Legislators: Give Small Generic Companies a Break from Use Fees

Posted 04 December 2013 | By Alexander Gaffney, RAC 

A new bill introduced in the House of Representatives on 2 December 2013 would specifically authorize the US Food and Drug Administration to "waive or reduce" the user fees paid by some smaller generic drug manufacturers.


Since 1992, the US Food and Drug Administration (FDA) has seen growing portions of its review operations funded by industry-paid user fees. The fees came out of an acknowledgement of "drug lag," in which US patients received the same drugs later than European citizens because of the length of time it took FDA to review the products.

Out of this acknowledgement was born a compromise: Industry would pay FDA for each application it submitted to the agency (and other activities like plant inspections as well), and in return FDA would commit those resources specifically toward improving review times and shoring up its aging infrastructure.

The model proved successful, and was expanded in 2002 to include medical devices, and later veterinary products as well.

But the 2012 authorization of the Food and Drug Administration Safety and Innovation Act (FDASIA) dramatically expanded the program once again, this time including human generic drug products for the first time.

The generic drug provisions of the law, known as the Generic Drug User Fee Act (GDUFA), allow FDA to assess fees on companies in order to expedite reviews, clear a massive backlog of abbreviated new drug applications (ANDAs), and better inspect foreign facilities. US regulators said the money was needed thanks to a surge in generic drug filings, many of which were for products that were no longer manufactured in the US, making it more difficult-and expensive-for FDA to regularly inspect the products to ensure their quality.

Among the reasons highlighted by FDA for the fees:

  • Program funding for generic drug reviews has remained flat since 2001.
  • ANDA submissions have more than tripled since 2001.
  • Submission of drug master files (DMFs) are up 100% since 2001.
  • The backlog of generics is at nearly 2,700 in 2012, up from just 1,400 in 2006.
  • Foreign inspections have increased dramatically and surpassed domestic inspections for ANDAs.

What Are the Fees?

While the fees payable by generic drug facilities, including manufacturers of active pharmaceutical ingredients, aren't nearly as expensive as the fees for their innovative pharmaceutical manufacturer counterparts, they are still substantive.

Domestic facilities must pay $220,152 per year, and foreign facilities must pay $235,152. Manufacturers of APIs get a substantially reduced registration fee, but still must pay $34,515 (domestic) or $49,515 (foreign).

Each ANDA cost $63,860 to file, while a prior approval supplement, used to make major changes to an approved application, costs $31,930. Type II Drug Master Files (DMFs) for chemistry, manufacturing and controls information cost $31,460.

Small Manufacturer Protection Act

For large manufacturers, these fees may not be cheap, but they can at least be seen as the cost of doing business. After all, if their generic products experience fewer backlogs and a more expeditious review time, they can recoup costs by reaching the market more quickly.

But for smaller manufacturers, the new fees may well exceed their ability to pay. And that evidently has at least two House legislators worried. The Small Manufacturer Protection Actof 2013, co-sponsored by Reps. Phil Roe (R-TN) and Robert Hurt (R-VA), would give FDA the ability to "waive or reduce" certain generic drug user fees in cases "where the fees would present a significant barrier to market entry because of limit resources available to such facilities or other circumstances."

The subjective term "significant barrier" is relatively unusual in that there is no definition for it. Whereas some regulatory authorities, such as the European Medicines Agency (EMA), grant waivers if a company is defined as a small or medium-sized enterprise, the "significant barrier" term could potentially apply to almost any company.

For example, during an economic downturn, a company might petition FDA to exempt it from user fees; a well-heeled company might petition for an exemption for a particular product's user fees based on a relatively small market size; and of course, small companies would likely petition FDA to be exempt from the fees by virtue of their size.

Regardless of the flexibility of the definition, the process by which companies would need to apply under the law is far more rigid. Applications for a waiver or reduction would need to be submitted within 180 days of the fee being due.

Flaw or a Feature?

But as Kurt Karst of the law firm Hyman, Phelps and McNamara (HPM) explains on the company's FDA Law Blog, the omission of a small business exemption in FDASIA was decidedly intentional.

Karst pointed to the GDUFA meeting minutes, in which it was explained:

Industry and FDA agreed not to include fee waivers or exemptions to the extent possible, given the relatively low amount of expected individual fees, the return participants can expect for paying the fees through quicker review times and inspections, ease of administration that will allow FDA to hire additional science and inspection staff rather than a significant number of administrative staff to handle adjudications, as well as other benefits anticipated by the program.

What's more, FDA has anticipated those firms benefiting greatly from the user fees and the stable review performance they provide, Kurst noted.

Given the small show of support so far from legislators and likely pushback from FDA and other manufacturers (who would likely see their fees rise), it's far from certain that we'll see this legislation reach the president's desk.

Small Manufacturer Protection Act

FDA Law Blog Explanation


FDA Q&A Guidance on GDUFA

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