New FDA User Fee Law includes unheralded but important provisions (and lots and lots of acronyms)

Compiled and written by Greenblum & Bernstein PLC

The passage of the FDA Safety and Innovation Act (FDASIA) ¹ on 9 July 2012, ushered in a number of new provisions of importance to the pharmaceutical industry. For example, the new law reauthorizes the Prescription Drug User Fee Act (PDUFA) for the fifth time and the Medical Device User Fee Act (MDUFA) for the third time. However, the FDASIA also includes provisions for two entirely new sets of fees, as well as a provision related to new market exclusivity for certain antibiotics. The following is a summary of a few provisions included in the FDASIA that are new and may have been overlooked in the acronym-soup headlines for PDUFA and MDUFA.

New generic drug user fees

Whereas the prescription drug user fees under PDUFA are collected from brand-name drug manufacturers, the new generic drug user fees will be collected from the generic drug industry. The fees are intended to reduce review times for abbreviated new drug applications (ANDAs) and to assist the FDA in meeting its domestic and foreign facility inspection goals. It currently takes the FDA on average 31 months to approve a new generic drug. ² Further, FDA currently faces a backlog of more than 2500 ANDAs. ³ FDA has also asserted that it does not currently have the resources to inspect drug-making facilities in line with its priorities. ⁴ The Generic Drug User Fee Amendments (GDUFA) of 2012 ⁵ enacted in FDASIA are, therefore, intended to address the backlog, and to provide resources to assist FDA in meeting its goals for inspecting the growing overseas generic drug manufacturing industry. FDA expects that the revenues generated from the new generic drug user fees – approximately $299 million in revenue per year, or $1.5 billion over 5 years – will decrease the time for review significantly. ⁶

Section 302 of GDUFA stipulates that $50 million of the $299 million for 2013 will be generated from a one-time ANDA backlog fee. Anyone with an ANDA pending on 1 October 2012 and that has not received a tentative approval prior to that date will be subject to the fee, per application. ⁷ The remaining $249 million for fiscal year 2013 will be generated from drug master file fees (6%), ANDA and prior approval supplement filing fees (24%), as well as facility fees (70%). ⁸ The facility fees are divided into fees from finished dosage form producing facilities (56%) and active pharmaceutical ingredient (API) facilities (14%). ⁹ Regardless of facility fee type, the minimum fee for facilities located outside the US is $15,000. ¹⁰ However, the fee cannot exceed more than $30,000 more than the fee for US facilities. ¹¹ Facilities that produce both the API and a finished dosage form must pay both types of fees. ¹²

Don’t feel like paying the new ANDA filing fee? Beware, as this will result in an application which is not ‘substantially complete’ for purposes of section 505(j)(5)(B)(iv)(II)(cc) of the Food Drug and Cosmetic Act (FDCA). ¹³ Not convinced yet? Section 505(j)(5)(B)(iv)(II)(cc) of the FDCA grants market exclusivity of 180 days to a ‘first applicant’ who files a substantially complete ANDA with a paragraph IV certification. In other words, those who do not pay the ANDA filing fee may lose the 180-day exclusivity period if another applicant files ‘first’ in the meantime. The penalty for failure to pay the ANDA backlog fee is also significant: placement on an ‘arrears list’ such that no new ANDA will be received within the meaning of 21 USC § 505 (j)(5)(A) until the fee is paid. ¹⁴ In other words, failure to pay the ANDA backlog fee may prevent or significantly postpone approval of later-filed ANDAs. Failure to pay the facility fees can also lead to trouble that includes placement on an arrears list. ¹⁵ Worse, drugs or APIs manufactured in a facility for which no facility fee has been paid will be deemed misbranded. ¹⁶

As with previous user fee laws, FDASIA sets goals and establishes responsibilities for the FDA in exchange for the new user fees. For example, FDASIA requires the FDA to create a unique facility identification system for drug facilities and maintain an electronic database of their registration and listing information. ¹⁷ FDASIA also makes domestic and foreign manufacturing facilities subject to inspection every 2 years to ensure that drugs, and particularly drugs from foreign generic manufacturers, are safe. ¹⁸ Currently, FDA asserts that it only has funding to support review of foreign manufacturing facilities once every 7–13 years. ¹⁹

