GDUFA Negotiations Shift To 'Tiered' Fee Models

Finance subgroup talks about new structure for generic drug user fee program that could mean bigger firms would pay more.

A few new approaches to structuring generic drug user fees are under consideration, potentially ensuring reauthorization talks continue for several more weeks.

One model, apparently proposed by FDA, appears to alter the existing system to set different fee levels in some cases.

Minutes of a June 30 meeting of a subgroup focused on fee modeling for GDUFA reauthorization state that FDA and industry "discussed possible approaches" to the fee schedule.

One of the models included "annual fees, one-time fees and a tiered fee structure," which industry representatives agreed to take to their organizations for evaluation and discussion, according to the minutes.

Discussions continued July 22, when both sides talked about a proposal involving "annualized tiered fees," according to meeting minutes.

The accounts of the meetings, the most recent posted July 28, did not offer further details on the ideas.

The key change under consideration seems to be a tiered fee structure. That suggests ANDA sponsors or manufacturers may not always pay the same fees.

Among the agreements in GDUFA I was that application and facility fees would be the same for all eligible in part to minimize the program's administrative burden on FDA. (Also see "Generic User Fee Waivers Created In Draft House Bill, Breaking FDA-Industry Agreement" - Pink Sheet, 19 Mar, 2012.)

An annualized tiered fee suggests that some of the fees, most likely those charged to manufacturers, could be structured based on company size.

That could fit with calls to create a small business fee waiver or discount. Stakeholders, including some manufacturers, have complained that GDUFA's facility fees are too high and in some cases more than the value of the generics business a new manufacturer wants. (Also see "GDUFA II: Facility Fees Might Be Deferred Until ANDA Approval" - Pink Sheet, 15 Jun, 2015.)

FDA and industry have considered the idea, but agency officials warned that larger businesses likely would have to pay more if a waiver is created. (Also see "Generic User Fee 'Relief' For Small Firms Would Mean Bigger Bills For Large One" - Pink Sheet, 25 Jan, 2016.)

The existing GDUFA fee structure relies mostly on fees for generic drug manufacturers producing for the US market that are charged annually.

Facility fees must account for 70% of the total revenue generated each fiscal year. Active Pharmaceutical Ingredient and finished dosage form facilities pay separate fees. An additional premium also is added for facilities outside the US to account for FDA's increased costs to inspect them.

The remaining 30% of fee revenue comes from applications, including ANDAs, prior approval supplements and Drug Master Files. Those fees are charged when the various applications are submitted.

Application and facility fees are determined based on the estimated number of filers or payers each fiscal year.

ANDA and supplement fees will decrease in FY 2017 compared to the previous fiscal year, but facility fees increased to their highest level in the GDUFA era. (Also see "ANDA User Fees Offer Sponsor Relief, But More Facility Pain" - Pink Sheet, 26 Jul, 2016.)

Who Wants To Pay More?

A tiered structure could provide some relief for manufacturers, but may force application sponsors to pay more.

As some facilities pay less, income likely would decrease in the category. In order for FDA to maintain the fee revenue stream, it may have to adjust application fees to generate more funding.

That could make the overall revenue stream less predictable, in part because application volume year-to-year can be volatile.

In FY 2014, in part to avoid new stability requirements that were about to take effect, sponsors submitted more than 1,400 ANDAs to the agency, including 635 in June 2014. (Also see "ANDA Avalanche: How Will FDA Deal With The 600 Received This Month?" - Pink Sheet, 30 Jun, 2014.)

The next fiscal year, the total number of ANDAs submitted did not surpass the total for that month. Only 539 reached the agency.

The yo-yo effect can make estimating submission figures for future fee rates difficult.

The agency did not include the June 2014 ANDA total in the historical data it used to estimate upcoming submission rates until it calculated the FY 2017 fees.

Funding questions could limit FDA plans to continue enhancing its ANDA review function. And the agency likely does not want to lose momentum after the multi-year transition under GDUFA I is now yielding increased approvals. (Also see "Dark, Then Dawn: ANDA Workload Approaching Steady State After 2014 Eruption" - Pink Sheet, 28 Mar, 2016.)

Is GDUFA II Close To Completion?

Negotiators continued to meet throughout July. However, FDA and industry likely want to wrap the talks up soon.

The longer the negotiations last, the less likely the completed commitment letter will reach Congress by the stated January deadline.

Progress has been made on some review system issues for GDUFA II, although discussions continue. (Also see "GDUFA II: FDA, Industry Reach Tentative 'Alignment' On ANDA Review Issues" - Pink Sheet, 17 Jun, 2016.)

Prescription drug and biosimilar user fee negotiations have been completed. (Also see "Two Out Of Three Ain't Bad: Biosimilar User Fee Talks Completed" - Pink Sheet, 20 Jun, 2016.)

Once the commitment letters complete internal approval processes, public meetings must be scheduled and comments reviewed before they can be transmitted to Congress.

The PDUFA VI commitment letter was released July 15. (Also see "Sponsors, FDA Reviewers To Get More Flexibility Under New User Fee Program" - Pink Sheet, 15 Jul, 2016.)