. One physician commented that 
she believed HFA MDIs were better drug delivery systems than CFC MDIs.
    The wording of certain comments leads us to believe that at least 
some of people submitting these comments may be confusing dry powder 
inhalers (DPIs) or aqueous (AQ) pumps with HFA MDIs. There are 
currently no albuterol DPIs or AQ pumps being marketed. We did not 
consider any DPI or AQ pump as a potential alternative to albuterol CFC 
MDIs. Other comments may reflect the common misperception that MDIs 
propel drugs into the lungs. MDIs do not in fact propel any significant 
amount of drug into the lungs. MDIs propel the drug into the mouth and 
the drug is then inhaled into the lungs. Albuterol CFC MDIs and 
albuterol HFA MDIs work in same way; both contain the active ingredient 
as a very fine powder which is delivered in a suspension into the 
patient's mouth. MDIs that forcefully deliver the drug suspension may 
actually be less effective at delivering the drug into the lungs. In 
these instances, a significant portion of the drug may be sprayed onto 
the surfaces in the back of the mouth, from which they will be 
swallowed rather than inhaled into the lungs. An explanation that we 
believe likely for some of these perceived differences is the 
possibility that the albuterol HFA MDIs that were being used had 
clogged mouthpieces. Cleaning the mouthpieces as described in the 
labeling for PROVENTIL HFA and VENTOLIN HFA should alleviate these 
problems.
    Whatever the perceived differences between albuterol CFC MDIs and 
albuterol HFA MDIs may be, clinical studies have shown the albuterol 
HFA MDIs are as effective as the albuterol CFC MDIs in treating asthma 
and COPD.
    (Comment 27) One comment stated we should not remove the essential-
use designation for albuterol MDIs because members of the person 
submitting the comment's family are allergic to the lactose contained 
in alternative products.
    Neither VENTOLIN HFA nor PROVENTIL HFA contains lactose. While 
other inhaled drug products for the treatment of asthma and COPD do 
contain small amounts of lactose, our determination on the essential-
use designation for albuterol MDIs is based exclusively on the 
suitability of VENTOLIN HFA and PROVENTIL HFA as alternatives.
    (Comment 28) One person said in his comment he had an adverse 
reaction that included tachycardia (elevated heart rate) after taking 
PROVENTIL HFA. He attributed the adverse event to ethanol, which is an 
inactive ingredient in PROVENTIL HFA and to which he is sensitive.
    Reports of an allergic reaction attributed to the very small 
amounts of ethanol contained in PROVENTIL HFA are extremely rare.\9\ 
VENTOLIN HFA, which does not contain ethanol, should be considered for 
asthma and COPD patients who may be sensitive to ethanol. Unlike the 
albuterol CFC MDIs, VENTOLIN HFA and PROVENTIL HFA do not contain 
identical active ingredients, and patients having difficulties with one 
product should discuss with their physicians switching to the other.
---------------------------------------------------------------------------

    \9\ We are only aware of one report in our MedWatch system of an 
allergic reaction attributed to the very small amounts of ethanol 
contained in PROVENTIL HFA. VENTOLIN HFA, which does not contain 
ethanol, should be considered for asthma and COPD patients who may 
be sensitive to ethanol. MedWatch is the FDA safety information and 
adverse event reporting program, which allows health care 
professionals and consumers to report serious problems that they 
suspect are associated with the drugs and medical devices they 
prescribe, dispense, or use.
---------------------------------------------------------------------------

    (Comment 29) One person said in his comment he had an asthma attack 
after his first use of a QVAR (beclomethasone dipropionate) HFA MDI. He 
attributed the adverse event to the HFA propellant in the QVAR MDI and 
concluded that HFA MDIs would not serve patients who were sensitive to 
HFA.
    Another person said in her comment her use of an albuterol HFA MDI 
caused irritation and triggered an asthma attack.
    A third comment suggested HFA MDIs could be less likely to cause 
paradoxical bronchospasm because of tighter specifications for the 
various compounds in the MDIs.
    Bronchospasm may occur after using any inhaled asthma drug, 
including both albuterol CFC and HFA MDIs. The approved labeling for 
both albuterol CFC and HFA MDIs, as well as QVAR and most other 
approved inhaled drugs, describe paradoxical bronchospasm as an adverse 
event that can be expected in a small number of patients. Paradoxical 
bronchospasm seems to be associated with the first use of an MDI or 
vial of an inhaled drug. The warnings about paradoxical bronchospasm 
represent a general concern with inhaled drugs, and do not represent a 
special concern for albuterol CFC and HFA MDIs or QVAR. Paradoxical 
bronchospasm is very rare; a study conducted in the United Kingdom of 
10,472 patients regularly using VENTOLIN EVOHALER (an albuterol HFA MDI 
marketed in the United Kingdom that is substantially similar to 
VENTOLIN HFA) over five 3-month observation periods, did not show any 
incidents of paradoxical bronchospasm (Ref. 3). We have not seen any 
evidence from the clinical studies of various HFA MDIs that this type 
of adverse event is more or less common with HFA MDIs than with CFC 
MDIs. Absent other data, we cannot assume that the adverse events 
described in the comments were caused by the HFA propellant in the 
MDIs.
    (Comment 30) A few comments stated albuterol HFA MDIs left a 
powdery residue at the back of the throat. One person said in her 
comment that after using an albuterol HFA MDI she felt the need to 
rinse her mouth out. One comment said this tendency to leave a powdery 
residue could lead to thrush and other infections.
    A very small number of patients have reported an unpleasant powdery 
residue in the oral cavity after use of an albuterol HFA MDI. Any MDI 
can leave a residue in the oral cavity. Use of a spacer can minimize 
the amount of residue left in the mouth. Patients who experience this 
problem may wish to speak to their physicians about using a spacer with 
the MDI. We do not consider problems with a powdery residue to be 
either prevalent enough or serious enough to prevent patients from 
being adequately served by albuterol HFA MDIs.
    Thrush, also known as candidiasis, is occasionally seen with the 
use of inhaled corticosteroids. Although thrush may be seen in patients 
who are taking both inhaled corticosteroids and inhaled albuterol, 
there is no evidence to suggest that use of albuterol or HFA 
contributes to the development of thrush. Accordingly, we do not 
believe thrush to be a problem with use of albuterol HFA MDIs.
    (Comment 31) One comment stated albuterol HFA MDIs are not an 
adequate substitute because they cannot be used with spacers.
    Commercially available spacers can be used with both albuterol HFA 
MDIs. Patients who are having difficulties with any MDI may wish to 
speak to their

[[Page 17178]]

physicians about using a spacer in conjunction with the MDI.
    We find that patients who medically require albuterol CFC MDIs are 
adequately served by albuterol HFA MDIs.

F. Effective Date

    (Comment 32) Several speakers at the PADAC meeting and comments, 
including comments from Schering, 3M, and GSK, recommended an effective 
date of December 31, 2005.
    Schering, 3M, and GSK have all stated that adequate production 
capacity and supplies would be in place by December 31, 2005. However, 
the December 31, 2005, date is merely a projected date, and neither 
Schering, 3M, nor GSK provided the basis for their projections. No 
timelines, construction and installation schedules, or training goals 
were provided to us. We have no descriptions of what new machinery must 
be procured, nor any idea when that machinery can be up and running. 
While we believe that the projections were made in good faith, 
unanticipated delays and shortages could push the date on which 
adequate production capacity and supplies are in place significantly 
beyond December 31, 2005. Due to the lack of underlying information, we 
are unable to evaluate the likelihood or length of any possible delays.
    If this rule were to go into effect before adequate production 
capacity and supplies were in place, there would not be a smooth 
transition from albuterol CFC MDIs to albuterol HFA MDIs. We could be 
forced to publish a document postponing the effective date. We could 
see resumption of production at albuterol CFC MDI lines that had been 
closed and increased production to restock supplies of albuterol CFC 
MDIs that had been allowed to dwindle in anticipation of the effective 
date of this rule. If needed CFCs, MDI components, or production 
facilities were unavailable, shortages of albuterol MDIs could exist.
    Furthermore, if we were forced to push the effective date of this 
rule back because of the failure of manufacturers to have adequate 
production capacity and supplies in place, it would be very harmful to 
any transition education program. Patients and health care providers 
would be provided with different dates by which the transition from 
albuterol CFC MDIs to albuterol HFA MDIs would be completed. This could 
lead to confusion, lack of trust, and the belief that people would not 
have to think about the transition because it would probably be 
postponed again.
    When we consider how serious and life threatening asthma and COPD 
are, and how important albuterol MDIs are in treating asthma and COPD, 
it becomes apparent that a conservative estimate of when sufficient 
supplies and production capacity will exist and a later effective date 
will better ensure that shortages do not happen and a smoother 
transition will be made. For these reasons we believe that a December 
31, 2005, effective date does not provide an adequate safety margin to 
ensure that adequate production capacity and supplies will be in place. 
Accordingly, we have determined that December 31, 2008, is a more 
appropriate effective date for this rule.
    We arrived at a December 31, 2008, effective date with the 
expectation that an orderly transition to albuterol HFA MDIs would be 
completed by that date. Although significant production and supplies 
may be in place prior to this date, in light of the serious 
consequences of inadequate supplies and the need to ensure that 
vulnerable patients have adequate access, the date of December 31, 
2008, ensures that the criteria in Sec.  2.125(g) will be met and that 
the transition to albuterol HFA MDIs can be accomplished smoothly. This 
transition period between the publication of the final rule and the 
effective date ensures that new facilities will be on line, that 
manufacturers will have successfully demonstrated their ability to 
produce necessary supplies of albuterol HFA MDIs, and patients and 
health care providers will be adequately educated about the transition 
to albuterol HFA MDIs. After the effective date, section 610 of the 
Clean Air Act would prohibit the sales of albuterol CFC MDIs in 
interstate commerce. As discussed in response to comment 42 of this 
document, the transition time under this rule should allow for 
retailers and their suppliers to deplete their stock.
    (Comment 33) One comment suggested a 2007 effective date without 
giving reasons why this date would be more appropriate than others.
    This comment did not provide any information or rationale for the 
date, and our rationale for the December 31, 2008, effective date is 
set out in our response to comment 32 of this document.
    (Comment 34) A few comments asked that we set an effective date 
that will allow patients to try different albuterol HFA MDIs to see if 
they perform adequately for individual patients.
    We believe the December 31, 2008, effective date provides ample 
opportunity for patients to work with their healthcare providers to 
determine the best substitute.
    (Comment 35) Several comments urged us to set the effective date 
for this rule late enough to allow lower-priced generic albuterol HFA 
MDIs onto the market before the essential-use status of albuterol MDIs 
is removed.
    As we discussed in our responses to comment 18 and in section V of 
this document, we do not believe that presence of generic albuterol HFA 
MDIs is necessary to ensure that patients are adequately served by 
albuterol HFA MDIs.
    (Comment 36) In the 2004 proposed rule we asked for comments ``on 
when patents may cease to bar the marketing of generic albuterol HFA 
MDIs'' (69 FR 33602 at 33608). We did not receive any substantive 
comments on this issue. One comment, while agreeing with us that we do 
not have the institutional expertise to evaluate patents, criticized 
our statement that ``it seems at least possible that key patents could 
be successfully challenged well before 2015 or perhaps even 2010, 
allowing generic drugs to enter the market much earlier than 
anticipated'' (69 FR 33602 at 33608). The comment asserted it would be 
irresponsible to base any decision on the mere possibility that patents 
may be successfully challenged. The comment also stated competition 
would not be blocked because of the ability of firms to license HFA MDI 
technology from 3M. It also pointed to IVAX as a potential source of 
competition.
    We did not receive any substantive comments on the validity of the 
patents listed in the Orange Book for albuterol HFA MDIs. Because we 
have determined that, as we discussed in our response to comment 18 and 
in section V of this document, the presence of generic albuterol HFA 
MDIs in the market is not necessary to ensure that patients are 
adequately served by albuterol HFA MDIs, it is not necessary for us to 
reach a conclusion on the validity of those patents. We do not believe 
that IVAX or entrants into the albuterol HFA MDI market that license 
HFA MDI technology from 3M will be priced as low as current generic 
albuterol CFC MDIs. We base this belief on the added expense that 
licenses will entail for manufacturers and the past history of drug 
pricing. However, we do believe that IVAX and other, potential, 
entrants can exert downward pressure on prices that could result in 
lower prices than we currently see for albuterol HFA MDIs.
    (Comment 37) A representative of Honeywell, speaking at the PADAC 
meeting, said Honeywell planned to resume production of CFC propellants 
at a Louisiana plant, and gave

