GDUFA III: Use MDUFA model to create competition in generic drug markets

As negotiations for the reauthorization of the Generic Drug User Fee Act (GDUFA) continue, stakeholders should consider a new financial model to improve equity and competition in generic drug markets, according to a recent Health Affairs blog post.
 
GDUFA was enacted in 2012 and reauthorized in 2017 as GDUFA II with the goal to “supplement FDA funds to expedite generic drug approval and inject competition in generic drug markets,” Margaret M. Dotzel, attorney and former deputy general counsel at the Department of Health and Human Services under the Obama administration, and colleagues wrote.
 
Both GDUFA and GDUFA II have had success in expediting generic drug approval, the authors acknowledged. Under GDUFA II, user fees have been responsible for between 58% and 76% of the Office of Generic Drugs’ operating budget, and the projection for 2021 is estimated at $692 million.
 
However, GDUFA and GDUFA II have “fallen short” in terms of improving equality and competition, Dotzel and colleagues argued. “While critical to the agency’s operations, this financing comes at an obvious cost to generic drug companies and is, in effect, a barrier to market entry,” they explained. While GDUFA II tried to stratify program fees for abbreviated new drug applications to aid small generic firms, these program fees make up about 35% of revenues, with 65% consisting of “largely flat fees per application that do not differ by manufacturer size.”
 
Manufacturers in the generic drug market have also been on the decline over the last decade, Dotzel and colleagues noted, which has had a “pronounced” impact on smaller markets. For instance, the authors’ analysis of IQVIA data between 2012 and 2018 found that small markets such as generic injectables had a larger percentage of small manufacturers (36%) when compared with larger markets, where small firms made up 29% of all manufacturers.
 
Negotiations on GDUFA III began in July 2020 and are now at a “critical phase” where a new financial model should be considered, the authors said. “To design an effective financing system for generic drug approvals, the FDA must balance the need to ensure sustainability with the goal of providing a level playing field for competition among firms of all sizes. To this end, the agency should impose fees where they are least likely to discourage supply,” they noted. (RELATED: FDA kicks off GDUFA III reauthorization process, Regulatory Focus 21 July 2020)
 
The authors proposed reducing GDUFA fees to allow small manufacturers to re-enter the market more easily, noting that reducing fees “would be especially important in markets for injectable products.” They estimated a new entrant in a small generic drug market could reduce prices of generics between 5% and 9%.
 
Stakeholders negotiating GDUFA III should consider a financial model like the one found in the Medical Device User Fee Act (MDUFA) user fee program, asserted Dotzel and coauthors. MDUFA reduces fees for medical device applications by 75% for small businesses with sales of less than $100 million. The user fee program under MDUFA also waives reporting fees for first-time applications for certain small businesses with $30 million in gross receipts or less.
 
“While recalibrating generic drug user fees will be a challenge, there is no need to reinvent the wheel,” Dotzel and colleagues said. “It is feasible to restructure user fees in the GDUFA to feature the same deep discount for small players. Simultaneous increases in fees for big players can keep the total financing to the FDA fixed.”
 
“These changes will provide an important tool for efforts to increase competition for generic drugs in small markets. Consumers and payers will reap the benefits, in the form of lower spending and fewer disruptions in supply, which in turn will enable greater continuity of care. Thus, the FDA will take a major step forward in realizing the full promise of the GDUFA,” the authors concluded.
 
Health Affairs Dotzel et al