In July 2012, the U.S. Congress enacted the Food and Drug Administration Safety and Innovation Act (FDASIA), which contained the Generic Drug User Fee Amendments (GDUFA). GDUFA has noble goals in its first five year term (FY 2013 - FY 2017): improving safety, access and supply chain transparency for generic drugs in the U.S. GDUFA’s key targets include cutting down the immense backlog in Abbreviated New Drug Applications (ANDAs) by 90%, reducing the current turnaround time for a new ANDA from an average of 32 months to approximately 10 months, and inspecting all facilities that supply generic Active Pharmaceutical Ingredients (APIs) and Final Dosage Forms (FDF).
The annual budget for this program, which began at $299 million and will be $320 million in the coming fiscal year, is funded solely through user fees: 30% of the budget is provided by generic pharmaceutical companies as they file for ANDAs, Prior Approval Supplements (PASs) and/or Drug Master Files (DMFs) of generic drugs, while the remaining 70% is covered by Facility Fees, which are paid by the owners of the individual sites that manufacture or package the dosage form or API of these generics. FDF Facility Fees account for 56% of the annual GDUFA budget, or approximately $179 million in the coming year, while the remaining 14% (~$45 million) is paid by API facilities. Non-U.S. facilities – both FDF and API – pay $15,000 more than domestic ones, to help defray the costs of overseas inspectors. In the first three fiscal years, GDUFA FDF Facility Fees for domestic manufacturers were $175,389, $220,152, and $247,717, respectively. Domestic API Facility Fees were $26,458, $34,515 and $41,926, respectively.
For the most part, GDUFA mirrors the Prescription Drug User Fee Act (PDUFA), which has been in place since 1993, in a series of five-year terms. For CMOs and CDMOs, GDUFA has two crucial differences from the prescription model. First, GDUFA’s Facility Fees are levied directly on the manufacturing sites, rather than being incorporated into the fees paid by the drug filer. This change means that CMOs pay directly into the GDUFA budget, and that ANDA filers are (somewhat) shielded from the full cost of GDUFA.
Second, GDUFA contains no provision for reductions or waivers of fees for small companies. This means that every facility that manufactures the final dosage form (FDF) or conducts primary packaging, whether in-house or contractor, must pay an identical fee, regardless of size or volume of generic business.
Meanwhile, review times for ANDAs have grown rather than shrunk, as the Office of Generic Drugs implemented its GDUFA overhaul, which involved an office move, an agency-wide IT revamp, and hiring and training of new reviewers and inspectors.
What impact does this have on CMOs? Let’s say you’re a single-site CMO and your only generic client has an ANDA that’s sitting in the multi-year backlog, still waiting for review.
Then you’ve paid $643,258 in Facility Fees without seeing a dime of manufacturing revenue (we’re assuming you’ve received some money for tech transfer and other pre-commercial activities).
Or you’re a CMO with only one generic client that has an approved ANDA, but it’s a small, short-run product. In order to live up to your contract and produce the client’s generic drug, you need to pay your FDF Facility Fee ($247,717 in FY 2015) every year. Even if that client assents to paying part of the fee – no guarantee, given the tight margins of small generic companies – will they have to raise their price to unsustainable levels in order to cover the new cost? Or you’re a CMO with a new, advanced manufacturing facility. Can you afford to sign a deal at that site with one generic client? In doing so, you’ll be triggering a GDUFA fee, with no guarantee of the client’s approval timeline. Can either party carry that fee or even split it, with no promise of a timely approval?
Or you’re a CMO who bought a facility that made generics a dozen years ago, but hasn’t worked on a single generic product since that time. You just received a bill for FDF Facility Fees because an out-of-date ANDA still lists your site as a manufacturer. Get your lawyers on the case and try to figure out how to get removed from the list. Until then, you could end up on the GDUFA Arrears List. According to the agency, “Failure to timely submit the annual facility payment means that FDA will not be able to receive new ANDAs or PASs referencing these facilities . . . until all outstanding fees are paid. The FDA will also not be able to receive applications submitted by the owners, or affiliates of the owners, of these facilities.” Or you’re a multinational CMO with a dozen sites that are subject to Facility Fees. Last year’s GDUFA bill was nearly $3 million, and it’s going to climb. Oh, you handle APIs at the same facility as final dosage forms? That means you’ll be paying two sets of GDUFA fees for that facility, and that’ll push you over the $3 million mark pretty quickly.
