FDA Sends User Fee Pacts to Congress; Proposed Generic Drug User Fee Statute Includes Some Unique Provisions

By Kurt R. Karst –      

Last week, FDA Commissioner Margaret A. Hamburg, M.D. announced that the Agency sent to Congress packages for three user fee programs, including proposed statutory language for the fifth iteration of the Prescription Drug User Fee Act (“PDUFA V”), and two new user fee statutes – the Generic Drug User Fee Amendments of 2012 (“GDUFA”) and the Biosimilars User Fee Act of 2012 (“BSUFA”).  FDA previously announced the proposed performance goals and procedures (Fiscal Years 2013 through 2017) for PDUFA V, GDUFA, and BSUFA (here, here, and here), which we reported on here, here, and here.  Noticeably absent from FDA’s submission is proposed statutory language and performance goals and procedures for the next iteration of the Medical Device User Fee and Modernization Act (“MDUFMA”). According to press reports (see here), FDA and industry are still haggling over some issues.  The House Energy and Commerce Committee has scheduled three hearings for February 2012 to consider each of the four user fee programs (see here, here, and here).

Of the various “UFAs” (User Fee Acts) up for consideration by Congress, GDUFA will likely have the most wide-ranging and immediate effects (both on industry and on FDA and the Office of Generic Drugs).  (Biosimilar are still in their infancy.  Earlier this week it was reported that the highly-anticipated and seemingly always “shortly forthcoming” draft guidance from FDA on the Biologics Price Competition and Innovation Act may be further delayed.)  We thought we would take a few minutes to point out a couple of the interesting and unique provisions in the proposed statutory language (as compared to other UFAs), which we alluded to in a previous post after GDUFA negotiations were completed.

User Fee Types and Amounts.  People have already been asking: “What will the GDUFA user fees rates be set at?”  The fact is that nobody (not even FDA) really knows yet exactly what all of the user fee rates will be set at for Fiscal Year (“FY”) 2013 or thereafter, because some of the rates depend on information that still needs to be collected.  That being said, the user fee rates for FYs 2014-2017 will likely be higher than what will be set for FY 2013 given that in FY 2013, $50 million of the total user fee revenue amount of $299 million (adjusted each FY) will come from a one-time ANDA backlog fee.

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 an original ANDA fee and Prior Approval Supplement (“PAS”) fee (one half of the ANDA fee) (both accounting for 24% of the total revenue amount), and a Type II Drug Master File (“DMF”) “first reference fee” (6% of total revenue amount).  There is also a one-time (FY 2013) ANDA backlog fee for ANDAs pending on October 1, 2012.  That fee will be calculated by dividing $50 million by the number of ANDAs in the backlog, which as of January 1, 2012, was at 2,696 ANDAs.  (There was a record 210 original ANDA submissions to FDA in December alone, historically the highest volume month of submission.  A total of 946 original ANDAs were submitted to FDA in 2011.)  The number of ANDAs in the backlog on October 1, 2012 may increase or decrease from the current backlog number as companies decide whether or not to withdraw applications (or perhaps play a game of chicken with other ANDA sponsors). 

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 (56% of the total revenue amount), and API facilities account for 20% of facility fee revenue (14% of the total revenue amount).  There is “a modest fee differential” of not less than $15,000 and not more than $30,000 for foreign FDF and API facilities “reflecting the added costs of overseas inspection.”

For FY 2013, FDA is supposed to set the application fees and ANDA backlog fee by October 31, 2012.  The FY 2013 facility fee rates must be set “within 45 days after the date to comply with the requirement for identification of facilities in [proposed FDC Act § 744G(f)(1)].”  Proposed FDC Act § 744G(f)(1) states in relevant part that “[b]y October 1, 2012, the Secretary shall cause to be published in the Federal Register a notice requiring each person that owns a facility as identified in [proposed FDC Act § 744G(a)(4)(A)] or a site identified in [proposed FDC Act § 744G(f)(3)] to identify each such facility or site.  Each such person shall comply with that requirement within 60 calendar days of the publication of such notice.”

Failure to Pay User Fees.  The penalties for failing to pay GDUFA fees are particularly harsh under the proposed statutory language. 

Failure to pay the ANDA backlog fee will result in placing the ANDA sponsor on an arrears list, “such that no new ANDAs or supplement submitted on or after October 1, 2012 from that person, or any affiliate of that person, will be received within the meaning of [FDC Act § 505(j)(5)(A)] as implemented in [FDA] regulations, until such outstanding fee is paid.”  Proposed FDC Act § 744G(g)(1) (emphasis added). 

