The Price of Doing Business - Following the 2012 implementation of the Generic Drug User Fee Act (GDUFA), an article in CHEManager Europe's July/August 2013 edition about GDUFA's Impact on the API Industry. The article summarized the legislation and outlined the FDA's intended outcomes along with other potential consequences resulting from the new regulations and associated fees. The legislation has now been on the books for over a year, and while more time is needed for the long-term effects of GDUFA to be fully realized, some initial trends have begun to emerge.

FDA on Track

The FDA has met all of the GDUFA first year commitments outlined in the "Generic Drug User Fee Act Program Performance Goals and Procedures". GDUFA brought in approximately $296 million during FY2013, just below the annual target of $299 million. The FDA adjusted FY2014 drug master file (DMF) and facility fees based on inflation and amounts received during the prior year (Fig. 1); these adjustments will be made each year throughout the life of the program. The FDA exceeded its goal of hiring and training 25% of total GDUFA program hires; 250 employees (approximately 30% of GDUFA program hires) came on board with over 100 assigned to the office of generic drugs (OGD), an FDA "super office" that has made GDUFA implementation its top priority. Improvements to the FDA's review processes for ANDAs and Prior Approval Supplements (PASs) have been made and while there remains a stack of these applications to be reviewed, the FDA has made initial progress toward reducing both the current backlog and future review times.

FDA officials have praised the generic industry for prompt fee payment and self-identification during GDUFA's inaugural year. The agency has begun developing an inventory of manufacturing establishments and products that they plan to make accessible online in the near future.

Industry Trends

At the time of this writing, 1,329 DMFs have been filed, paid for and made "available for reference" under the new GDUFA system (Fig. 2). India was by far the most prolific filer with Indian-based companies accounting for 520 DMFs. India's percentage of the total DMF filings (39%) is very much in line with what was seen during the pre-GDUFA decade. However, only 126 DMF filings originated from China since the GDUFA implementation, which is a sharp downturn from a year ago when Chinese API manufacturers accounted for nearly 20% of DMF filings. The 142 Israeli DMF filings are the result of Teva Pharmaceuticals proactively paying filing fees on a large portion of their API portfolio; this should be a one-time spike and not a trend toward greater API production in that nation. Total DMF count is not a direct measure of regional API production or presence in the US market, especially considering that DMF fees were not required to be paid until the first new DMF reference in a drug application after GDUFA implementation. It will be interesting, however, to continue to monitor DMF filings by country to determine whether nations in less regulated markets have slowed their prolific filing rates in response to new fees as well as the challenge of preparing for and responding to FDA inspections.

Despite the difficulties of training new staff and obtaining foreign work visas, the FDA has increased its level of scrutiny in less regulated markets. FDA staff increases in India and, very recently, China, along with increased inspections from US-based staff, will no doubt result in increased depth and frequency of manufacturers in these less regulated markets. Several large Indian API producers, namely Ranbaxy and Wockhardt, have already seen products banned from US import following unsatisfactory inspection reports; with US officials finally obtaining permission from the Chinese government to increase FDA presence there, we can expect this market to be the next to fall under the FDA's regulatory spotlight.

Value for Small Companies

GDUFA fees have proven burdensome for small generics companies. The new legislation will eventually provide value for small companies and first time entrants to the market through reduced review times and earlier drug launches, however, these benefits are still several years away. Representative Robert Hurt (R-VA) introduced a bill designed to bring some relief to small companies required to pay the same DMF and facilities fees as large companies. The "Small Manufacturer Protection Act of 2013" would allow for waivers and refunds in cases where fees represent a significant barrier to market entry due to limited resources.

Without financial relief in the form of GDUFA fee waivers, small companies may need to trim their API portfolios and specialize in products with some barrier to market entry which limits competition. Additionally, the recent wave of mergers and acquisitions is likely to continue as small innovative generics companies are "bolted on" to large established firms with the capital to gain market entry.

Moving Forward

This year will be a telling one for GDUFA and its effects on the future of the generic drug industry. The ANDA backlog should finally begin to shrink and many companies in less regulated markets will determine whether they can meet FDA standards. An increase in DMF filing fees and annual facility fees may now prove prohibitive to companies wishing to enter the U.S. market, any API or finished dose manufacturers leaving the U.S. market would lead to further increases in annual facility fees. U.S. consumers should be the biggest winners as GDUFA has entered its second year - increased regulations and transparency for foreign API producers will mean safer, higher quality generics medicines.