[[Page 17179]]

assurances that Honeywell Chemicals could supply CFC propellants for 
years to come, if needed. He also said FDA should not consider a 
shortage of CFC propellants in establishing a transition strategy. 
Honeywell later provided more details on the subject in a written 
comment.
    Another speaker at the PADAC meeting said Honeywell's resumption of 
production at their Baton Rouge plant would violate U.S. law and the 
Montreal Protocol. He further said that according to statements made by 
Honeywell, current stockpiles of CFCs coupled with production of CFCs 
at Honeywell's Netherlands facility, which is scheduled to close at the 
end of 2005, should meet U.S. demand for CFCs for use in MDIs until 
2008.
    Another comment stated it was appropriate for us to take into 
account the disruptions in the supply of CFCs caused by Honeywell 
ending production of CFCs at their Netherlands facility and the 
equivocal legal status of Honeywell's resumption of production of CFCs 
at their Baton Rouge facility. It also said we should carefully 
scrutinize Honeywell's ability to manufacture pharmaceutical grade CFCs 
at the Baton Rouge facility.
    Although we discussed Honeywell's continued production of CFCs in 
the 2004 proposed rule (69 FR 33602 at 33607-33608), this issue does 
not address any of the criteria under which we are making a 
determination on the essential-use status of albuterol MDIs. The 
criteria in Sec.  2.125(g) direct us to examine the adequacy of 
supplies and capacity for the non-ODS substitutes, but not the supplies 
and capacity for the ODS product.
    (Comment 38) Speakers at the PADAC meeting and written comments 
stated that the Parties to the Montreal Protocol were unlikely to 
continue to approve the United States' future nominations for 
allocations of CFCs for use in MDIs. One comment asked that we 
carefully consider the future supply of CFCs in setting an effective 
date for this rule. Another comment pointed out that a key raw material 
in the production of CFCs is carbon tetrachloride, an ODS that is being 
phased out under the provisions of the Montreal Protocol. The comment 
asserted that this could lead to a situation where it could be very 
difficult to obtain the needed raw materials for the manufacture of 
CFCs, even if the manufacture itself was allowed under the Montreal 
Protocol. Another comment urged us to not allow the fact that other 
Parties to the Montreal Protocol have initiated phaseouts of albuterol 
CFC MDIs pressure us into a premature action, pointing out that prices 
for albuterol HFA MDIs are lower in other countries.
    We are obligated to follow the procedures and criteria in Sec.  
2.125 in this rulemaking, and the continued supply of CFCs under the 
Montreal Protocol or the phaseout strategies in other countries are not 
criteria listed in Sec.  2.125(g) and these issues were not considered 
in this rulemaking.
    (Comment 39) Prior to publication of the 2004 proposed rule, we 
received a comment from a manufacturer of MDI components submitted in 
response to the Stakeholders' petition. The manufacturer said it has 
the ongoing capacity to supply MDI components necessary for ongoing use 
of CFC MDIs, including albuterol CFC MDIs, and it will continue 
production as long as there is sufficient demand.
    While we appreciate the information contained in this comment, the 
continued availability of MDI components necessary for continuing use 
of CFC MDIs is also not a criterion under Sec.  2.125(g) upon which we 
may base our decision.
    (Comment 40) One speaker at the PADAC meeting suggested that FDA 
monitor patient compliance and access to albuterol HFA MDIs and reserve 
the right to allow a certain number of albuterol CFC MDIs to be sold in 
case of a real emergency.
    Under the Clean Air Act, a use of an ODS is either essential or it 
is not. We are currently unaware of any interpretation of the 
provisions of the Clean Air Act that would give us the flexibility to 
allow emergency sale or distribution of a CFC MDI once its use is 
determined to be non-essential.
    (Comment 41) One comment recommended that we not set an effective 
date until we are certain that adequate production capacity will exist.
    In choosing December 31, 2008, as the effective date of this rule, 
we did so with every reasonable expectation that adequate supplies and 
production capacity will exist by that time.
    (Comment 42) A comment recommended that we not establish a date 
beyond which retail pharmacies are barred from selling albuterol CFC 
MDIs, even if we did establish a date beyond which albuterol CFC MDIs 
could not be manufactured.
    The sale of remaining stocks of albuterol CFC MDIs was one of the 
factors we considered in establishing an effective date that is well 
after the date we expect the transition to HFA MDIs to be substantially 
completed by manufacturers of albuterol MDIs. This additional buffer 
period should give wholesalers and retailers adequate time to dispose 
of stocks of albuterol CFC MDIs. That being said, we do not have the 
authority to establish an effective dates for wholesalers and retailers 
that differs from an effective date for manufacturers. We can only make 
a determination on the date by which the criteria set out in Sec.  
2.125(g) will be met and the use of ODSs in albuterol MDIs is no longer 
essential. Once a product is no longer an essential use, the 
prohibitions in section 610 of the Clean Air Act automatically come 
into play. However, section 610 of the Clean Air Act only applies to 
sales in interstate commerce. If shipments of albuterol CFC MDIs by 
producers have stopped by December 31, 2007, or shortly thereafter, 
wholesalers and retailers should not find it difficult to distribute 
their stocks by December 31, 2008.

G. CFCs and the Environment

    (Comment 43) A few comments asserted that CFCs used in MDIs do not 
have an adverse impact on the environment because the CFCs are inhaled 
rather than being released into the environment.
    Nearly all of the CFCs inhaled into the lungs from an MDI are 
almost immediately exhaled into the environment. The small amounts of 
CFCs absorbed into the body are later excreted and exhaled without 
being broken down. Essentially all of the CFCs released from an MDI end 
up in the atmosphere with resulting harm to the stratospheric ozone 
layer.
    (Comment 44) A few comments asserted that the amount of ODSs 
released from albuterol CFC MDIs is insignificant, and eliminating 
their use would not provide any environmental benefit.
    The United States evaluated the environmental effect of eliminating 
the use of all CFCs in an environmental impact statement (EIS) in the 
1970s (see 43 FR 11301, March 17, 1978) (the 1978 rule). As part of 
that evaluation, FDA concluded that the continued use of CFCs in 
medical products posed an unreasonable risk of long-term biological and 
climatic impacts (see Docket No. 96N-0057). In 1990, Congress enacted 
Title VI of the Clean Air Act, which codified the decision to fully 
phase out the use of CFCs over time. Congress did not assign us the 
task of determining what amount of environmental benefit would result 
from the removal of CFC-containing medical devices, diagnostic 
products, drugs, and drug delivery systems from the market. Congress 
did instruct us to determine whether such products are essential. This 
rulemaking fulfills that obligation.

[[Page 17180]]

    (Comment 45) A comment asserted that the Montreal Protocol is 
working well and that according to the Executive Summary of the ``World 
Meteorological Organization Global Ozone and Research Project--Report 
No. 47: Scientific Assessment of Ozone Depletion: 2002'' (Executive 
Summary) (available at http://www.unep.org/ozone/Publications/6v_science%20assess%20panel.asp), the continuing use of CFCs in albuterol 
MDIs would delay restoration of the Earth's ozone layer to its 1980 
condition by an insignificant time past the currently projected date of 
2050. The comment quoted the following passage from page xvii of the 
Executive Summary:
    The updated, best-estimate scenario for future halocarbon mixing 
ratios suggests that the atmospheric burden of halogens will return 
to the 1980 pre-Antarctic-ozone-hole levels around the middle of the 
21st century, provided continued adherence to the fully amended and 
adjusted Montreal Protocol. Only small improvements would arise from 
further reduced production allowances in the future.
    The size of the delay in the date the ozone layer will be restored 
to its 1980 condition is not a criterion in determining which medical 
devices, diagnostic products, drugs, and drug delivery systems are 
essential under the Clean Air Act. These criteria are set out in Sec.  
2.125 and are discussed previously in this document. However, we note 
that the estimate described in the quoted paragraph assumes ``continued 
adherence to the fully amended and adjusted Montreal Protocol.'' As we 
discussed in section II.C.2 of this document, Decision IV/2 envisioned 
elimination of the production and importation of CFCs by January 1, 
1996, by Parties that are developed countries. Although production and 
importation of CFCs for use in albuterol MDIs are permitted, year to 
year, as an essential use under the Montreal Protocol, we fail to see 
how a rule that permits sale and distribution of albuterol CFC MDIs 
into 2008 can be characterized as a reduction in production allowances. 
The Montreal Protocol is frequently called the most successful 
environmental treaty in history, yet its success is based primarily on 
voluntary compliance by all of the Parties to the treaty. If the United 
States were to continue sale and distribution of ODS products after 
adequate alternative products were available, this could lead other 
Parties to do the same, eventually threatening the integrity of the 
Montreal Protocol. In the words of the Executive Summary cited in the 
comment, ``Failure to comply with the Montreal Protocol would delay or 
could even prevent recovery of the ozone layer.'' (Executive Summary at 
xxv.) The continued existence of a strong Montreal Protocol is in the 
best interest of the public health of the United States, and our 
failure to take timely action on albuterol MDIs could potentially 
weaken the Montreal Protocol.
    (Comment 46) One comment criticized our attempts in the 2004 
proposed rule to quantify the environmental benefits of this 
rulemaking.
    We agree with the comment that accurately quantifying the direct 
environmental benefits of this rule is very difficult and that 
quantifying the indirect environmental benefits may be impossible. 
However, as we discussed in our response to comment 25 of this 
document, we are under separate legal obligation to examine the broader 
societal costs and benefits of any rulemaking, including the 
environmental costs and benefits. Accordingly, the discussion of the 
environmental costs and benefits of this rule is separate from the 
determination as to whether the criteria in Sec.  2.125 have been met.
    (Comment 47) One comment stated the amount of CFCs released by MDIs 
is negligible compared to naturally occurring CFCs.
    There are no naturally occurring CFCs.
    (Comment 48) A few comments seemed to confuse CFCs with other 
greenhouse gases, such as carbon dioxide and nitrous oxide, when 
stating that MDIs were a minor source of CFCs compared to sources such 
as power plant and automobile emissions.
    While CFCs are considered to be greenhouse gases, we are publishing 
this rule because the criteria in Sec.  2.125 have been met, rather 
than any contribution CFCs may be making towards global warming.
    (Comment 49) A few comments stated that MDIs were a minor source of 
CFCs compared to hair spray and deodorants.
    CFCs were banned from deodorants, hair spray, and other cosmetics 
by the 1978 rule. Cosmetics containing CFCs have not been legally 
marketed in the United States since April 15, 1979, the effective date 
of the 1978 rule.