Or you’re on the other end of the scale; a small, single-site CMO that now faces an unforeseen annual charge of around a quarter of a million dollars. Do you lay off staff or get out of the generic space? These aren’t mere hypotheticals, but part of the new reality for CMOs, and contract packagers. It’s important to remember that the fee structure and many of the parameters for GDUFA I (the first five-year period) weren’t dictated by fiat. They were negotiated by FDA and several industry trade groups in meetings from March to August 2011, but none of those groups represented CMOs.
With that in mind, we launched the Pharma & Biopharma Outsourcing Association (PBOA) last year to provide regulatory and legislative advocacy for this industry. GDUFA isn’t the sole reason the PBOA came into existence, but it does provide a vivid illustration of the hazards CMOs and other service providers face when they don’t have a collective voice.
One of our key goals is participating in GDUFA II negotiations this fall. During the past year, we’ve worked with FDA and Congress to explain the CMO perspective by speaking at FDA hearings, bringing together our members with their local legislators, lobbying on Capitol Hill, and holding a workshop in which FDA policy directors were able to meet with member companies to talk about GDUFA, manufacturing quality, and other issues.
When it comes to GDUFA, we know that CMOs and contract packagers want the same things FDA does: speedier reviews, improved facility quality, and increased access to generics. Where we differ is in the notion that a one-size-fits-all Facility Fee was the correct way to fund those goals. With GDUFA coming up for renewal, we feel it’s critical that the Facility Fee structure be overhauled, either to mirror PDUFA (with the fees being folded into the drug filer’s application fees), or to create payment tiers will allow different classes of companies to pay their fair share of the annual budget, or with other mechanisms to level the playing field, including reductions or waivers for small manufacturers. (At the same time, there are other, non-fee aspects of GDUFA that we think can be improved for its second five-year period.) In June, the PBOA gave a presentation at the FDA’s public hearing on GDUFA reauthorization in Silver Spring, MD. We began by talking about the importance of CMOs and other contract service providers to the generic ecosystem. Hard numbers aren’t available, since CMOs are typically under non-disclosure agreements with their clients, but an examination of the FDA’s Self-Identified Facilities List for GDUFA fees shows that at least 15% of sites subject to FDF Facility Fees are engaged in contract manufacturing for generics.
The main purpose of our presentation was to discuss the effect of Facility Fees on our members and other contract service providers, and that included a sequence on the potential long-term impact of Facility Fees as currently structured:
Some CMOs may have no choice to but to exit generic space/not renew generic contracts
CMOs may not be able to accept generic clients in new, advanced manufacturing facilities
Reduced competition and fewer manufacturing options for generic clients
Vicious cycle: Facility Fees will grow larger for remaining sites, making it more difficult for manufacturers to afford to stay in the market
Small-scale product and orphan drugs will become scarce and more expensive; potential drug shortages in critical areas, such as generic injectables.
Our presentation was part of the trade association segment of the hearing, and I was gratified to learn that two of the associations that helped negotiate GDUFA I share some common goals in terms of improving GDUFA II. Since that hearing, several other affected groups have reached out to learn more about the PBOA and how we might be able to work together on this and other issues.
Getting CMOs involved in the GDUFA II negotiations doesn’t just mean that we’ll have a say in how our sector helps fund the overhaul and advancement of the generic review process. It also means that CMOs and CDMOs – the providers of technology solutions and contract services, the companies that help the pharma and biopharma industry develop and manufacture drugs, biologics, vaccines, and other treatments safely and cost effectively – are being taken seriously as an industry.
Gil Roth is the President of the Pharma & Biopharma Outsourcing Association (PBOA), a non-profit trade association devoted to advancing the regulatory, legislative and general business interests of CMOs, CDMOs, and other contract services and technology solutions providers. He can be reached at [email protected]. You can find out more about the PBOA at www.pharma-bio.org.