What’s in Your Wallet? Less Money With an Increased GDUFA ANDA Holder Program Fee . . . But Consider an Alternative

Back in June 2017, we introduced folks to a system we dubbed “ANDA Arbitrage.”  It’s an effort undertaken by a company called ANDA Repository, LLC to help companies potentially decrease annual user fee liability under the second iteration of the Generic Drug User Fee Amendments (“GDUFA II”).  Since then, we’ve hear the words “genius” and “entrepreneurial” used to describe the service.

As we quickly approach the October 1, 2018 deadline when the state of ANDAs solidifies and fee payments are due, we thought it would be a good time to remind some ANDA owners who have a small number of approved ANDAs, or who are just over the application count threshold for paying a higher ANDA Holder Program Fee, that there’s another option out there to consider.

GDUFA II significantly changed the user fee system and structure that had been in place under GDUFA I. Among other fees under GDUFA II, there’s the ANDA Holder Program Fee.  That fee is set up as follows: a firm and its affiliates pays one program fee each fiscal year commensurate with the number of approved ANDAs (both active and discontinued ANDAs) that the firm and its affiliates collectively own (see here).

The program fee to be paid each year depends on the number of ANDAs owned. Firms do not pay a per-ANDA fee.  Instead, the program fee is split into three tiers that represent different positions held by the firms and their affiliates within the market (i.e., small, medium, and large).  Specifically, FDC Act § 744B(b)(2)(E) states that:

if a person has affiliates, a single program fee shall be assessed with respect to that person, including its affiliates, and may be paid by that person or any one of its affiliates. The Secretary shall determine the fees as follows:

(I) If a person (including its affiliates) owns at least one but not more than 5 approved [ANDAs] on the due date for the fee under this subsection, the person (including its affiliates) shall be assessed a small business generic drug applicant program fee equal to one-tenth of the large size operation generic drug applicant program fee.

(II) If a person (including its affiliates) owns at least 6 but not more than 19 approved [ANDAs] on the due date for the fee under this subsection, the person (including its affiliates) shall be assessed a medium size operation generic drug applicant program fee equal to two-fifths of the large size operation generic drug applicant program fee.

(III) If a person (including its affiliates) owns 20 or more approved [ANDAs] on the due date for the fee under this subsection, the person (including its affiliates) shall be assessed a large size operation generic drug applicant program fee.

The statute (at FDC Act 744B(g)(5)) also includes certain penalties for failure to pay the ANDA Holder Program Fee:

(A) IN GENERAL.—A person who fails to pay a [ANDA Holder Program Fee] by the date that is 20 calendar days after the due date . . . shall be subject to the following:

(i) The Secretary shall place the person on a publicly available arrears list.

(ii) Any [ANDA] submitted by the generic drug applicant or an affiliate of such applicant shall not be received, within the meaning of section 505(j)(5)(A).

(iii) All drugs marketed pursuant to any [ANDA] held by such applicant or an affiliate of such applicant shall be deemed misbranded under section 502(aa).

(B) APPLICATION OF PENALTIES.—The penalties under subparagraph (A) shall apply until the fee required under subsection (a)(5) is paid.

For Fiscal Year 2019, the ANDA Holder Program Fee tier rates increased pretty significantly compared to Fiscal Year 2018:

That’s where ANDA Repository, LLC comes into the picture. . . .

Imagine a parking lot. The owner of a car that is not being used on a daily basis needs a parking space for that car.  In exchange for that parking space (and an annual fee) the car’s owner transfers title of the automobile to the parking lot owner.  The old owner of the car can, with appropriate notice, take back ownership when he decides that he wants to use the automobile again.  Provided the parking lot owner has enough cars, this can be a beneficial venture for all of the parties involved.

In the imagery above, the automobile owner is an ANDA sponsor (typically with a discontinued ANDA), and the parking lot owner and attendant is ANDA Repository, LLC. As a “large size” operation, ANDA Repository, LLC pays a flat ANDA Holder Program Fee regardless of how may ANDAs are owned.  In exchange for its services, ANDA Repository, LLC charges an ANDA sponsor an annual fee, which we understand is significantly less than the ANDA Holder Program Fee such ANDA sponsor would otherwise pay as a small or medium size operation.

If you’re interested in the program, you should reach out to ANDA Repository, LLC soon. The mechanism to communicate to FDA a transfer in ANDA ownership prior to October 1, 2018 should be relatively painless: (1) Transfer of Ownership Letters (Seller) and Acknowledgment of Transfer of Ownership letters (Buyer) to the Office of Generic Drugs; and (2) Email and call CDER Collections notifying them of the change in ownership.