H. Comments on the Analysis of Impacts

    (Comment 50) We received several comments about our estimates of 
the price increases that might result from the proposed rule.
    One comment objected to FDA estimates of expected price increases 
based on the price gap between albuterol CFC MDIs and albuterol HFA 
MDIs from drugstore.com, because the Web site's market share is small 
and therefore does not accurately represent market prices. This comment 
recommended that we use retail cash albuterol MDI prices from IMS 
Health Inc. (IMS). Another comment took average wholesale prices of 
albuterol MDIs and inflated them according to average retail markups on 
albuterol for cash payers of 28.8 percent for branded MDIs and 363.3 
percent for generic MDIs. From this, the comment calculated cash payers 
will pay on average $8.61 more per MDI.
    Another comment contended that price increases are of limited 
importance, because insurers have an incentive to maintain lower 
copayments for albuterol. Lower copayments would minimize the costs to 
insurers for emergency department visits, hospitalizations, etc. that 
result from poorer compliance with albuterol therapy.
    A few comments said individuals eligible for Medicare or Medicaid 
are unlikely to face higher costs for albuterol as a result of this 
rule.
    We believe that cash albuterol MDI prices best reflect prices paid 
by the uninsured, and, consistent with the comment, have considered 
data on retail cash albuterol MDI prices from IMS, which are generally 
considered to be the best price data available. Although we did use 
prices from drugstore.com in the 2004 proposed rule,\10\ this was done 
primarily because we did not have rights to use the IMS data when the 
2004 proposed rule was being prepared. IMS retail price data reflect 
the impact on consumers better than other measures such as estimates 
derived from average wholesale cash prices inflated by average retail 
markups for cash payers.
---------------------------------------------------------------------------

    \10\ Although the prices derived from IMS data give us much 
greater assurance than the prices found on drugstore.com that the 
numbers we use accurately reflect market prices, in the case of 
albuterol MDIs the differences in prices are not very significant. 
The drugstore.com price for generic albuterol CFC MDIs is $13.99, 
while the weighted average retail price derived from IMS data is 
approximately $13.50. The drugstore.com prices for VENTOLIN HFA and 
PROVENTIL HFA are $39.61 and $38.99 respectively, while the weighted 
average retail price derived from IMS data for albuterol HFA MDIs is 
$39.50. The drugstore.com prices are those posted on February 10, 
2005. See section V.C.6 of this document for more information on the 
prices derived from IMS data.
---------------------------------------------------------------------------

    After reviewing these comments, we continue to believe that the 
likely price increase will be approximately the current difference in 
price between generic albuterol CFC MDIs and albuterol HFA MDIs, 
although competition from IVAX's approved albuterol HFA MDI and other 
albuterol

[[Page 17181]]

HFA MDIs that enter the market may lower prices somewhat.
    We believe that price increases are an important determinant of 
access for individuals without insurance, who are likely to pay the 
full amount of price increases out of their own pockets. Copayments for 
albuterol MDIs for privately insured individuals may change when this 
rule goes into effect, but such changes will be determined by their 
insurers. While copayments are generally higher for branded drugs, they 
are not necessarily higher for branded drugs that lack a generic 
alternative. We are unable to predict how average copayments may change 
as a result of the rule.
    We agree with the comments suggesting that individuals eligible for 
Medicare or Medicaid are unlikely to face higher out-of-pocket costs 
for albuterol as a result of this rule.
    (Comment 51) Comments were submitted about our use of estimates of 
consumers' response to drug price increases taken from the Goldman 
article (Ref. 4). One comment noted that elasticity estimates in the 
Goldman article were based on a broad range of asthma drugs, many of 
which differ from albuterol MDIs in important ways. The comment 
contended that these differences prevent us from drawing meaningful 
conclusions about how demand for albuterol MDIs will respond to price 
increases.
    A second comment noted that the proposed rule failed to make use of 
estimates in the Goldman article indicating a price elasticity of 
demand for asthma drugs as large as -.32.
    We recognize the limitations of applying results from the Goldman 
article to the market for albuterol MDIs, and have sought to 
characterize fully the associated uncertainty. We believe, however, 
that focusing on a range of elasticity estimates from -.05 to -.15 is 
reasonable and appropriate given available information.
    We used the Goldman article because it provides recent estimates of 
how consumer demand for asthma drugs responds to price increases. The 
article finds that among all users of asthma drugs, a doubling of 
copayments for asthma drugs reduced drug use by 32 percent. Among 
chronic asthma sufferers, use of asthma drugs decreased only 22 
percent. To the extent that asthmatics are more willing to reduce their 
use of maintenance drugs, such as steroid inhalers, than to reduce 
their use of rescue drugs, such as albuterol MDIs, the true consumer 
response to albuterol MDI price increases may be less than the Goldman 
article suggests.
    We acknowledge the potential shortcomings of applying estimates 
from the Goldman article to the market for albuterol MDIs but, lacking 
better information upon which to base our estimates, focus on the range 
of elasticity estimates from -.05 to -.15, the same range focused upon 
in the proposed rule.
    (Comment 52) Several comments sought to place our analysis of 
impacts in proper historical context by suggesting that the reductions 
in use that we estimate are small compared with historical variations. 
One comment noted that introduction of generic albuterol MDIs to the 
market for albuterol MDIs in the mid-1990s, and the associated decline 
in prices, was not associated with any decrease in asthma morbidity.
    A second comment noted that the introduction of cheaper generic 
albuterol MDIs did not result in an increase in consumption of 
albuterol MDIs, implying that removal of generic albuterol MDIs should 
not result in a decrease in consumption.
    A third comment pointed out that the introduction of generic 
albuterol MDIs to the market coincided roughly with the entry of 
therapeutic alternatives such as salmeterol xinafoate, ipatropium 
bromide, fluticasone propionate, and COMBIVENT, which would have 
decreased demand for albuterol MDIs at the time lower priced generics 
became available.
    A fourth comment noted that year-to-year fluctuations in demand for 
albuterol MDIs exceed 1 million units, implying that estimated 
decreases in albuterol demand are small relative to the market.
    We believe it is difficult to draw conclusions about the future 
albuterol MDI market based on characteristics of the market from the 
1990s. Our projected decrease in albuterol MDI sales assumes that, 
apart from price increases, other determinants of albuterol demand are 
held constant. In the mid-1990s, several factors that influence 
albuterol MDI demand changed including the prevalence and incidence of 
asthma and COPD and patterns of medical practice. However, the effects 
of these changes cannot easily be estimated with existing data. For 
example, changes in asthma prevalence before and after 1997 are 
complicated by changes in the design of the National Health Interview 
Survey in 1997. We believe the comment stating that introduction of new 
asthma drugs at this time decreased demand for albuterol MDIs is 
probably correct, but we lack the data needed to quantify any decrease 
in demand caused by introduction of new asthma drugs. Because important 
determinants of albuterol MDI demand are not held constant, the lack of 
a clear relationship between aggregate albuterol MDI sales and average 
prices in the 1990s does not undermine the projection that, all other 
factors remaining the same, use of albuterol MDIs will fall as prices 
rise.
    We agree that a reduction in albuterol MDI use of several hundred 
thousand annually is a small percentage of the total number of 
albuterol MDIs used in the United States.

I. Other Comments

    (Comment 53) Speakers at the PADAC meeting and written comments 
said albuterol MDIs were overused and the phaseout of albuterol CFC 
MDIs would be an appropriate time for physicians and patients to 
reevaluate the patients' use of asthma medication. The reevaluation 
would optimize drug regimens used by asthma patients by emphasizing use 
of maintenance drugs and deemphasizing the use of albuterol MDIs as a 
rescue medication. One comment suggested we incorporate strategies to 
encourage these interchanges into this final rule. Another written 
comment disagreed with these comments, and asserted that the 
elimination of the essential-use designation for albuterol MDIs should 
not be viewed as a teachable moment and it would be inappropriate to 
force patients to use other longer acting but more expensive drugs by 
effectively raising the price of albuterol MDIs.
    While recognizing that many experts believe that albuterol MDIs are 
being overused, we do not have any reliable data that show that there 
is a significant pattern of overuse. In any case, the overuse or 
underuse of a drug product is not a factor that we consider under Sec.  
2.125(g). We do, however, welcome any opportunity for physicians and 
patients to reexamine the patients' drug use and to try to optimize the 
patients' treatment regimens. It is also important to remember that we 
do not regulate the practice of medicine and, depending on how the 
strategies are expressed, an effort on our part to incorporate into our 
regulation strategies to encourage these consultations might be 
construed as the regulation of the practice of medicine.
    (Comment 54) A comment from an industry organization stated that 
educating patients and health care providers about the transition from 
albuterol CFC MDIs to albuterol HFA MDIs is very important, and offered 
to participate in cooperative education programs with FDA and other 
interested parties. GSK has outlined their education plans in their 
comments.

[[Page 17182]]

 Other comments stated the importance of transition education.
    We agree that educating patients and health care providers about 
the transition is very important. Anyone who wishes to discuss a 
cooperative educational effort with HHS and FDA should contact FDA or 
the Office of the Secretary of HHS.
    (Comment 55) One comment recommended that, in setting an effective 
date, we take into consideration the time necessary to educate patients 
and health care providers about the transition to albuterol HFA MDIs, 
and one comment recommended more time for this education.
    We believe that educating patients and health care providers about 
the transition to albuterol HFA MDIs is very important. From most 
patients' perspective, albuterol HFA MDIs are essentially identical\11\ 
to the albuterol CFC MDIs they will be replacing. An explanation that 
an albuterol HFA MDI is being substituted for the albuterol CFC MDI the 
patient had been receiving and a explanation of the differences in 
using the new MDI should be adequate for the vast majority of patients. 
This explanation can be given by the patient's physician, pharmacist, 
or other health care provider. While we realize it will take some time 
to prepare and distribute educational material, we believe that 
adequate education can easily be provided before the final transition 
to albuterol HFA MDIs.
---------------------------------------------------------------------------

    \11\ While PROVENTIL HFA and VENTOLIN HFA can be substituted for 
albuterol CFC MDIs, they are not therapeutic equivalents to 
albuterol CFC MDIs, or to each other, as that term is defined in the 
Orange Book. There are minor differences between the formulations of 
VENTOLIN HFA and PROVENTIL HFA that might be significant for some 
small patient subpopulations (see our response to comment 28 of this 
document), but for the vast majority of patients these differences 
should not be significant.
---------------------------------------------------------------------------

    (Comment 56) One comment asserted that ``a premature phaseout would 
compromise the reward structure for innovation.'' The comment also 
asserted that firms that had made substantial investments in developing 
albuterol HFA MDIs would be adequately rewarded for the innovation even 
if this rule were made effective at a date that would allow generic 
albuterol HFA MDIs to enter the market before the removal of the 
essential-use designation for albuterol MDIs. The comment stated that 
GSK had profited handsomely from sales of its combination fluticasone 
and salmeterol DPI products in the United States and abroad.
    We do not see, nor does the comment explain, how profits from the 
sale of combination fluticasone and salmeterol DPIs could be seen as a 
reward for GSK's albuterol HFA MDI research and development. Even if we 
assume that GSK's sales of other products somehow provide adequate 
incentives for its innovation, the comment does not assert how the 
research and development efforts of 3M, the manufacturer of the first 
albuterol HFA MDI marketed in the United States, have been rewarded.
    The development of ozone-friendly products is important to 
achieving the goal of protection of the Earth's ozone layer. 
Accordingly, it is a factor we considered in our analyses of impacts 
(see 69 FR 33602 at 33614-33615 and section V of this document).
    (Comment 57) One comment emphasized the importance of encouraging 
the development of ozone-friendly products and stated that, in 
consideration of the pharmaceutical firms developing ODS free 
alternatives, the U.S. Government had committed itself ``to ensure 
prompt removal of nonessential CFC MDIs as soon as new and reformulated 
products became available.''
    As we said previously in this document, the development of ozone-
friendly products is important to achieving the goal of protection of 
the Earth's ozone layer. However, we are unaware of the commitment 
described in this comment. The 2002 final rule and this rulemaking have 
been undertaken under our obligations under the Clean Air Act and the 
Montreal Protocol.
    (Comment 58) A few comments expressed unfavorable opinions on 
salmeterol DPIs and combination fluticasone and salmeterol DPIs. 
Another comment complained about the high prices of levalbuterol 
hydrochloride (HCl) inhalation solution.
    We have not considered salmeterol DPIs, combination fluticasone and 
salmeterol DPIs, or levalbuterol HCl inhalation solution to be 
alternatives to albuterol CFC MDIs. Comments about salmeterol DPIs, 
combination fluticasone and salmeterol DPIs, and levalbuterol HCl 
inhalation solution are not relevant to this rulemaking.

IV. Environmental Impact

    We have carefully considered the potential environmental effects of 
this action. We have concluded that the action will not have a 
significant adverse impact on the human environment, and that an 
environmental impact statement is not required. Our finding of no 
significant impact, and the evidence supporting that finding, contained 
in an environmental assessment, may be seen in the Division of Dockets 
Management (see ADDRESSES) between 9 a.m. and 4 p.m., Monday through 
Friday.