The total amount of generic drug user fees is estimated to cost generic drug makers one-half of 1% of generic drug sales. ²⁰ However, FDA’s position is that these fees will be offset by faster review times that allow generics to reach the market more rapidly. ²¹ In particular, FDA performance goals outlined by the new legislation include a commitment to review and act on 90% of complete, electronic ANDA applications within 10 months of submission by the fifth year of the program. ²² FDA has also committed to reviewing and acting on 90% of the ANDAs pending on 1 October 2012 within the next 5 years. ²³

Biosimilars User Fee Act

The Biosimilars User Fee Act (BsUFA) ²⁴ was included in the FDASIA with the intent to support review of biosimilars, i.e. biological products that are very similar to, or interchangeable with, an already approved biological product. The approval pathway for biosimilars was authorized in 2009 by the Biologics Price Competition and Innovation Act, passed as part of President Obama’s Patient Protection and Affordable Care Act, and designed to foster price competition in the biological drug marketplace.

Prior to passage of FDASIA, likely biosimilar manufacturers, patient and consumer advocates, health care professionals, and other stakeholders developed the provisions which would become the basis for the new BsUFA. The user fee funding, authorized for 5 years, will provide supplemental support for the FDA’s goals of implementing processes for review and approval of biosimilar versions of FDA-licensed biological products.

Section 402 of BsUFA establishes four types of biosimilar-specific fees: product development fees, application fees, establishment fees, and product fees. Beginning 1 October 2012, an ‘initial biosimilar biological product development fee’ will be charged to each person who submits a meeting request or who submits a clinical protocol for a biosimilar investigational new drug application. ²⁵ The fee is 10% of the PDUFA application fee rate. ²⁶ id="469621-fn26"]--> An ‘annual product development fee’ of 10% of the PDUFA application fee is also charged for each subsequent year that the product is being developed. ²⁷ BsUFA also requires an application fee of biosimilar applicants equal to the PDUFA application fee rate minus the cumulative amount paid in development fees for the product. ²⁸ Establishment fees and product fees will also be collected, each at the same rate as their respective PDFUA fees. ²⁹

Biosimilar development fees, unlike other user fees, may not be waived, refunded, exempted, or reduced. ³⁰ As with the generic drug user fees, penalties also apply if the biosimilar user fees are not paid. For example, FDA may refuse to hold a biosimilar product development meeting or to receive an investigational new drug application. ³¹ Penalties also include financial holds prohibiting continuation of biosimilar clinical investigations. ³² id="469621-fn32"]-->

In exchange for these new user fees, FDA must strive to reach certain goals. For example, FDA has targeted to review 70% of new biosimilar applications within 10 months of receipt in fiscal years 2013 and 2014. ³³ The targets increase each year thereafter, reaching as high as 90% by fiscal year 2017. ³⁴ FDA has also committed to other goals, including, for example, goal timeframes for holding meetings with manufactures of biosimilar biological products in development. ³⁵

The ‘Generating Antibiotic Incentives Now’ Act

New market exclusivities do not come along every day. However, not only does the ‘Generating Antibiotic Incentives Now’ (GAIN) Act ³⁶ of the FDASIA provide an additional 5 years of market exclusivity for antibiotics to treat serious or life-threatening diseases, it also provides for priority review and fast track status for these drugs.

With the GAIN Act, Congress sought to incentivize pharmaceutical companies to develop and market new antibiotics for serious or life-threatening diseases caused by certain multi-drug resistant pathogens. The statute enumerates a few of the pathogens that qualify, including, for example, methicillin-resistant Staphylococcus aureus. ³⁷ The GAIN Act also provides for FDA to issue rules with regard to other qualifying pathogens. ³⁸ Thus ‘qualified infectious disease products’ will be eligible to receive not only priority review, but will upon approval, be granted 5 extra years of marketing exclusivity on top of other exclusivity periods, including the pediatric exclusivity under Section 505A of the FDCA. ³⁹

What the FDASIA is not

There are too many important provisions in FDASIA to describe here. Many have wide-ranging impacts on FDA’s authority and regulation over pharmaceutical and biological products. However, it is interesting to note that some provisions that had been proposed in earlier versions of the bill did not make it into the final legislation. For example, FDASIA did not include a requirement for pharmacies to provide labeling for visually impaired and blind patients. ⁴⁰ Neither did the FDASIA include a requirement for a ‘track and trace’ system to help prevent the distribution of counterfeit or adulterated drugs or a reclassification of hydrocodone-containing drugs from a Class III to a Class II status. ⁴¹ These, and other matters, will have to wait for possible inclusion in future legislation.