Pressure is growing for Congress to create a generic drug user fee exemption for small businesses, some of whom claim the charge is an increasingly difficult burden to bear while waiting for ANDAs to be approved.

The problem may simply be a consequence of the agency’s launch of the GDUFA program, which is intended to reduce review times to 10 months for most submissions by fiscal year 2017. It also likely is one that cannot be addressed until program renewal negotiations, which are years away. However, it appears the push has started and gained the attention of members of Congress.

Waivers came up during a June 12 small business assistance conference on GDUFA, when some attendees complained that the fees are so expensive that some small businesses have to borrow money to pay them.

Several have said new employees are not being hired and some companies are not filing ANDAs because they cannot afford the fees. They view fee waivers as a way to help competitive balance between large and small companies.

Some of the concern appears to be centered on the time FDA needs to ramp up the GDUFA program. The head of a small generic company said in an interview that FDA’s long ANDA approval time, estimated at more than 30 months recently, is amplifying the strain of the fee payments.

The company, which has less than 50 employees, has paid GDUFA backlog, application and facility fees, but has little revenue because it is awaiting approval of several pending applications. That has forced the company to limit or stop expansion and equipment purchases.

The company official said without sales revenue, fee payments are difficult to finance through banks.

“If I have an approval today, then I wouldn’t be so vociferous about my concerns over the fees because I would actually have some revenues that would keep me occupied as a business and keep me going to further submit [applications],” said the company official, who asked to remain anonymous. “But because the fees really haven’t done much ... I don’t see any results yet.”

The company also has several other applications ready to be filed are not being submitted because of a lack of revenue for fee payments.

“I had to cut the number of projects that I had and that I wanted to work on this year and I had to cut my workforce or not hire new workforce,” said the company official. “I also made a decision not to work on a particular generic drug that required a biostudy and postponed that drug until I have other revenue. ... It was a tremendous impact for me because I had to make a lot of trade-offs and a lot of cuts for my company.”

GDUFA, which was included in the FDA Safety and Innovation Act and launched in October 2012, was created to generate more revenue for FDA’s Office of Generic Drugs and allow it and other portions of the Center for Drug Evaluation and Research to better handle the growing volume of generic applications and facility inspections Also see "ANDA User Fee Negotiations Finished; Backlog To Be Mostly Cleared By Year Five" - Pink Sheet, 12 September, 2011..

Donal Parks, director of the user fee collections staff in the Office of Management at FDA’s Center for Drug Evaluation and Research, acknowledged the fee costs have been a common complaint among small businesses.

“We are getting a lot of concern from small businesses for whom a $175,000 facility fee is a huge chunk of change, and we understand that,” Parks said during the conference. “Administering small business exemptions is administratively very complex because anybody can say they’re a small business.”

FDA set the FY 2013 GDUFA facility fees in January, including a $175,389 charge for domestic finished dosage form facilities and $190,389 for foreign finished dosage form facilities, which were higher than originally estimated ([A#14130115007]).

ANDA, drug master file and prior approval supplement fees were lower than estimated ([A#14121024002]).

Among the initial principals FDA employed during the 2011 negotiations to create the program was to avoid creating administrative complexity in GDUFA to ensure that as much of the funding as possible went into review and inspection activites. No fee exemptions were allowed, unlike its sister program for prescription drugs (see chart below).

A provision was added to a House version of FDASIA that would have allowed an exemption from GDUFA fees if the product helped alleviate a drug shortage, but it was later dropped Also see "Generic User Fee Waivers Created In Draft House Bill, Breaking FDA-Industry Agreement" - Pink Sheet, 19 March, 2012..

Lobbying Encouraged

If the FY 2013 fee levels created financial problems for small businesses in the generic industry, the FY 2014 fees, which should be announced about Aug. 1, likely will not provide any relief.

They are almost certainly going to be higher than the FY 2013 figures, as Parks acknowledged. An adjustment for inflation likely will cause an increase, as will the absence of the backlog fee, which only was charged in the first year of the program.

Facility fees also may increase because the list used to calculate the fees is shrinking ([A#00130610019]).

The House appropriations bill under consideration that includes FDA funding allows for $306 million in GDUFA fees in FY 2014. It was scheduled to generate $299 million in FY 2013 Also see "FDA’s Sequestered User Fees From FY 2013 Likely Gone, But FY 2014 Fees Could Be Exempted" - Pink Sheet, 5 June, 2013..

Parks encouraged those concerned about the fees to lobby industry trade associations and members of Congress to consider adding a waiver.

“We can’t grant a waiver that Congress doesn’t allow us to do,” he said. “I would urge you … to make sure these concerns get floated up to the trade associations and such in preparation for GDUFA II negotiations. Because that’s really the main way we can work these into the agreement.”

It appears that effort already has begun. There has been talk about forming a generic industry alliance focused on small businesses, the company official said. If established and supported, that group may be able to push for the waiver as a participant in GDUFA II negotiations.

The Generic Pharmaceutical Association, among the industry representatives that negotiated the GDUFA agreement, said June 19 its members have not asked the organization about a small business exemption. David Gaugh, GPhA senior VP of sciences and regulatory affairs, said in a statement that the group supports the existing provisions “and will stay the course to implement them.”