V. Analysis of Impacts

A. Introduction

    We have examined the impacts of the final rule under Executive 
Order 12866, the Regulatory Flexibility Act (5 U.S.C. 601-612), the 
Unfunded Mandates Reform Act of 1995 (Public Law 104-4), and the 
Congressional Review Act. Executive Order 12866 directs agencies to 
assess all costs and benefits of available regulatory alternatives and, 
when regulation is necessary, to select regulatory approaches that 
maximize net benefits (including potential economic, environmental, 
public health and safety, and other advantages; distributive impacts; 
and equity). We believe that this final rule is consistent with the 
regulatory philosophy and principles identified in the Executive order. 
This final rule is considered an economically significant regulatory 
action under the Executive order.
    The Regulatory Flexibility Act requires agencies to analyze 
regulatory options that would minimize any significant impact of a rule 
on small entities. We lack the data to certify that this final rule 
will not have a significant economic impact on a substantial number of 
small entities. Therefore, we have prepared a Regulatory Flexibility 
Analysis.
    Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires 
that agencies prepare a written statement, which includes an assessment 
of anticipated costs and benefits, before issuing ``any rule that 
includes any Federal mandate that may result in the expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100,000,000 or more (adjusted annually for 
inflation) in any one year.'' The current threshold after adjustment 
for inflation is $115 million, using the most current (2003) Implicit 
Price Deflator for the Gross Domestic Product. This rule, however, does 
not contain such a mandate.
    The Congressional Review Act requires that regulations that have 
been identified as being major must be submitted to Congress before 
taking effect. This rule is major under the Congressional Review Act.
    Limitations in the available data prevent us from estimating 
quantitatively the anticipated costs and benefits to society, so we 
focus instead on proxy measures. The costs of this final rule include 
the benefits lost by consumers who would have bought albuterol MDIs at 
the current price but are unwilling or unable to buy them at

[[Page 17183]]

a higher price. The price of albuterol MDIs will rise because this 
rule, by ending the essential-use designation for albuterol MDIs, will 
effectively remove less expensive generic versions of albuterol MDIs 
from the market. Consumers and third-party payers, including Federal 
and State Governments, will spend more for albuterol MDIs as a result 
of the price increase. But this increased spending is not part of 
social cost as conventionally defined, because it represents resources 
that are transferred from drug buyers (consumers and third-party 
payers) to drug sellers (drug manufacturers, wholesalers, pharmacies, 
etc.). The benefits of this rule include the value of improvements in 
the environment and public health that may result from reduced 
emissions of ODSs (for example, the reduced future incidence of skin 
cancers and cataracts). The benefits also include improved expected 
returns on investments in environmental technologies and greater 
international cooperation to comply with the Montreal Protocol. As we 
are unable to estimate the costs and benefits in dollar terms, we 
instead focus on the cumulative number of albuterol MDIs that might not 
be sold and the changes in CFC emissions as a result of the rule.
    As a result of this rule, approximately 96 million to 430 million 
albuterol CFC MDIs will be removed from the market, depending on 
whether generic albuterol MDIs become available in 2010 or 2017. If 
generic albuterol HFA MDIs enter the market at the end of 2010 (when 
one of the earlier listed patents for albuterol HFA MDIs expires) then 
96 million albuterol CFC MDIs would have been sold between the 
effective date of this rule (December 31, 2008) and the end of 2010, 
without the rule. If generic albuterol HFA MDIs enter the market at the 
end of 2017 (when the last listed patent for albuterol HFA MDIs 
expires)\12\ 430 million albuterol CFC MDIs would otherwise have been 
sold between the effective date of this rule, and December 2017, 
without the rule. After generic albuterol HFA MDIs enter the albuterol 
MDI market and competition among albuterol HFA MDI producers determines 
the price, there would be no rationale related to patient access to 
albuterol MDIs for maintaining an essential-use designation for ODSs 
for albuterol.
---------------------------------------------------------------------------

    \12\ Since publication of the 2004 proposed rule, two patents 
that expire in 2017 have been listed in the Orange Book for VENTOLIN 
HFA.
---------------------------------------------------------------------------

    Assuming generic albuterol HFA MDIs enter the market at the end of 
2010, the removal of albuterol CFC MDIs will eliminate competition from 
low-cost generic drugs during the period between December 2008 and 
December 2010, thereby raising prices and increasing spending on 
albuterol MDIs by about $2.1 billion, assuming a 3-percent discount 
rate, or $1.7 billion, assuming a 7-percent discount rate (present 
value in 2005).
    Assuming generic albuterol HFA MDIs enter the market at the end of 
2017, the removal of albuterol CFC MDIs will eliminate competition from 
low-cost generic drugs during the period between December 2008 and 
December 2017, thereby raising prices and increasing spending on 
albuterol MDIs by about $8.3 billion, assuming a 3-percent discount 
rate, or $6.2 billion, assuming a 7-percent discount rate (present 
value in 2005).
    Taking into account GSK's commitment to provide free samples and 
coupons, we estimate that higher prices due to the elimination of 
generic competition will reduce the number of albuterol MDIs sold by 
between 300,000 and 900,000 per year. This will induce U.S. consumers 
to use between 600,000 and 1.8 million fewer albuterol MDIs between the 
removal of albuterol CFC MDIs on December 31, 2008, and December 2010, 
or to use 2.7 million and 8.1 million fewer albuterol MDIs during the 
years between December 31, 2008, and December 2017. These estimates do 
not take into account the GSK and Schering patient assistance programs 
designed to provide free or low cost drugs to low-income patients. 
Should generic albuterol MDIs become available at the end of 2010, 
consumers will substitute 96 million albuterol HFA MDIs for albuterol 
CFC MDIs between 2008 and December 2010, reducing atmospheric CFC 
emissions by 2,400 tons in total. If generic albuterol MDIs become 
available at the end of 2017, substitution of albuterol HFA MDIs for 
the 430 million albuterol CFC MDIs that would have been consumed 
between 2008 and December 2017 will reduce atmospheric emissions of 
CFCs by about 10,800 tons in total. These quantitative estimates of the 
effects of this rule are summarized in tables 1 and 2 of this document.

                          Table 1.--Summary of Quantifiable Effects of the Final Rule Relative to HFA Patent Expiration in 2010
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Increased Expenditures for Albuterol MDIs
                                                              Present Value in 2005 (billions)           Possible Reduction in      Reduced Aggregate
    Number of Affected Albuterol MDIs (millions)     --------------------------------------------------    MDI Use (millions)      Emissions Related to
                                                      3-percent discount rate  7-percent discount rate                            Phaseout (metric tons)
--------------------------------------------------------------------------------------------------------------------------------------------------------
96 million                                                               $2.1                     $1.7               0.6 to 1.8                    2,400
--------------------------------------------------------------------------------------------------------------------------------------------------------


                          Table 2.--Summary of Quantifiable Effects of the Final Rule Relative to HFA Patent Expiration in 2017
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Increased Expenditures for Albuterol MDIs
                                                              Present Value in 2005 (billions)           Possible Reduction in      Reduced Aggregate
Number of CFC Albuterol MDIs Removed From the Market --------------------------------------------------    MDI Use (millions)      Emissions Related to
                                                      3-percent discount rate  7-percent discount rate                            Phaseout (metric tons)
--------------------------------------------------------------------------------------------------------------------------------------------------------
430 million                                                              $8.3                     $6.2               2.7 to 8.1                   10,800
--------------------------------------------------------------------------------------------------------------------------------------------------------

    While the agency believes that the benefits of this regulation 
justify its costs, we cannot estimate quantitatively the public health 
effects of the phaseout. The decreased use of albuterol MDIs may 
adversely affect some patients, but we lack an ability to characterize 
such effects quantitatively. We also are unable to estimate 
quantitatively the reductions in skin cancers, cataracts, and 
environmental harm that may result from the reduction in CFC emissions 
by 10,800 metric tons during these years.
    We state the need for the regulation and its objective in section 
V.B of this

[[Page 17184]]

document. Section V.C of this document provides background on CFC 
depletion of stratospheric ozone, the Montreal Protocol, the albuterol 
MDI market, and the health conditions that albuterol is used to treat. 
We analyze the benefits and costs of the rule, including effects on 
government outlays, in section V.D of this document. We assess 
alternative phaseout dates in section V.E of this document, and conduct 
a sensitivity analysis on entry dates of generic competition in section 
V.F of this document. We present an analysis of the effects on small 
business in a regulatory flexibility analysis in section V.G of this 
document. We discuss our conclusions in section V.H of this document.

B. Need for Regulation and the Objective of this Rule

    This regulation is necessary because private markets are very 
unlikely to preserve levels of stratospheric ozone sufficient to 
protect the public health. Individual users of albuterol MDIs have no 
significant private incentive to switch to non-ozone depleting 
albuterol HFA MDIs. In fact, each user would bear all of the costs and 
virtually none of the benefits of such a switch, as the environmental 
and health benefits would tend to be distributed globally and occur 
decades in the future. Thus, the outcome of a private market would be 
continued use of the albuterol MDI available at the lowest price, even 
if the social value of reducing emissions were clearly much greater 
than the price premium for non-ozone depleting albuterol HFA MDIs.
    The objective of this final rule is to reduce atmospheric emissions 
of ODSs, specifically CFCs. CFCs and other ODSs deplete the 
stratospheric ozone that protects the Earth from ultraviolet solar 
radiation. We are ending the essential-use designation for ODSs used in 
albuterol MDIs because two acceptable ODS-free albuterol formulations 
have been successfully marketed in the United States for more than 2 
years. Removing this essential-use designation will comply with 
obligations under the Montreal Protocol and the Clean Air Act, thereby 
reducing emissions that deplete stratospheric ozone, while preserving 
access to essential drugs by minimizing adverse effects on affected 
patient populations.

C. Background

1. CFCs and Stratospheric Ozone
    During the 1970s, scientists became aware of a relationship between 
the level of stratospheric ozone and industrial use of CFCs. Ozone 
(O3), which causes respiratory problems when it occurs in 
elevated concentrations near the ground, shields the Earth from 
potentially harmful solar radiation when in the stratosphere. Excessive 
exposure to solar radiation is associated with adverse health effects 
such as skin cancer and cataracts, as well as other adverse 
environmental effects. Emissions of CFCs and other ODSs reduce 
stratospheric ozone concentrations through a catalytic reaction, 
thereby allowing more solar radiation to reach the Earth's surface. 
Because of this, environmental scientists from the United States and 
other countries advocated ending all uses of these chemicals.
2. The Montreal Protocol
    The international effort to craft a coordinated response to the 
global environmental problem of stratospheric ozone depletion 
culminated in the Montreal Protocol, an international agreement to 
regulate and reduce production of ODSs. The Montreal Protocol is 
described in section III.B of this document. One hundred and eighty-six 
countries have now ratified the Montreal Protocol, and the overall 
usage of CFCs has been dramatically reduced. In 1986, global 
consumption of CFCs totaled about 1.1 million metric tons annually, and 
by 2000, total annual consumption had been reduced to fewer than 0.1 
million metric tons (Ref. 5). This decline amounts to about a 90-
percent decrease in consumption and is a key measure of the success of 
the Montreal Protocol. Within the United States, consumption of ODSs, 
and CFCs in particular, has fallen sharply--consumption of CFC-11 and 
CFC-12 is about 20 percent of 1990 consumption.\13\
---------------------------------------------------------------------------

    \13\ The ozone depleting potentials of CFC-11 and CFC-12 are 
equal. See http://www.epa.gov/ozone/ods.html.
---------------------------------------------------------------------------

    A relevant aspect of the Montreal Protocol is that production of 
CFCs in any year by any country is banned after the phase-out date 
unless the Parties to the Montreal Protocol agree to designate the use 
as ``essential'' and approve a quantity of new production for that use. 
Each year, each Party nominates the amount of CFCs needed for each 
essential use and provides the reason why such use is essential. 
Agreement on both the essentiality and the amount of CFCs needed for 
each nominated use has been reached by consensus at the annual Meeting 
of the Parties.
3. Benefits of the Montreal Protocol
    EPA has generated a series of estimates of the environmental and 
public health benefits of the Montreal Protocol (Ref. 6). The benefits 
include reductions of hundreds of millions of nonfatal skin cancers, 6 
million fewer fatalities due to skin cancer, and 27.5 million cataracts 
avoided between 1990 and 2165 if the Montreal Protocol were fully 
implemented. EPA estimates the value of these and related benefits to 
equal $4.3 trillion in present value when discounted at 2 percent over 
the period of 175 years. This amount is equivalent to about $6 trillion 
after adjusting for inflation between 1990 and 2004. This estimate 
includes all benefits of total global ODS emission reductions expected 
from the Montreal Protocol and is based on reductions from a baseline 
scenario in which ODS emissions would continue to grow for decades but 
for the Montreal Protocol.
4. Characteristics of COPD
    Albuterol MDIs are used to treat COPD. While there is some overlap 
between asthma patients and COPD patients, COPD encompasses a group of 
diseases characterized by relatively fixed airway obstruction 
associated with breathing-related symptoms (for example, chronic 
coughing, expectoration, and wheezing). COPD is generally associated 
with cigarette smoking and is extremely rare in persons younger than 
25.
    According to the Centers for Disease Control (CDC), an estimated 10 
million U.S. adults carried the diagnosis of COPD in 2000 (Ref. 7). 
Because the underlying surveys depend on patient-reported diagnoses and 
many affected individuals have not been formally diagnosed, the 
National Health Interview Survey (NHIS) suggests that as many as 24 
million Americans may actually be affected by the disease. The 
proportion of the U.S. population with mild or moderate COPD has 
declined over the last quarter century, although the rate of COPD in 
females increased relative to males between 1980 and 2000. The most 
effective intervention in modifying the course of COPD is smoking 
cessation. Symptoms such as coughing, wheezing, and sputum production 
are treated with medication.
5. Characteristics of Asthma
    Albuterol MDIs are also used to treat asthma, a chronic respiratory 
disease characterized by episodes or attacks of bronchospasm on top of 
chronic airway inflammation. These attacks can vary from mild to life-
threatening and involve shortness of breath, wheezing, cough, or a 
combination of symptoms. Many factors, including allergens, exercise, 
viral infections, and others, may trigger an asthma attack.

