Patent Baristas

There is more backlash by generic drug companies against the user fees for generic drug reviews proposed in the 2008 budget. The budget proposal would increase funds for FDA by $100 million, including a large increase in user fees for brand-name pharmaceutical companies and the first fees for generic pharmaceutical companies. The $2.1 billion FDA budget includes almost $444 million in user fees from industries regulated by the agency, with $15.7 million in fees from generic pharmaceutical companies.

The user fee program, which was first authorized by the Prescription Drug Use Fee Act (PDUFA) in 1992, helps fund the FDA’s human drug review program achieve demanding performance goals. Over the years, the PDUFA programs, which have to be reauthorized by Congress every five years, have enabled the agency to dramatically reduce its review times for drugs and biological medications while increasing scientific consultations, clarifying issues involving drug development, and increasing oversight of postmarket safety. Pharmaceutical Research and Manufacturers of America (PhRMA) estimates that pharmaceutical companies will fund almost 60% of the cost of FDA reviews of applications for prescription drugs in FY 2008, compared with about 40% in FY 1998.

The biggest recommended increase, of $29.3 million, would provide a major boost for FDA activities to ensure the safety of medications after they are on the market. The increased funds would be available for FDA drug safety activities for marketed medications throughout as long as they remain on the market and would increase FDA’s drug safety capacity for surveillance including hiring an additional 82 employees to perform postmarket safety work.

Another $4.6 million in new user fees and 20 employees will go to help expand FDA’s implementation of guidance for FDA’s reviewers (Good Review Management Principles) and develop guidelines for industry on clinical trial designs and other topics; and additional $4 million to improve the information technology activities for human drug review by moving the agency and industry towards an all-electronic environment.

The Generic Pharmaceutical Association (GPhA) counters that the slow entry of generics on the market are due to the brand name companies actions including citizen petitions and authorized generics (generic drugs launched by brand companies during the 180-day exclusivity period).

The FDA contends that the user fees would help it process applications for generic drugs – the FDA has a backlog of more than 1,200 generic drug applications. They are also looking into ways to address citizen-petition issues. A recent study found that 76 percent of citizen petitions filed between 2000 and 2005 were ultimately dismissed by the FDA as having no merit. GPhA is urging Congress to act against “the abuse of the citizen petition process” while PhRMA is against banning authorized generics or limiting citizen petitions.

These concerns are being driven by the fact that the U.S. generic drug companies are facing shrinking profit margins as global competition increases in the $60 billion market for generic drugs. Patented drugs worth approximately $16 billion a year are set to expire this year alone. This has prompted a lot of outcry from the generic companies over the so-called authorized generics. 

The provisions of the Drug Price Competition and Patent Term Restoration Act of 1984 (Hatch-Waxman Amendments) which govern the generic drug approval process give 180 days of marketing exclusivity to certain generic drug applicants. The statute provides an incentive of 180 days of market exclusivity to the “first” generic applicant who challenges a listed patent by filing a paragraph IV certification and running the risk of having to defend a patent infringement suit.

The provisions of the (Hatch-Waxman Amendments) which govern the generic drug approval process give 180 days of marketing exclusivity to certain generic drug applicants. The statute provides an incentive of 180 days of market exclusivity to the “first” generic applicant who challenges a listed patent by filing a paragraph IV certification and running the risk of having to defend a patent infringement suit.

The statute provides that the first applicant to file a substantially complete ANDA containing a paragraph IV certification to a listed patent will be eligible for a 180-day period of exclusivity beginning either from the date it begins commercial marketing of the generic drug product, or from the date of a court decision finding the patent invalid, unenforceable or not infringed, whichever is first.

Authorized generics are brand pharmaceutical products re-branded as generics and aimed at discouraging generic companies from challenging questionable brand patents. Under federal law, the generic company that is first to successfully challenge a questionable brand patent, file an abbreviated new drug application (ANDA) with FDA and receive approval to market that drug product is awarded 180 days of marketing exclusivity. During the 180-day period, that generic company alone is permitted to compete with the brand company, allowing the generic to recoup costs incurred for undertaking a patent challenge.

Brand drug makers have figured out that by re-labeling their own product, they can compete directly against the generic during the 180-period. Authorized generics are considered brand products by the FDA, so the authorized generic does not have to go through the abbreviated approval process required by a true generic. Brand companies argue that authorized generics increase competition and lower prices, but the Federal Trade Commission (FTC) thinks differently.  Sales of an authorized generic during the exclusivity period can cut the generic maker’s profits by 59 percent.Prescription Drug User Fee Rates for Fiscal Year 2007 (PDF)

PDUFA Fact Sheet