GDUFA Negotiations Completed; Safety, Access, Transparency Are the Primary Aims of the New Program

By Kurt R. Karst –      

Generic Pharmaceutical Association (“GPhA”) Board of Directors Chairman Paul Bisaro recently sent a letter to members announcing both the completion of the negotiating phase (see here and here) of what is intended to become the Generic Drug User Fee Act (“GDUFA”) and GPhA’s formal ratification of the performance goals letter and the proposed legislative language needed to authorize GDUFA agreed to between industry and FDA.  Both of those documents have been sent off to the Department of Health and Human Services and to the Office of Management and Budget (“OMB”) for review.  Once approved, the documents will then be sent to Congress for enactment (presumably as part of a larger bill including other user fee statutes, such as the Prescription Drug User Fee Act (“PDUFA”)). 

The GDUFA draft performance goals letter and the proposed legislative language have not yet been publicly released.  They will be posted on FDA’s website once OMB clears them.  Both the GPhA member letter and the negotiation meeting minutes provide some details on the program.  (We’ll stick to those documents now and will plan on providing greater detail on the GDUFA performance goals letter and the proposed legislative language once they are out in the public domain.) 

The intent of GDUFA, like other user fee statutes, is to provide FDA with funding supplemental to the traditional funds Congress appropriates to FDA each year with the expectation that FDA will significantly enhance the approval process.  Since the beginning of GDUFA negotiations, the aims of the program have been three-fold: (1) Safety (“Ensure that industry participants, foreign or domestic, who participate in the U.S. generic drug system are held to consistent high quality standards and are inspected biennially, using a risk-based approach, with foreign and domestic parity.”); (2) Access (“Expedite the availability of low cost, high quality generic drugs by bringing greater predictability to the review times for ANDAs, amendments and supplements, increasing predictability and timeliness in the review process.”); and (3) Transparency (“Enhance FDA’s ability to protect Americans in the complex global supply environment by requiring the identification of facilities involved in the manufacture of generic drugs and associated APIs, and improving FDA’s communications and feedback with industry in order to expedite product access.”).  Both the draft performance goals letter and the proposed legislative language seek to embody these three principles.

With these principles in mind, FDA and the generic drug industry agreed early on to conduct GDUFA negotiations under a metaphorical “four walls and a roof” – specifically:

• FDA must continue to adhere to a general first-in-first-reviewed application review policy, with no separation of the currently pending application queue (the so-called “backlog”);
• A goal to reduce the queue to a steady state level, where applications coming in can go out within the goal times, by the end of year 5 of the program;
• A primary application review goal of 10 months in year 5 of the program;
• User fee resources not exceeding $250-$300 million annually, as a basis for discussion; and
• Commitment by FDA to a risk-adjusted biennial surveillance inspection model with foreign and domestic parity in year 5.

What You Pay (GDUFA User Fees)

The total amount of annual funding from GDUFA user fees, which is supposed to be set at $299 million in Fiscal Year (“FY”) 2013 (and at $299 million plus an annual adjustment in FYs 2014-2017), is intended to come from various funding sources, “and any individual fee is expected to be approximately an order of magnitude of lower than PDUFA application fees.” 

There are proposed to be four types of fees in two categories – application fees and facility fees.  Application fees, which account for 30% of total fee revenue each FY, include a one-time (FY 2013) ANDA backlog fee for ANDAs pending on October 1, 2012, an original ANDA and Prior Approval Supplement (“PAS”) fee, and a Type II Drug Master File (“DMF”) “first reference fee.”  A facility fee, which accounts for 70% of total fee revenue each FY, must be paid by both Finished Dosage Form (“FDF”) and Active Pharmaceutical Ingredient (“API”) manufacturers.  FDF facility fees account for 80% of facility fee revenue, and API facilities account for 20% of facility fee revenue, and there is “a modest fee differential” for foreign FDF and API facilities “reflecting the added costs of overseas inspection.” 

According to GDUFA negotiation meeting minutes, the percentage of user fees to be obtained from different industry segments by fee type and year are estimated to be as follows:

FY 2013

• 17% from ANDA submissions pending on October 1, 2012 (i.e., the ANDA backlog)
• 5% from Type II DMF submissions
• 20% from ANDAs and PASs (where the PAS fee is half the amount of that for an original ANDA)
• 46% from FDF facilities
• 12% from API facilities

FYs 2014-2017

• 6% from Type II DMF submissions
• 24% from ANDAs and PASs (where the PAS fee is half the amount of that for an original ANDA)
• 56% from FDF facilities
• 14% from API facilities

With respect to the backlog fee, $50 million, or approximately 17% of the $299 million fee revenue set for FY 2013, will be split equally among the ANDAs pending at FDA as of October 1, 2012.  As of August 31, 2011, we understand that the ANDA backlog stood at around 2,500 applications.  Assuming that number remains constant, the ANDA backlog fee could be around $20,000 per ANDA.  (It is possible, however, that with the prospect of paying a backlog fee, ANDA sponsors will withdraw some pending ANDAs before October 1, 2012, thereby decreasing the ANDA backlog andincreasing the per-ANDA backlog fee.)