[[Page 17185]]

    According to the 2002 NHIS, approximately 20 million patients in 
the United States reported they had asthma (Ref. 8). The prevalence of 
asthma decreases with age, with the prevalence being 92 per 1,000 
children ages 0-17 (6.1 million children) compared to 83 per 1,000 
among adults ages 18-44 (7.4 million), 71 per 1,000 among adults ages 
45-64 (4.6 million), and 59 per 1,000 among adults age 65 and over (1.9 
million) (Ref. 8).
    The NHIS reported that during 2002, about 12 million patients 
reported experiencing an asthma attack during the previous year (Ref. 
8, table 10). According to the National Ambulatory Medical Care Survey, 
in 2001 there were 1.3 million outpatient asthma visits to physician 
offices and hospital clinics and 1.9 million emergency room visits 
(Ref. 8, table 16). According to the National Center for Health 
Statistics, there were 454,000 hospital admissions for asthma in 2001 
(Ref. 8, table 12), and 4,269 mortalities (Ref. 8, table 1). The 
estimated direct medical cost of asthma (hospital services, physician 
care, and medications) was $9.4 billion (Ref. 8, table 17).
    While the prevalence of asthma has been increasing in recent years, 
CDC reports that the incidence of asthma (or the rate of new diagnoses) 
has remained fairly constant since 1997 (Ref. 9). Non-Hispanic blacks, 
children under 17 years old, and females have higher incidence rates 
than the general population and also have higher attack prevalence. The 
CDC notes that although numeric increases have occurred in the numbers 
and rates of physician office visits, hospital outpatient visits, and 
emergency room visits, these increases are accounted for by the 
increase in prevalence. This phenomenon might indicate early successes 
by asthma intervention programs that include access to medications.
6. Current U.S. Albuterol MDI Market
    Albuterol is the preferred, and most commonly prescribed, short-
acting relief medication for asthma and is also important in the 
treatment of COPD. For reasons of cost, convenience, and effectiveness, 
MDIs are the preferred, and most commonly prescribed, route of 
administration for albuterol.
    We estimate that, in the first two quarters of 2004, U.S. consumers 
bought about 22.7 million generic albuterol MDIs through retail 
channels. This estimate is based on our analysis of IMS data (Ref. 10). 
Total consumption of albuterol MDIs has fluctuated around approximately 
50 million MDIs annually over the last several years (Ref. 11). Based 
on retail sales, we estimate approximately 96 percent of albuterol MDIs 
sold were generic MDIs or branded MDIs relabeled and sold as generic 
(Ref. 10) (all containing CFCs), suggesting a total market for generic 
albuterol MDIs of approximately 48 million MDIs.
    IMS provides data on average retail prices for marketers of 
albuterol MDIs for each of three payer types (cash customers, Medicaid 
recipients, and patients covered by other third-party payers), and the 
proportion of each marketer's sales to each payer type. As described in 
table 3 of this document, the weighted average (across all payer types) 
of retail prescription price for generic albuterol CFC MDIs during the 
first half of 2004 was about $13.50 per MDI, the weighted average 
retail prescription price for branded versions of albuterol CFC MDIs 
was about $38.90 per MDI, and the weighted average retail prescription 
price for albuterol HFA MDIs was about $39.50 per MDI.

                                      Table 3.--Summary of Current Retail Prices for Albuterol CFC and HFA MDIs\1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Albuterol CFC MDI Prices     Albuterol HFA   Price Premium: HFA MDI Price
                                                           ------------------------------   MDI Prices       Relative to Generic Price       Estimated
               Payer Type                  Generic Market                                ------------------------------------------------      Units
                                          Share (percent)    Generics   Weighted Average     Weighted       Dollars per                    (millions)\2\
                                                                        Branded Products      Average           MDI           Percent
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cash                                                  97.0     $19.13             $45.90          $46.32          $27.19             142             5.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
Medicaid\3\                                           97.3     $15.61             $37.10          $41.14          $25.53             164             8.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
Third-party                                           95.4     $12.03             $37.75          $38.60          $26.57             221            31.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Market                                          96.0     $13.53             $38.87          $39.47          $25.94             192            45.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Source: (Ref. 10)
\2\ These estimates reflect retail sales of generic albuterol MDIs, excluding sales at Internet and mail-order pharmacies.
\3\ Medicaid prices do not reflect rebates given directly to States by drug companies.

    We estimate albuterol CFC MDIs are responsible for roughly 1,200 
metric tons of CFC emissions annually. Each albuterol CFC MDI contains 
about 21 grams of CFCs.\14\ The estimated 48 million albuterol CFC MDIs 
sold annually therefore contain about 1,000 metric tons of CFCs. Adding 
an additional 20 percent to account for use in production, unusable 
batches, and other factors (as manufacturers typically do in the 
process of requesting essential-use allocations of CFCs for 
manufacturing) brings the total emissions to about 1,200 metric tons. 
To the extent that CFCs used in the production process are reclaimed 
and destroyed, this estimate overstates expected emissions reductions.
---------------------------------------------------------------------------

    \14\ CFC MDI manufacturers disclose the CFC content of their 
MDIs to EPA as part of the process of requesting essential-use 
allocations; however, the CFC content of any particular MDI is 
considered confidential business information and may not be 
disclosed without the manufacturer's consent.
---------------------------------------------------------------------------

D. Benefits and Costs of the Final Rule

    The benefits and costs of a government action are conventionally 
estimated relative to a baseline scenario that in this case is a 
description of the production, use, and access to albuterol MDIs in the 
absence of this rule. In this section we first describe such a baseline 
and then present our analysis of the benefits of the final rule. Next 
we turn to the costs of the rule and to an analysis of the effects on 
the Medicare and Medicaid programs.
1. Baseline Conditions
    We developed baseline estimates of future conditions to estimate 
the economic effects of prohibiting marketing of albuterol CFC MDIs 
after December 31, 2008. It is standard practice to use, as a baseline, 
the state of the world absent the rulemaking in question, or where this 
implements a legislative requirement, the world absent the statute.

[[Page 17186]]

    For the baseline in this analysis, we assume that access to CFC 
propellants, and therefore to albuterol CFC MDIs, continues 
indefinitely. This assumption focuses our analysis on the impact of 
removing less expensive generic albuterol CFC MDIs from the market, 
until the date that competition from generic albuterol HFA MDIs lowers 
prices. As stated previously in this document, we have identified 
listed patents on the HFA technology with expiration dates of 2009, 
2010, 2014, 2015, and December 2017. In performing our analysis, we 
make two different sets of assumptions. First, we perform an evaluation 
based on the assumption that generic versions of albuterol HFA MDIS 
will come on the market after patents expire in 2010. Second, we 
perform an evaluation based on the assumption that generic albuterol 
HFA MDIs will come on the market after the last listed patent expires 
in 2017. Without this rule, U.S. commitments to the Montreal Protocol 
could limit future access to CFCs and, therefore, inexpensive generic 
albuterol CFC MDIs. This observation suggests an alternative baseline 
where Parties to the Montreal Protocol stop approving nominations for 
the use of CFCs in albuterol MDIs at a particular date. While the 
Parties could theoretically take such action for calendar year 2008, it 
would be speculative on our part to assume that they would take such 
action for that specific date or any other. As a result, we do not 
pursue a quantitative analysis with such alternative baselines.
    Throughout our analysis, we assume that future prices for albuterol 
CFC and HFA MDIs do not change from current levels. This assumption 
overstates prices to the extent that competition from new entrants 
reduces future albuterol HFA MDI prices. We assume, however, that 
competition among the albuterol HFA MDI manufacturers will leave prices 
roughly stable and note that one manufacturer has pledged to freeze 
prices until at least the beginning of 2008.
    Throughout this analysis, we assume that sufficient inventories of 
CFCs are available to meet demand up to December 31, 2008, and that 
albuterol HFA MDIs available on and after December 31, 2008, will be 
adequate to meet demand. In calculating the present value of increased 
expenditures, we discount expected future increases in expenditures by 
both 7 percent and 3 percent annually for each year after 2005.
2. Benefits of the Final Rule
    The benefits of the final rule include environmental and public 
health improvements from protecting stratospheric ozone by reducing CFC 
emissions. Benefits also include expectations of increased returns on 
investments in environmentally friendly technology, reduced risk of 
unexpected disruption of supply of albuterol MDIs, and continued 
international cooperation to comply with the spirit of the Montreal 
Protocol, thereby potentially reducing future emissions of ODS 
throughout the world.
    a. Reduced CFC emissions. Market withdrawal of albuterol CFC MDIs 
will reduce emissions by approximately 1,200 metric tons of CFCs per 
year. We have reviewed current CFC inventories and believe currently 
available quantities are likely to be sufficient to supply the 
albuterol CFC MDI market for approximately 12 months. Nominations for 
new CFC production are generally approved by the Parties to the 
Montreal Protocol 2 years in advance. The final rule bans marketing of 
albuterol CFCs after December 31, 2008. There is considerable 
uncertainty with respect to the amount of inventories that will be 
available in the future, but we anticipate that utilization of existing 
inventory will allow the United States to avoid requesting a 2008 
exemption, or to significantly reduce the amount requested. Therefore, 
we estimate the final regulation will reduce CFC use by 1,200 metric 
tons per year after the end of 2008, a benefit that will continue 
beyond the evaluation period.
    In an evaluation of its program to administer the Clean Air Act, 
EPA has estimated that the benefits of controlling ODSs under the 
Montreal Protocol are the equivalent of $6 trillion in current dollars. 
However, EPA's report provides no information on the total tons of 
reduced emissions or the incremental value per ton of reduced 
emissions. EPA derived its benefits estimates from a baseline that 
included continued increases in emissions in the absence of the 
Montreal Protocol. We have searched for authoritative scientific 
research that quantifies the marginal economic benefit of incremental 
emission reductions under the Montreal Protocol, but have found none 
conducted during the last 10 years. As a result, we are unable to 
quantify the environmental and human health benefits of reduced ODS 
emissions from this regulation. Such benefits, in any event, were 
apparently included in EPA's earlier estimate of benefits.
    As a share of total global emissions, the reduction associated with 
the elimination of albuterol CFC MDIs represents only a small fraction 
of 1 percent. Current allocations of CFCs for albuterol MDIs account 
for about 0.1 percent of the total 1986 global consumption of CFCs 
(Ref. 5). Furthermore, current U.S. CFC emissions from MDIs represent a 
much smaller, but unknown share of the total emissions reduction 
associated with EPA's estimate of $6 trillion in benefits because that 
estimate reflects future emissions growth that has not occurred.
    Although the direct benefits of this regulation are small relative 
to the overall benefits of the Montreal Protocol, we believe the 
reduced exposure to UV-B radiation that will result from these reduced 
emissions will help protect public health. However, we are unable to 
assess or quantify specific reductions in future skin cancers and 
cataracts associated with these reduced emissions.
    b. Returns on investment for environmental technology. Establishing 
a phaseout date prior to the expiration of patents on albuterol HFA 
MDIs not only rewards the developers of the HFA technology, but also 
serves as a signal to other potential developers of ozone-safe 
technologies. In particular, such a phaseout date would preserve 
expectations that the government protects incentives to research and 
develop ozone-safe technologies.
    Newly developed technologies to avoid ODS emissions have resulted 
in more environmentally ``friendly'' air conditioners, refrigerants, 
solvents, and propellants, but only after significant investments. 
Several manufacturers have claimed development costs that total between 
$250 million and $400 million to develop HFA MDIs and new propellant-
free devices for the global market (Ref. 11).
    These investments have resulted in several innovative products in 
addition to albuterol HFA MDIs. For example, breath-activated delivery 
systems, dose counters, dry powder inhalers, and mini-nebulizers have 
also been successfully marketed. This technology could also affect 
other drugs used for the treatment of asthma and COPD because of the 
likelihood that, eventually, CFCs will not be available for any drug 
use. To compare the effect of alternative phaseout dates on these 
returns to investment, we compare the ratio of the present value of 
increased revenues expected to accrue to innovative firms from a 
December 31, 2008, phaseout date and the present value of the future 
revenue stream of alternative phaseout dates, using both 7 percent and 
3 percent annual discount rates. This ratio can provide a basis for 
relative assessments of the returns to investors for alternative 
phaseout dates. We present estimates of this ratio in a later 
discussion of alternatives.

