505(b)(2) Drugs: Creating New Chaos for Infusion Centers

As oncology pharmacists navigate the ever-evolving therapeutic landscape, regulatory realities pose operational challenges. During a breakout session at HOPA 2025, Scott A. Soefje and Clayton C. Irvine presented on the intricacies of the 505(b)(2) drug approval pathway and its implications on practice management.

Setting the Stage: What Is a 505(b)(2) Drug?

The Drug Price Competition and Patent Term Restoration Act of 1984, more commonly known as the Hatch-Waxman Act, introduced multiple drug approval pathways, including the 505(b)(1) pathway for new drugs, the 505(j) pathway for generic drugs, and the 505(b)(2) pathway for drugs that have already received approval but are now being changed in some way, such as a new fixed-combination drug or new dosage formulations.¹

Traditional generics filed under 505(j) are filed as abbreviated new drug applications (ANDAs) and must demonstrate bioequivalence to a reference drug and are deemed therapeutically equivalent by the FDA. 505(b)(2) drugs are typically filed as new drug applications (NDAs) that include some of the reference drug’s clinical efficacy and safety data without requiring full clinical trials.¹ However, 505(b)(2) drugs can also be submitted under ANDAs. Pursuing a 505(b)(2) application allows for a more streamlined and cost-efficient process.²

Originally intended to foster innovation, such as extended-release formulations or novel delivery systems, recent years have seen a surge in 505(b)(2) applications for minor changes, such as vial size. As Dr Soefje noted, “Some of these changes are getting to be what I would consider slightly ridiculous.”

One key concern is that 505(b)(2) drugs, although similar to their reference drugs, are not considered therapeutically equivalent unless specifically evaluated and designated as such by the FDA.^3,4 In practice, this makes them more like branded drugs in the eyes of the Centers for Medicare & Medicaid Services (CMS) and payers.

The CMS Shift: From Bundled to Unique J Codes

A pivotal change occurred in 2022, catalyzed by a CMS reinterpretation of the Social Security Act’s J-code reimbursement policy.^3,4 Historically, CMS grouped 505(b)(2) products with their reference drugs under the same J code, treating them as multisource generics. However, after a pharmaceutical company complaint, CMS ruled that 505(b)(2) drugs that are not therapeutically equivalent qualify as sole-source drugs and will have unique J codes.

This shift has created a cascade of reimbursement complexities:

• Each 505(b)(2) drug now may be reimbursed differently from the reference product
• CMS and commercial payers rely heavily on the J-code system for claims processing, affecting prior authorizations, billing, and denials
• The FDA does not automatically assign therapeutic equivalence; thus, if manufacturers do not request it, the product remains unclassified

For pharmacists, this regulatory change presents significant operational burdens across procurement, electronic health records (EHRs), payer communications, and clinical workflows.

Identifying 505(b)(2) Drugs: No Central Listing

One of the first hurdles for pharmacists is identifying which products fall under the 505(b)(2) umbrella. Neither the FDA nor CMS provides a centralized, user-friendly database of these products. Dr Irvine and his team at the Mayo Clinic recommend 2 approaches. For newly approved drugs, they recommend using the Drugs@FDA website to review NDA approval documents to determine the pathway designation. For previously approved drugs, they recommend using the FDA’s NDA and ANDA listings by calendar year, which can often be sorted to identify 505(b)(2) drugs.^5,6

Clinical Implications: Not Interchangeable

Because 505(b)(2) drugs are not therapeutically equivalent, automatic substitution, common with generics, is usually not permissible. Pharmacists must carefully consider:

• Patient safety and efficacy: Different excipients or manufacturing processes may affect tolerability and clinical outcomes
• Provider education: Many hematologists/oncologists may be unaware of the distinctions between a 505(b)(2) and a traditional generic; pharmacists must bridge this knowledge gap
• Patient communication: Patients often research drugs or have prior experience with similar drugs, making it critical to explain why substitutions may not be possible or safe

Operational and Financial Challenges

Operational challenges caused by 505(b)(2) drugs include charge description master (CDM) setup issues related to the fact that new J codes are assigned off-cycle from CMS’s quarterly updates. Close collaboration with revenue cycle teams is essential to ensure timely CDM updates for accurate billing.

Prior authorizations and denials can occur because prior authorization teams are often unaware of which drug is intended. Establishing an internal crosswalk, linking specific national drug codes to J codes and prior authorization status, is a viable solution. Dr Irvine noted, “If you take the time to build a clinical crosswalk and maintain it with your revenue team, it can dramatically reduce denials.”

Many EHR systems group multiple national drug codes under 1 medication record, making it nearly impossible to ensure the dispensed drug matches the authorized drug. Potential solutions include creating separate medication records for 505(b)(2) drugs; renaming drugs with suffixes or manufacturer names (with caution, as some manufacturers make both generic and 505(b)(2) versions); and advocating for enhanced EHR capabilities to support this increased level of detail.

Finally, procurement and inventory challenges can occur when pharmacy buyers unknowingly purchase a 505(b)(2) drug, thinking it is a generic drug. This can lead to mismatches between what was authorized, dispensed, and billed. Potential solutions include flagging 505(b)(2) drugs in procurement software, training buyers to recognize and differentiate between these drugs, and establishing internal inventory segregation systems to avoid mix-ups.

Pharmacists’ Role: A Critical Link

Hematology/oncology pharmacists are uniquely positioned to lead institutions through this complexity. Key pharmacist-led initiatives include developing and maintaining the 505(b)(2) drug internal crosswalk; collaborating with IT, revenue cycle, and procurement to redesign workflows; educating providers and patients on clinical and reimbursement implications; and advocating for smarter EHR systems and CDM integrations.

As Dr Soefje noted, “We haven’t solved this completely yet, but we’re starting to work on some things. We have some ideas that we believe will make it work.”

Editor’s Note: This article summarizes the presentation “505(b)(2) Drugs: New Chaos for Infusion Centers” by Scott A. Soefje, PharmD, MBA, BCOP, Director, Pharmacy Cancer Care, Associate Professor of Pharmacy, Mayo Clinic, Rochester, MN, and Clayton C. Irvine, PharmD, MBA, MS, Senior Manager of Pharmacy, Cancer Infusion Center, Mayo Clinic, Rochester, MN, given at the 21st Hematology/Oncology Pharmacy Association Annual Conference (April 9-12, 2025; Portland, OR). To see a video interview on this topic with Dr. Soefje, please visit our sister journal's website. 

References

1. Food and Drug Administration. Overview of 505(b)(2) regulatory pathway for new drug applications. Accessed October 17, 2024. www.fda.gov/media/156350/download
2. Drug Patent Watch. The 505(b)(2) drug patient approval process: uses and potential advantages. October 5, 2018. Accessed October 25, 2024. https://www.drugpatentwatch.com/blog/the-505b2-drug-patent-approval-process-uses-and-potential-advantages
3. Centers for Medicare & Medicaid Services . HCPCS level II coding for 505(b)(2)-approved drug or biologics. FAQ. Accessed October 17, 2024. https://www.cms.gov/files/document/frequently-asked-questions-single-source-drugs-and-biologicals.pdf
4. Wood T. Understanding the 505(b)(2) pathway. Pharm Prac Focus Health Sys. 2024;13:23-25.
5. Food and Drug Administration. Drugs@FDA: FDA-approved drugs. Accessed October 17, 2024. https://www.accessdata.fda.gov/scripts/cder/daf/
6. Food and Drug Administration. NDA and BLA calendar year approvals. Accessed October 17, 2024. https://www.fda.gov/drugs/nda-and-bla-approvals/nda-and-bla-calendar-year-approvals