The talks to create the program also included the Society of Chemical Manufacturers and Affiliates’ Bulk Pharmaceutical Task Force and the European Fine Chemicals Group Also see "Generic User Fee Negotiations Begin In Ernest On Feb. 28 With Four Seats At The Table" - Pink Sheet, 18 February, 2011..

Creation of a new generic trade association for small firms would be a significant shift in the Washington landscape for the industry, which has seen its effectiveness increase significantly since the consolidation of three generic trade groups to form GPhA was completed in 2001.

The last group to join, the National Association of Pharmaceutical Manufacturers, was comprised mostly of smaller companies. Current feeling that those kinds of firms now need more focused representation could be a function of how the industry has grown and evolved in the dozen years since GPhA solidified. The big firms are now multinational hybrids with vast brand divisions, while smaller firms can still often count their applications on their hands.

Even with a formal trade association presence, however, small generic firms appear to be getting their concerns heard. The House Appropriations Committee also mentioned GDUFA small business concerns in its draft committee report on the FY 2014 agriculture appropriations bill, which includes FDA funding.

The draft report, a list of instructions on how appropriated dollars should be spent, directed FDA to issue a report on the impact of the GDUFA fee structure on small manufacturers within three months of the bill’s enactment.

“While the committee understands that user fees provide the resources to facilitate generic drug approvals, the committee believes FDA should study the impact of smaller generic manufacturers’ ability to pay at the same level as large manufacturers,” committee members said in the draft report. The draft Senate Appropriations report, released June 20, does not mention the issue.

FDA Moving Beyond Launch Phase

Given uneasiness about upsetting the industry-FDA agreement mid-cycle, there likely will not be a waiver created until GDUFA II begins in FY 2018. Negotiations likely will begin in FY 2016.

FDA may become more open to the idea by then, since the program will be better established. There may be some room to add some administrative complexity because the hiring to deal with approval times and facility inspections should be mostly completed.

The agency announced in a June 17 memo to CDER staff that the GDUFA launch has officially been completed. The program now is “poised to transition to a new project and governance structure” similar to PDUFA for brand drugs, CDER Director Janet Woodcock wrote in the memo.

Theresa Mullin, director of the CDER Office of Strategic Programs, will chair a new GDUFA steering committee that will lead the next program phase, focusing on “implementation of review program enhancements, transforming the generic drug review process to meet the new GDUFA performance commitments,” Woodcock said in the memo.

The committee members will include the heads of all the super offices in CDER, such as the Office of Generic Drugs, as well as a senior leader in the Office of Regulatory Affairs and Office of the Commissioner’s Office of Operations, according to the memo.

Among the review process enhancements that have been considered is adding a pre-submission meeting for ANDA sponsors as a way to improve application quality Also see "ANDA Pre-Submission Meetings Being Considered By FDA" - Pink Sheet, 17 June, 2013..

Available User Fee Waivers and Exemptions
Prescription Drug User Fee
Public Health	FDA may waive or reduce application, product and/or establishment fees if necessary to protect public health and continue an activity that protects public health. The agency will ask questions such as whether the product fills an unmet need or is designated for a rare disease. It also could consider the sponsor’s “limited resources.”
Barrier to Innovation	Application, product, and/or establishment fees can be waived or reduced if they “would present a significant barrier to innovation because of limited resources available to the applicant or other circumstances,” according to FDA guidance. The product must be considered innovative, such as using new and progressive methods and/or forward thinking. The agency also will consider the relationship between annual user fee costs and gross annual revenue. Sponsors with more than $20 million in financial resources are not considered as having limited resources, according to FDA guidance.
Small Business	Application fee can be waived if the sponsor is a small business submitting its first human drug application for review and does not have another approved product. Sponsors also must employ fewer than 500 people, including affiliates.
Orphan Drugs	Products that receive an orphan drug designation are exempt from paying the application fee unless the application includes a non-rare disease indication. Product or establishment fees can be exempted if the application meets public health requirements and the sponsor has less than $50 million in gross worldwide revenue during the year prior to requesting the exemption.
State or Federal Entities	Products submitted by state or federal entities that are not distributed commercially are not considered human drug applications and not assessed application, product or establishment fees.
Biosimilar User Fee
Small Business	Application fees are waived for the first biosimilar product submitted by a small business or its affiliate. Sponsors must employ less than 500 people, and not have a drug product approved under PDUFA or BsUFA.
Medical Device User Fee
Small Business	Reduced fees are available for sponsors with less than $100 million in gross receipts or sales, including affiliates. Sponsors with less than $30 million in gross sales or receipts can have their first premarket approval, product development protocol, premarket report or biologics license application fee waived.
Discretionary	FDA may waive or reduce fees if it finds it is in the interest of public health. The total amount waived in a fiscal year cannot exceed 2% of the total fee revenue amount established for that year. FDA decided this waiver would only be used for lab-developed test reviews.
Pediatric Use	Applicants are exempt from all device fees. If a supplement is later submitted for adult use, fees would apply.
State and Federal Government Entities	Applications for products not distributed commercially are exempt from all fees.
Note: FDA does not allow waivers for generic drug user fees. Source: FDA guidance, website and other documents

Generic User Fees Need Small Business Waiver, Firms Say; Congress May Agree

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