[[Page 17187]]

    Returns on investment are very sensitive to the current market 
prices in the United States. The pharmaceutical markets of other 
Parties to the Montreal Protocol operate with implicit or explicit 
price controls. These controls have depressed the potential returns to 
technological innovation. For example, in 2003, the ex-manufacturer 
prices (the prices of the drugs when they leave the production 
facilities) of the albuterol HFA MDIs most widely sold in France, 
Germany, and the United Kingdom ranged between roughly $3.30 and $6.40; 
in the United States these prices were in the neighborhood of $29 to 
$30.\15\
---------------------------------------------------------------------------

    \15\ Analysis completed by FDA based on information provided by 
IMS Health, IMS MIDAS\TM\, United States, Germany, France and the 
United Kingdom, 2003.
---------------------------------------------------------------------------

    c. International cooperation. The advantages of selecting a date 
that maintains international cooperation are substantial because the 
Montreal Protocol, like most international environmental treaties, 
relies primarily on a system of national self-enforcement, although it 
also includes a mechanism to address noncompliance. In addition, 
compliance with its directives is subject to differences in national 
implementation procedures. Economically less-developed nations, which 
have slower phaseout schedules than developed nations, have emphasized 
that progress in eliminating ODSs in developing nations is affected by 
observed progress by developed nations, such as the United States. If 
we had adopted a later phaseout date, other Parties could attempt to 
delay their own control measures.
3. Costs of the Final Rule
    The effects of the final rule include increased spending for needed 
albuterol medication. The social costs of the final rule include the 
lost benefits of albuterol use that may result from the price increase. 
We discuss the increased spending and then the social costs in turn.
    In the absence of this regulation, we would expect 430 million 
generic albuterol MDIs to be sold during the entire period between 
December 31, 2008, and December 2017, when the last patent listed in 
the Orange Book for an albuterol HFA MDI will expire. Of these, 96 
million would be sold before 2010, an earlier date when generics might 
arrive. These figures are based on the estimate that approximately 96 
percent (Ref. 10) of the approximately 50 million albuterol MDIs sold 
per year (Ref. 11) are generic, suggesting that about 48 million 
generic albuterol MDIs are sold annually.
    With this regulation, patients who would have used generic 
albuterol CFC MDIs are expected generally to switch to albuterol HFA 
MDIs. We estimated in section V.C.6 of this document a weighted average 
price difference at retail pharmacies (across all payer types) of about 
$26 between these products. If this difference can be applied to future 
transactions involving 48 million generic albuterol MDIs annually (less 
the 2 million free samples promised by GSK and decreased demand of 
300,000 to 900,000 MDIs resulting from price increases--as calculated 
later in this analysis), then increased expenditures from consumers and 
private or public third-party payers would reach about $1.2 billion per 
year. This estimate is based, in part, on estimated increases in 
Medicaid prices that do not take into account rebates given directly to 
States by drug companies. To the extent that such rebates are larger 
for branded albuterol MDIs, which are more expensive, the increased 
expenditures are overestimated.
    The present value of these increased expenditures in 2005 is about 
$6.2 billion using a 7 percent annual discount rate and $8.3 billion 
using a 3 percent annual discount rate. In estimating this increased 
spending, we focus on the period between December 31, 2008, and 
December 2017, when the last patent listed in the Orange Book will 
expire. We also ignore the fact that after a VENTOLIN HFA MDI is first 
used, it expires much more quickly than a PROVENTIL HFA MDI or 
albuterol CFC MDIs. Although this change in the usable life of some 
MDIs may affect the quantity consumed, we are unable to quantify the 
magnitude of such an effect.
    These increased expenditures represent primarily transfers from 
consumers and third-party payers, including State and Federal 
Governments, to branded pharmaceutical manufacturers; they are, 
therefore, not net costs to society. Because these estimates are based 
on average retail prices, they include additional spending that will go 
to parties other than innovative manufacturers, such as distributors 
and retail pharmacies. We estimate that about 11 percent of this 
increase--about $130 million annually--may be paid by uninsured 
customers ($130 million) (Ref. 10). We derive these estimates assuming 
increased spending is the product of the number of albuterol MDIs sold 
for cash and the difference between the average price for generic 
albuterol MDIs and the simple mean of the prices for albuterol HFA 
MDIs. We estimate that 5 million generic albuterol MDIs are sold to 
uninsured patients annually and that retail cash prices for albuterol 
MDIs will rise by about $27 per MDI (details of these estimates follow 
later in this section of the document.) Taking in to account savings 
from coupons and free samples, uninsured albuterol users would 
therefore spend about $120 million more each year.\16\
---------------------------------------------------------------------------

    \16\ (5 million MDIs - 300,000 free sample MDIs) x ($25/MDI) - 
(450,000 coupons) x ($10) = $117,500,000. Here, we assume coupons 
and free samples reach uninsured albuterol users in proportion to 
estimates of the uninsured fraction of the overall population (15 
percent).
---------------------------------------------------------------------------

    According to MEPS, private nongroup and uninsured individuals used, 
on average, 3.3 albuterol prescriptions per year (Ref. 12). Based on 
IMS data, we estimate the average albuterol prescription is for 1.2 
MDIs (Ref. 10). The average uninsured, or underinsured, albuterol user 
would therefore use about 4 MDIs/year. Based on these figures, we 
estimate that a population of uninsured albuterol users of about 1.25 
million\17\ would pay, on average, $95 more per year for albuterol.\18\ 
This estimate does not take in to account the reduced use of albuterol 
MDIs among the uninsured that may result from higher prices or the 
extent to which quicker expiration of some HFA albuterol MDIs, relative 
to CFC MDIs, will increase albuterol MDI demand and expenditures. In 
the future, some fraction of these cash payers will likely be covered 
by Medicare (Ref. 10).
---------------------------------------------------------------------------

    \17\ (5 million MDIs) / 4 MDIs per uninsured user = 1.25 million 
uninsured users.
    \18\ ($117,500,000) / (1.25 million uninsured users) = $94.00 
per uninsured user.
---------------------------------------------------------------------------

    We expect price increases resulting from market withdrawal of less 
expensive generic albuterol MDIs will reduce albuterol use by several 
hundred thousand MDIs annually (as explained below), although there is 
substantial uncertainty about these estimates. The impact of this 
reduction on health outcomes is too uncertain to quantify given 
available data. Some patients, however, respond to price increases for 
medications for chronic conditions in ways that may adversely affect 
their health. A recent article found that:
    ***copayment increases led to increased use of emergency 
department visits and hospital days for the sentinel conditions of 
diabetes, asthma, and gastric acid disorder: predicted annual 
emergency department visits increased by 17 percent and hospital 
days by 10 percent when copayments doubled * * *.
    However, the article proceeds to characterize these results as 
``not definitive.'' (Ref. 4) This finding

[[Page 17188]]

suggests that increased prices for albuterol may lead to some adverse 
public health effects among the populations that would face increased 
prices. This evidence is insufficient to permit us to quantify any 
adverse public health effects. We use expected reductions in albuterol 
MDI purchases as a surrogate measure of the impact.
    Our approach to estimating the effects of the rule assumes that the 
primary effect of an elimination of albuterol CFC MDIs from the market 
would be an increase in the average price of albuterol MDIs. Given the 
price increase expected from the elimination of generics and existing 
estimates of market responses to price increases, we have projected how 
the quantity of albuterol MDIs consumed may decline as a result of this 
rule. As in the 2004 proposed rule, we assume that the reduction in the 
use of albuterol MDIs attributable to this rule can be calculated as 
the product of the sensitivity of use with respect to the price 
increase, the baseline use of albuterol MDIs among price--sensitive 
patients, and the price increase in percentage terms. We discuss these 
in turn.
    We have no information about how consumers react to increases in 
the price of MDIs per se or to increases in the price of ``rescue'' 
types of MDIs, such as albuterol, in particular. Economists have 
researched the response of consumers to higher insurance copayments for 
drugs in general. The results appear to indicate price elasticities in 
the range of -.1 to -.2, meaning that a 10 percent increase in 
insurance copayments appears to lead to a reduction in the number of 
prescriptions of between 1 and 2 percent (Ref. 13). Some researchers 
have reported estimates of price elasticities as great as -.3 for 
asthma drugs (Ref. 4), but the authors report that there is wide 
variance based on the availability of over-the-counter substitutes. For 
example, for drugs with no over-the-counter substitute--a set that 
presumably includes albuterol--the reported price elasticity was 
-.15.\19\ We have used price elasticities of between -.05 and -.15 to 
estimate the potential effect of price increases on demand. We 
recognize that elasticity estimates derived from insurance copayment 
studies may not be specifically applicable to the effects of average 
retail price increases on uninsured patients' demand for albuterol.
---------------------------------------------------------------------------

    \19\ Some patients may view PRIMATENE, an epinephrine MDI 
available over the counter, as a substitute for prescription 
albuterol MDIs. If this view is widespread, the decline in albuterol 
MDI use may be greater than that estimated here. However, insofar as 
PRIMATENE is effective in treating asthma, the adverse health 
effects would not be greater. We lack data to evaluate patients' 
willingness to substitute PRIMATENE for albuterol MDIs.
---------------------------------------------------------------------------

    To derive an estimate of the number of albuterol MDIs not sold as a 
result of this rule, we need an estimate of the baseline use of 
albuterol MDI sales by price-sensitive consumers. From data on retail 
sales by payer type from the first half of 2004, we find about 5 
million generic albuterol MDIs are sold to uninsured patients annually. 
This estimate includes sales to people over age 65 not covered by 
Medicaid who we expect will be covered by Medicare in the future, but 
it excludes mail order and Internet sales and sales through hospitals 
and nursing homes. Alternatively, if uninsured individuals under age 65 
use albuterol MDIs in proportion to their share of the population 
(roughly 15 percent) (Ref. 14), then roughly 7 million of 46 million 
generic albuterol MDIs would be sold to the uninsured (46 million = 48 
million generic albuterol MDIs - 2 million free samples).
    Finally, to estimate the price increase from this rule, we first 
assess IMS data, which indicate that cash payers paid, on average, 
$19.10 for generic albuterol MDIs and $46.30 for albuterol HFA MDIs, a 
difference that would suggest a price increase of $27.20 per MDI, or 
142 percent. However, alternative assumptions about the future market 
share of different albuterol HFA MDI manufacturers would result in a 
smaller price increase--130 percent. These estimated price differences 
faced by cash payers are only a proxy for price differences faced by 
uninsured patients, because some people with insurance may pay cash, 
and some uninsured patients may buy drugs from mail-order and Internet 
pharmacies.
    We believe that estimates of the recent price premium for albuterol 
HFA MDIs may be a reasonable approximation of the price increase 
anticipated from this rule, at least to the extent that patent 
protection and the more costly criteria for FDA approval of albuterol 
HFA MDIs substantially curb competition. At least one listed patent is 
expected to expire in December 2017. While increased competition from 
new patented albuterol HFA MDIs may reduce future albuterol HFA MDI 
prices, such reduction may be small until generic albuterol MDIs are 
reintroduced into the market. Apart from any patents, marketing of new 
albuterol HFA MDIs before the patents expire requires FDA approval of a 
completed NDA. After the patents expire, FDA can approve generic 
albuterol HFA MDIs by the abbreviated new drug application (ANDA) 
process. The NDA process is more complicated, expensive, and time 
consuming than the ANDA process by which new generic drugs are brought 
to market. This NDA requirement constitutes a barrier to entry in the 
market that will tend to further limit competition until the patents 
expire as compared to markets where generic drugs can be marketed. 
Finally, as noted previously in this document, one manufacturer has 
also announced a voluntary price freeze on its albuterol HFA MDI until 
2008.
    We combine different measures of price elasticities (-.05 to -.15), 
the size of the uninsured generic albuterol MDI market (5 to 7 million 
MDIs), and estimated price increases (130 percent to 140 percent) to 
estimate the impact of price increases on use. For example, assuming a 
price elasticity of .15 and 6 million generic albuterol MDIs sold to 
the uninsured annually, a 130 percent price increase would reduce 
demand for albuterol MDIs from the uninsured by about 1.2 million MDIs 
annually (6 million x -.15 elasticity x 130 percent price increase = 
1,200,000 MDIs). These preliminary estimates do not take into account 
offsetting increases in consumption from changes in promotional efforts 
already announced by GSK. We also note that the elasticity estimates 
are based on relatively small price changes and may not be applicable 
to large price changes such as these.
    Manufacturers have announced programs to distribute free samples 
and coupons to mitigate any adverse effect of higher prices on 
utilization. For example, GSK has committed to provide 2 million 
albuterol HFA MDIs each year to physician offices in expectation that 
they would be distributed to patients in need (2003P-0029/CR1, p. 7). 
In addition, GSK has committed to annually providing 3 million coupons 
worth $10 each in rebates for VENTOLIN HFA to any patient. Both GSK and 
Schering currently operate outreach programs that assist patients to 
obtain needed medications, but we are unable to assess how many 
albuterol MDI users are currently helped by these programs or how many 
more would be helped in the future.
    Free samples and coupons help mitigate adverse impacts on uninsured 
patients only to the extent that they are distributed to physicians and 
other health care professionals who then give them to uninsured 
individuals.\20\ To assess how free samples and coupons might affect 
albuterol MDI use, we conducted a thorough review of the relevant peer-
reviewed literature and