The $249 million remaining for FY 2013 after the ANDA backlog fee revenue is subtracted will be split as shown above.  With many hundreds of ANDA and PAS submissions each year, the ANDA and PAS application fee could be relatively modest (at least as compared to PDUFA application fees).  Similarly, assuming there are a couple of thousand fee-paying FDF and API facilities, facility fees may not be particularly high (again, at least as compared to PDUFA establishment fees).  And that, of course, is the intent.  As explained in GDUFA negotiation meeting minutes:

Recognizing the critical role generic drugs play in providing more affordable, therapeutically equivalent medicine, the Generic Drug User Fee program is designed to keep individual fee amounts as low as possible to supplement appropriated funding to ensure that consumers continue to receive the significant benefits offered by generic drugs which provided more than $824 billion dollars in savings to the nation’s health care system in the last decade alone.  The additional resources called for under the agreement, an inflation adjusted $299 million annually for each of the five years of the program, will provide FDA with the ability to perform critical program functions that could not otherwise occur.  This program is not expected to add significantly to the cost of generic drugs: given that a reported 3.99 billion retail prescriptions per year were dispensed in the United States in 2010, and assuming that 78% of these prescriptions were filled by generic drugs, if the entire cost of the program were passed through to U.S. retail consumers (although this is not the intent), the average cost of a prescription filled by a generic drug in the Unites States would rise less than a dime per prescription.  Moreover, with the adoption of user fees and the associated savings in development time, the overall expense of bringing a product to market may decline and result in reduced costs.

Nonpayment of GDUFA user fees within the period specified by the statute could have significant implications.  Consider the following, which is taken from recent GDUFA negotiation meeting minutes:

The groups also discussed impact of nonpayment of fees, such as inclusion on an “arrears” list, non review of any new applications until all fees are paid, and potential for deeming misbranded products produced in facilities that fail to pay fees.  Special issues discussed were the impact of fee collection on paragraph IV applications, clarifying that the date of receipt of such applications will not be changed as long as fees are paid with in 20 calendar days of application submission; if fees are not paid, the FDA will “refuse to receive” the application.

What You Get (Performance Goals)

The proposed GDUFA performance goals letter, like that for PDUFA, is long and contains a lot of detail.  Below are some of the highlights. 

Application Metrics – The program is structured based on five cohorts of submission dates for original ANDAs and Type II DMFs, which correspond to the five fiscal years under GDUFA.  For ANDAs in the year 5 cohort (i.e., applications submitted in FY 2017, October 1, 2016 to September 30, 2017), FDA will review and act on 90% of complete electronic ANDAs within 10 months after the date of submission.  As under the initial iteration of PDUFA, there are various interim year metrics, but we understand that things only really begin to take off at the year 3 cohort (i.e., applications submitted in FY 2015, October 1, 2014 to September 30, 2015).

Backlog Metrics – FDA will reportedly review and act on 90% of all ANDAs, ANDA amendments and ANDA PASs regardless of current review status (whether electronic, paper, or hybrid) pending on October 1, 2012 by the end of FY 2017 (i.e., September 30, 2017).

CGMP Inspection Metrics – FDA agreed to conduct “risk-adjusted biennial CGMP surveillance inspections of generic API and generic FDF manufacturers, with the goal of achieving parity of inspection frequency between foreign and domestic firms in FY 2017.”  Domestic and foreign facility parity was an important concept during GDUFA negotiations (and has been since, with a recent GAO report and Senate Health Committee hearing).  As noted in GDUFA meeting minutes, “[t]he program’s goals of ensuring FDA has necessary resources to conduct needed inspections as part of the complete review framework and achieve parity of GMP inspections for foreign and domestic facilities by the 5th year of the user fee program will [] provide significant value to industry participants given that outstanding inspections can result in delays of ANDA approvals.”

Efficiency Enhancements – FDA agreed to implement various efficiency enhancements including: (1) use of complete review/response letters for ANDAs and DMFs; (2) a DMF completeness assessment (at least for DMFs intending to be referenced by ANDA sponsors); (3) division level deficiency review for ANDAs and DMFs; (4) rolling review of ANDAs and DMFs; and (5) first cycle deficiency meetings for ANDAs and DMF.

Regulatory Science – FDA also agreed to “undertake various initiatives designed to enhance post-market safety, to develop guidance to industry, and to mitigate regulatory science gaps in select generic regulatory pathways.”