Failure to pay the required application fee within 20 calendar days of the due date will result in the application not being received (FDC Act § 505(j)(5)(A)) until the fee is paid.  ANDA receipt date is, of course, particularly important when 180-day exclusivity is at stake.  And the proposed statute recognizes this at § 744G(o), which states:

An [ANDA] that is not considered to be received within the meaning of [FDC Act § 505(j)(5)(A)] because of failure to pay an applicable fee under this provision within the time period specified in [FDC Act § 744G(g)] shall be deemed not to have been “substantially complete” on the date of its submission within the meaning of section 505(j)(5)(B)(iv)(II)(cc).  An [ANDA] that is not substantially complete on the date of its submission solely because of failure to pay an applicable fee under the preceding sentence shall be deemed substantially complete and received within the meaning of section 505(j)(5)(A) as of the date such applicable fee is received.

Failure to pay the DMF fee within 20 calendar days of the due date “will result in the Type II [API DMF] not being deemed available for reference.”  An affected ANDA “shall not be received within the meaning of [FDC Act § 505(j)(5)(A)]” unless the fee “has been paid within 20 calendar days of the Secretary providing the notification to the sponsor of the [ANDA] or supplement of the failure of the owner of the Type II [API DMF] to pay the [DMF] fee . . . .”  Proposed FDC act § 744G(g)(2).

Failure to pay a facility fee within 20 calendar days of the due date will result in several penalties, included what might be the harshest penalty of all – misbranding.  Specifically, proposed FDC Act § 744G(g)(4) (emphasis added below) states that failure to pay a fee will result in:

(A) identification of the facility on a publicly available arrears list, such that no new [ANDAs] or supplement submitted on or after October 1, 2012 from that person, or any affiliate of that person, will be received within the meaning of [FDC Act § 505(j)(5)(A)] as implemented in [FDA] regulations;

(B) any new generic drug submission submitted on or after October 1, 2012 that references such a facility shall not be received, within the meaning of FDC Act § 505(j)(5)(A)] as implemented in [FDA] regulations if the outstanding facility fee is not paid within 20 calendar days of the Secretary providing the notification to the sponsor of the failure of the owner of the facility to pay the facility fee as specified in [proposed FDC Act § 744G(a)(4)(C)]; and

(C) all drugs or [APIs] manufactured in such a facility or containing an ingredient manufactured in such a facility being deemed misbranded under [proposed FDC Act § 502(aa)].

The penalties in [proposed FDC Act § 744G(g)(4)] shall apply until the [facility] fee . . .  is paid or the facility is removed from all generic drug submissions that refer to the facility. 

Proposed FDC Act § 502(aa) (Section 106 of GDUFA) would amend the statute to state that a drug shall be deemed to be misbranded:

If it is a drug, or an [API], and it was manufactured, prepared, propagated, compounded, or processed in a facility for which fees have not been paid as required by [proposed FDC Act § 744G(a)(4)] or for which identifying information required by [proposed FDC Act § 744G(f)] has not been submitted, or it contains an [API] that was manufactured,  prepared, propagated, compounded, or processed in such a facility.

The misbranding provision, which was a point of controversy during GDUFA negotiations, appears to be intended to add some teeth to the proposed user fee statute.

User Fee Refunds.  Although other UFAs, like PDUFA and BSUFA, include user fee waiver/refund provisions (e.g., small business waiver), as well as strict waiver/refund request timelines (i.e., requests must be submitted within 180 days after a fee is due), the proposed GDUFA statute does not.  There is a 75% refund of the application (original ANDA and PAS) fee if an application is not received, see Proposed FDC Act § 744G(a)(3)(D); however, such an application will be subject to a new fee upon resubmission.  See id.  § 744G(a)(3)(E).  It is unclear whether an ANDA sponsor must specifically request in writing a 75% refund of the application fee, or whether such refund is automatic.  Proposed FDC Act § 744G(n) (emphasis added), titled “Disputes concerning fees,” states that “[t]o qualify for the return of a fee claimed to have been paid in error under this section, a person shall submit to the Secretary a written request justifying such return within 180 calendar days after such fee was paid.”  Is a fee subject to the 75% refund provision a fee that can be claimed to have been paid in error, thereby requiring a written refund request?