[[Page 17189]]

found two pertinent articles. One found that, while 54 percent of the 
free samples were actually distributed to patients, only 9 percent of 
the patients who received free samples were uninsured (Ref. 15). These 
data suggest that 4.8 percent of the free samples were actually 
distributed to uninsured patients. Assuming this estimate is applicable 
to the albuterol HFA MDIs distributed by the GSK program, then about 
96,000 albuterol HFA MDIs per year would reach the uninsured. The 
second article estimated that 71 percent of free samples were given to 
patients (Ref. 16). As an upper bound, assuming all samples are 
distributed to patients and that the uninsured receive them in 
proportion to their share of the population, approximately 300,000 MDIs 
(15 percent of 2 million) would reach the uninsured each year.
---------------------------------------------------------------------------

    \20\ We found no information addressing how pharmaceutical 
companies distribute free samples among physicians and clinics, but 
assume that GSK will not systematically channel free samples away 
from low-income areas.
---------------------------------------------------------------------------

    We expect coupons will do relatively little to improve access to 
albuterol among the uninsured. If 150,000 (5 percent (Ref. 15)) to 
450,000 (15 percent) of the 3 million coupons reach uninsured patients 
each year and 100 percent of them are redeemed, this would increase 
albuterol MDI consumption by roughly 2,000 to 15,000 MDIs per year, 
based on the range of price elasticities considered.
    Taking into account the offsetting effect of free samples and 
coupons, we focus on a range of 300,000 to 900,000 fewer albuterol MDIs 
sold each year as a result of increased prices stemming from removal of 
generic albuterol MDIs from the market. This assessment does not take 
into account Schering's and GSK's patient assistance programs designed 
to provide free or low cost drugs to low-income patients as we are 
unable to assess how many albuterol MDI users are currently helped by 
these programs or how many more would be helped in the future. Over the 
course of the evaluation period, this would equal between 2.7 million 
and 8.1 million fewer albuterol MDIs sold. We recognize that due to 
varying measures of the size of the generic albuterol MDI market for 
the uninsured, uncertainty about the magnitude of price increases, 
consumers' response, and the impact of free samples and coupons, and 
other factors, the true impact of the rule could fall outside this 
range.
4. Effects on Medicare and Medicaid
    In order to apportion the possible spending increases described 
previously in this document to the Medicaid and Medicare programs, FDA 
and the Centers for Medicare & Medicaid Services (CMS) have analyzed 
utilization data related to Medicaid and Medicare, as well as Medicaid 
program spending data. As explained in this section of the document, 
these data suggest that, were this rule in effect in 2003, Medicaid 
spending (including spending by States) would have increased by 
approximately $100 million for that year. In addition (based on 2001 
utilization and 2004 prices), it would have increased drug spending on 
Medicare beneficiaries by roughly $240 million, although this estimate 
includes copayments and coinsurance paid by individuals and may be too 
low because the estimate does not take into account increases in 
utilization associated with the increase in insurance coverage. These 
data yield the very rough estimate that the rule would increase 
Medicare and Medicaid spending by $340 million annually relative to a 
situation where access to generic albuterol CFC MDIs continued.
    a. Medicaid. Medicaid spending on albuterol MDIs would have been 
higher by roughly $100 million in 2003--after taking into account 
rebates from drug companies--if albuterol CFC MDIs were not available. 
CMS estimates that 58 percent of this amount would be paid by the 
Federal Government and 42 percent by States.
    Deriving this cost estimate required making some adjustments to 
available data. Our point of departure is the State Drug Utilization 
Data, available at http://www.cms.hhs.gov/medicaid/drugs/drug5.asp for 
2003. These data on utilization and spending on drugs paid for by the 
Medicaid program suggest that State reimbursements under Medicaid would 
have been approximately $127 million higher in 2003 if no albuterol CFC 
MDIs were available (that is, if only albuterol HFA MDIs were 
available). This estimate assumes substitutes for all albuterol CFC 
MDIs were purchased at the weighted average price of albuterol HFA 
MDIs. However, it does not take into account the effect of the rebates 
from drug companies to States and the Federal Government. CMS estimates 
that Medicaid program rebates constitute roughly 20 percent of gross 
spending on prescription drugs under the Medicaid program, suggesting 
that Medicaid spending on albuterol MDIs after rebates would have been 
roughly $100 million higher in 2003 if albuterol CFC MDIs were not 
available. It is important to note that this is a rough estimate, as 
rebates for a specific drug may differ from the 20 percent estimate. 
Incomplete data for 2004 suggest that comparable estimates for 2004 are 
higher but we believe that these are not reliable because of the 
incompleteness of the data.
    b. Medicare. Our analysis of the impacts of this rule on Medicare 
addresses: (1) The total utilization of albuterol MDIs, (2) the likely 
price increase, and (3) the aggregate spending increase.
    CMS estimates that noninstitutionalized Medicare beneficiaries not 
eligible for Medicaid drug coverage filled about 8 million 
prescriptions for albuterol MDIs (including VENTOLIN and PROVENTIL) in 
2001, based on the Medicare Current Beneficiary Survey (MCBS) and with 
an adjustment for under-reporting for aggregate analysis purposes. As 
noted in this section of the document, this estimate is based on 
Medicare beneficiaries' self-reported outpatient prescription drug 
utilization, including prescriptions filled at both retail and mail 
order pharmacies. In addition, the adjustment for underreporting is 
normally used for aggregate use or spending data in MCBS and may not 
necessarily reflect actual underreporting for albuterol.
    This analysis used data from the 2001 MCBS, a continuous, 
multipurpose survey of a nationally representative sample of Medicare 
beneficiaries. The survey is focused on health care use, cost, and 
sources of payment. No ``paid claims'' data on use of albuterol MDIs 
exist because Medicare will pay for albuterol MDIs only after the 
implementation of the new Medicare outpatient prescription drug benefit 
in January 2006. MCBS is the largest nationally representative set of 
data available on prescription drug utilization and spending by 
Medicare beneficiaries. The MCBS data have been used by both CMS's 
Office of the Actuary and the Congressional Budget Office to prepare 
estimates related to the new Medicare prescription drug benefit. 
However, because the data are self-reported, there are considerable 
limitations, most notably underreporting. CMS has studied the 
underreporting in the survey and has developed methods to adjust the 
data. For purposes of the estimates done for the Medicare drug benefit, 
the data on drug spending are analyzed in the aggregate (that is, for 
large collections of drugs). Estimates of individual drug product 
utilization and spending, however, may be even more vulnerable to the 
limitations inherent in self-reported utilization data.
    A reliable assessment of impacts must avoid double counting of 
people who are eligible for both Medicaid and Medicare. With the 
implementation of the new Medicare prescription drug benefit, payment 
for outpatient prescription drugs on behalf of

[[Page 17190]]

Medicare beneficiaries who are also eligible for prescription drug 
benefits under Medicaid will be moved from the Medicaid program to the 
Medicare program. For purposes of this analysis, this population of 
dually eligible beneficiaries (that is, Medicare beneficiaries also 
eligible for full-benefits under Medicaid) is excluded from the 
analysis of the MCBS data, since their albuterol MDI utilization is 
captured within the Medicaid data. Approximately half of total Medicaid 
prescription drug spending is for this dually eligible population. 
However, the proportion will vary based on the type of drug involved. 
It is worth noting that albuterol MDIs are used to treat asthma in both 
the aged and disabled in the Medicare/Medicaid dually eligible 
population, as well as to treat asthma in children, who make up a large 
share of Medicaid beneficiaries.
    For purposes of this analysis, we assess only data for the time 
periods for which data are available and we do not make projections for 
future years. As was noted in the impact analysis for the proposed rule 
on the Medicare prescription drug benefit (69 FR 46632, August 3, 
2004), there is considerable uncertainty in making estimates when there 
is no program experience from prior years. This uncertainty is 
exacerbated in the context of making estimates related to a particular 
drug. For example, in the context of preparing aggregate estimates for 
the Medicare drug benefit, CMS makes assumptions about how increased 
coverage induces greater utilization and, based on the National Health 
Expenditures, projects growth in per capita drug spending. But making 
such calculations for a specific individual drug would be difficult and 
not likely reliable. Furthermore, in the case of albuterol MDIs, the 
drug is subject to large annual fluctuations in demand per user and 
size of population using the drug due to the nature of the conditions 
being treated, such as asthma where acute episodes may vary by 
environmental factors (for example, allergies), prevalence of 
infectious diseases (for example, colds), and seasonal weather 
conditions (for example, temperature-related bronchial conditions). In 
addition, analyzing the effect on Medicare of a change related to one 
drug is further complicated, for example, by the need to consider the 
interactions with beneficiary cost-sharing in the context of the 
Medicare drug benefit design and the availability of additional low-
income subsidies for certain populations. Also, the introduction of an 
albuterol HFA MDI from IVAX is expected to increase competition in the 
market to some extent, potentially dampening anticipated price 
increases in part. Our estimates, therefore, apply only to past years.
    We believe that prices paid by private insurers offer a potentially 
reasonable approximation of prices negotiated in the context of a 
privately administered risk-based insurance program such as the new 
Medicare Part D drug plans. Using proprietary data from IMS Health, we 
determined that prices for patients with third-party insurance were on 
average about $30 more per prescription for albuterol HFA MDIs than for 
albuterol CFC MDIs, according to IMS's National Prescription Audit for 
the first half of 2004 (Ref. 10). This price estimate reflects 
transactions in U.S. retail pharmacies, excluding Internet and mail-
order sales. It also reflects both payments by insurers and copayments 
or coinsurance payments by patients. We calculate the average price per 
prescription for the albuterol HFA MDIs and the albuterol CFC MDIs, 
respectively, as the weighted average of the price per prescription of 
different firms' products, where the weights are the firms' shares of 
the total albuterol MDIs sold. Price differences per prescription are 
larger than price differences per MDI, because some prescriptions are 
for more than one MDI.
    Given this estimate of the price difference that would have existed 
without CFC albuterol MDIs, spending by, and on behalf of, Medicare 
beneficiaries without Medicaid drug coverage could have been roughly 
$240 million more in order to fill the 8 million prescriptions 
estimated to have been filled in 2001 (based on the MCBS data). This 
estimate is quite approximate because it relies on an estimate of 
albuterol MDI prescriptions from 2001 and estimates of prescription 
price differences from the first half of 2004. In addition, albuterol 
MDI use may grow as the Medicare drug benefit reduces the cost to 
individuals of using albuterol MDIs.

E. Alternative Phaseout Dates

    In developing this rule, we considered removing the essential-use 
designation for ODSs in albuterol MDIs for different dates between 12 
months after issuance of a final rule and December 31, 2009. As shown 
previously in this document, earlier removal would increase consumer 
expenditures while increasing environmental benefits. A later date 
would reduce the potential health effect from reduced access, but also 
reduce the environmental benefit and potentially put at risk 
international cooperation. We also considered and rejected small 
business exemptions as inconsistent with international commitments.
    Table 4 of this document shows the effects of selecting December 
31, 2005, as the effective date, and Table 5 of this document shows the 
effects if we had selected December 31, 2009 (assuming continued 
availability of CFCs).

                                                  Table 4.--Effects of Phaseout as of December 31, 2005
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                        Increased Expenditures for Albuterol                                        Relative Return on Investment to New
                                             MDIs Present Value in 2005          Possible       Reduced Aggregate      Technology (return for 12/31/08
  Number ofAffected of Albuterol MDIs                (billions)                  Reduction    CFC EmissionsRelated              phaseout = 1)
              (millions)               --------------------------------------    inMDI Use     to Phaseout (metric -------------------------------------
                                            3-percent          7-percent        (millions)            tons)             3-percent          7-percent
                                          discount rate      discount rate                                            discount rate      discount rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
576                                                 $11.6               $9.3      3.6 to 9.8                14,400                1.4                1.5
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 17191]]


                                                  Table 5.--Effects of Phaseout as of December 31, 2009
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                        Increased Expenditures for Albuterol                                        Relative Return on Investment to New
                                             MDIs Present Value in 2005          Possible       Reduced Aggregate      Technology (return for 12/31/08
    Number ofAffected Albuterol MDIs                 (billions)                  Reduction    CFC EmissionsRelated              phaseout = 1)
              (millions)               --------------------------------------   inAlbuterol    to Phaseout (metric -------------------------------------
                                            3-percent          7-percent          MDI Use             tons)             3-percent          7-percent
                                          discount rate      discount rate      (millions)                            discount rate      discount rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
384                                                  $7.3               $5.3      2.4 to 7.2                 8,400                .88                .85
--------------------------------------------------------------------------------------------------------------------------------------------------------

F. Sensitivity Analyses

    We have conducted a sensitivity analysis to address how key sources 
of uncertainty may affect our estimates. Our key focus is the effect of 
alternative dates when generic competition for albuterol HFA MDIs may 
begin.
    In Table 6 of this document, we present estimates assuming that 
generic competition arrives in 2015.

                                   Table 6.--Effects of Phaseout on December 31, 2008--Assuming Generic Entry in 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                        Increased Expenditures for Albuterol                                        Relative Return on Investment to New
                                          Present Value in 2005 (billions)                                             Technology (return for 12/31/08
                                       --------------------------------------    Possible       Reduced Aggregate    phaseout with genetic entry in 2017
    Number ofAffected Albuterol MDIs                                             Reduction    Emissions Related to                  = 1)
              (millions)                    3-percent          7-percent         inMDI Use      Phaseout (metric   -------------------------------------
                                          discount rate      discount rate      (millions)            tons)             3-percent          7-percent
                                                                                                                      discount rate      discount rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
336                                                  $6.7               $5.2      2.1 to 5.6                 8,400                .81                .84
--------------------------------------------------------------------------------------------------------------------------------------------------------

    This analysis suggests that the eventual date that generic 
competition arrives will have a substantial effect on the total 
reduction in albuterol MDI use and the aggregate reductions in CFC 
emissions. Further analysis of the arrival of generic competition would 
require an evaluation of the legal merits of the different patents, but 
such an evaluation is beyond the expertise of FDA.

G. Small Business Impact

    Current HHS guidance (Ref. 17) suggests that a 3 to 5 percent 
impact on total costs or revenues of small entities could constitute a 
significant regulatory impact. We lack the data to certify that this 
final rule will not have a significant economic impact on a substantial 
number of small entities. Therefore, this analysis, together with other 
relevant sections of this document, serves as FDA's Regulatory 
Flexibility Analysis, as required under the Regulatory Flexibility Act.
1. Affected Sector and Nature of Impacts
    The affected industry sector includes manufacturers of 
pharmaceutical products (NAICS 32514). We obtained data on this 
industry from the 1997 Economic Census and estimated revenues per 
establishment. Although other economic measures, such as profitability, 
may provide preferable alternatives to revenues as a basis for 
estimating the significance of regulatory impacts, we do not believe it 
would change the results of this analysis.
    The impact of this rule on generic manufacturers is the lost 
revenues currently generated by sales of generic albuterol CFC MDIs. 
While ``lost revenues'' are an imperfect measure, because production 
resources could be shifted to alternative markets, they provide a 
measure that suggests the magnitude of the impact.
    The Small Business Administration (SBA) has defined as small any 
entity in this industry with fewer than 750 employees. According to 
Census data, 84 percent of the industry is considered small. The 
average annual revenue for a small entity is $26.6 million per entity. 
However, the agency does not have revenue information specific to the 
affected entities. According to retail sales in the first half of 2004, 
of the 22.7 million generic or relabeled annual prescriptions for 
albuterol, approximately 63 percent (14.3 million MDIs) were 
distributed by Schering, a large firm, under the Warrick label. Six 
different companies marketed the other 8.4 million albuterol MDIs, with 
three companies accounting for over 99 percent of these 8.4 million 
(Ref. 10). According to data collected by the Congressional Budget 
Office (Ref. 18), the value of shipments from manufacturers of generic 
drug products accounts for approximately 35 percent of the retail price 
of the product. If so, revenue from 1.7 million albuterol MDIs would 
approximate $8.0 million per year (1.7 million prescriptions X $13.50 
per generic prescription X 35 percent). Because we lack company-
specific revenue data, we are unable to estimate the impact of this 
rule on these small entities. To the extent that generic albuterol HFA 
MDIs might become available prior to the removal of the essential-use 
designation, any impact on small entities would be mitigated.
2. Outreach
    The Montreal Protocol and Clean Air Act have been in place for more 
than a decade. Manufacturers of albuterol CFC MDIs have long known that 
CFCs would eventually lose their essential-use designations for this 
purpose. During the proposal stage of this rulemaking, we specifically 
solicited comments on the impact on small entities. No comments were 
received that explicitly addressed this issue.

H. Conclusion

    This final rule could result in increased health care expenditures 
of about $1.2 billion for each year between the removal of the 
essential-use designation and reintroduction of generic competition at 
patent expiration. Taking into account GSK's commitment to provide free 
samples and coupons, we estimate that higher prices due to the 
elimination of generic competition will reduce the number of MDIs sold 
by between 300,000 and

[[Page 17192]]

900,000 per year. This estimate does not take into account Schering's 
and GSK's patient assistance programs designed to provide free or low 
cost drugs to low-income patients as we are unable to assess how many 
albuterol MDI users are currently helped by these programs or how many 
more would be helped in the future. In addition, each year without 
using CFCs in albuterol MDIs will reduce atmospheric emissions of ODSs 
by 1,200 metric tons and provide increased investment returns for 
environmentally friendly technology that may induce further gains. 
Removal of the essential-use designation is consistent with FDA's role 
in determining the essentiality of MDIs under section 601 of the Clean 
Air Act, and also meets U.S. obligations under international 
agreements. Finally, we lack the data to certify that this final rule 
will not have a significant economic impact on a substantial number of 
small entities.

VI. The Paperwork Reduction Act of 1995

    This final rule contains no collections of information. Therefore, 
clearance by the Office of Management and Budget under the Paperwork 
Reduction Act of 1995 is not required.

VII. Federalism

    We have analyzed this final rule in accordance with the principles 
set forth in Executive Order 13132. We have determined that the rule 
does not contain policies that have substantial direct effects on the 
States, on the relationship between the National Government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. While this rule may result in States 
increasing spending for albuterol MDIs in programs such as Medicaid, 
the increased spending is not a substantial direct compliance cost, as 
the term is used in Executive Order 13132. Accordingly, we have 
concluded that the rule does not contain policies that have federalism 
implications as defined in the Executive order and, consequently, a 
federalism summary impact statement is not required.

VIII. References

    The following references have been placed on display in the 
Division of Dockets Management (see ADDRESSES) and may be seen by 
interested persons between 9 a.m. and 4 p.m., Monday through Friday.
    1. U.S. Food and Drug Administration, ``Guidance for Industry: 
Integration of Dose-Counting Mechanisms into MDI Drug Products,'' 
March 2003.
    2. Penick, T. B. et al., ``Accuracy of Float Testing for 
Metered-Dose Inhaler Canisters,'' Journal of the American 
Pharmaceutical Association, 42:582, July/August 2002.
    3. Craig-McFeely, P. M. et al., ``Prospective Observational 
Cohort Safety Study to Monitor the Introduction of a Non-CFC 
Formulation of Salbutamol with HFA 134a in England,'' International 
Journal of Clinical Pharmacology and Therapeutics, 41:67-76, 2003.
    4. Goldman, D. P. et al., ``Pharmacy Benefits and the Use of 
Drugs by the Chronically Ill,'' The Journal of the American Medical 
Association, 291:2344-2350, 2349, May 19, 2004.
    5. United Nations Environmental Programme, ``Production and 
Consumption of Ozone-Depleting Substances 1986-2000,'' 2002.
    6. U.S. Environmental Protection Agency, ``The Benefits and 
Costs of the Clean Air Act: 1990-2010'' (http://www.epa.gov/air/sect812/copy99.html).
    7. Mannino, D. M. et al., ``Chronic Obstructive Pulmonary 
Disease Surveillance--United States, 1971-2000,'' Morbidity and 
Mortality Weekly Report, 51(SS06):1-16, August 2, 2002.
    8. American Lung Association, ``Trends in Asthma Morbidity and 
Mortality,'' Epidemiology & Statistics Unit, Research and Scientific 
Affairs, April 2004.
    9. Mannino, D. M. et al., ``Surveillance for Asthma--United 
States, 1980-1999,'' Morbidity and Mortality Weekly Report, 
51(SS01):1-13, March 29, 2002.
    10. Analysis completed by FDA based on information provided by 
IMS Health, IMS National Prescription Audit\TM\, 2004; IMS Health, 
IMS MIDAS\TM\, Q1/2004--Q2/2004. These data can be purchased from 
IMS Health. Please send all inquiries to: IMS Health, Attn: Brian 
Palumbo, Account Manager, 660 West Germantown Pike, Plymouth 
Meeting, PA 19462.
    11. Rozek, R. P., and E. R. Bishko, ``Economics Issues Raised in 
the FDA's Proposed Rule on Removing the Essential-Use Designation 
for Albuterol MDIs,'' National Economic Research Associates, August 
13, 2004 (FDA Docket No. 2003P-0029/C25).
    12. Agency for Healthcare Research and Quality, ``Albuterol 
Inhalers: Prescriptions per User, Price per Prescription and 
Expenditure Given Use,'' spreadsheet prepared at FDA's request for 
this rulemaking, 2004.
    13. Ringel, J. S. et al., ``The Elasticity of Demand for Health 
Care,'' National Defense Research Institute, Rand Health, 2002.
    14. U.S. Census Bureau, ``Income, Poverty, and Health Insurance 
Coverage in the United States: 2003,'' Current Population Reports, 
U.S. Department of Commerce, pp. 14-15, August 2004.
    15. Morelli, D., and M. R. Koenigsberg, ``Sample Medication 
Dispensing in a Residency Practice,'' Journal of Family Practice, 
34(1):42-48, 1992.
    16. Peterson, M. C. et al., ``Disposition of Pharmaceutical 
Samples from a Private Medical Clinic,'' Journal of the American 
Pharmacists Association, 44(3):397-398, 2004.
    17. U.S. Department of Health & Human Services, ``Guidance on 
Proper Consideration of Small Entities in Rulemakings of the U.S. 
Department of Health and Human Services,'' May 2003.
    18. Congressional Budget Office, ``How Increased Competition 
from Generic Drugs Has Affected Prices and Returns in the 
Pharmaceutical Industry,'' July 1998.

List of Subjects in 21 CFR Part 2

    Administrative practice and procedure, Cosmetics, Devices, Drugs, 
Foods.

0
Therefore, under the Federal Food, Drug, and Cosmetic Act and the Clean 
Air Act and under authority delegated to the Commissioner of Food and 
Drugs, after consultation with the Administrator of the Environmental 
Protection Agency, 21 CFR part 2 is amended as follows:

PART 2--GENERAL ADMINISTRATIVE RULINGS AND DECISIONS

0
1. The authority citation for 21 CFR part 2 continues to read as 
follows:

    Authority: 15 U.S.C. 402, 409; 21 U.S.C. 321, 331, 335, 342, 
343, 346a, 348, 351, 352, 355, 360b, 361, 362, 371, 372, 374; 42 
U.S.C. 7671 et seq.


Sec.  2.125  [Amended]

0
2. Section 2.125 is amended by removing and reserving paragraph 
(e)(2)(i).

    Dated: March 29, 2005.
Jeffrey Shuren,
Assistant Commissioner for Policy.
[FR Doc. 05-6599 Filed 3-31-05; 8:45 am]
BILLING CODE 4160-01-S