Now that generic suppliers are required to pay more for getting their product dossiers reviewed by the FDA in the second year of the Generic Drug User Fee Amendments (GDUFA), it will be interesting to see how the proposed user fee hike by the regulator is being received by drugmakers from India — the second largest exporter of pharmaceuticals to the U.S. market.

The revised GDUFA user fee rates for submitting generic product applications were published by FDA in August 2013. The user fees are intended to supplement the costs of reviewing generic drug applications and inspecting facilities that manufacture generic drugs and APIs. The funds will also help clear the backlog of pending applications and expedite the whole approval process for generics, according to the agency’s mandate.

Starting October, generic exporters will have to pay $63,860 to file an ANDA, up nearly 24% from the previous year’s fee of $51,520. The Prior Approval Supplement (PAS) fees for fiscal year 2014 have also been hiked by 24 per cent to $31,930. The PAS application includes changes to be made to approved products.

Similarly, the annual facility fees charged for finished dosage forms (FDF) units located in foreign countries will go up as much as 25%. At $235,152, the facility fee for foreign plants is $15,000 more than that of their domestic counterparts. Finished formulations suppliers with manufacturing units located outside the U.S., whether in Montreal or Mumbai, will have to bear this additional cost as inspection charges for visiting the facilities.

The facility fee for API units has considerably been reduced for both foreign and US-based factories. The gesture, however, is unlikely to elevate their spirits as the API suppliers feel that they take the highest burden of the user fee hike. GDUFA now charges $31,460 towards Drug Master File (DMF) submission fees, which is almost 50% more than the current rates.

Presently, companies from India account for a major chunk of DMFs filed with the FDA.

Down But Not Out
In addition to Facility Fees, Indian CMOs have more reasons to worry. They have to offset the after-effects of weak currency, as the Indian rupee has been fluctuating recently.

Even though the overall sentiment among generic drugmakers toward the jump in user fees is not very positive, the outlook doesn’t appear to be altogether discouraging. In fact, companies continue to hold their faith and optimism unwavered in the world’s top generic market.

“We do not think that the decision to hike GDUFA fees will have an impact on product filings made by large Indian companies operating in the US. Our plans to file 18 to 20 ANDAs in the U.S. this year remain unchanged,” said Glen Saldanha, CMD of Glenmark Pharmaceuticals.

Lupin Ltd., another major generics player, expressed similar views, adding that the firm has already made a provisioning for a total of 178 filings with the FDA. Like Glenmark, the Mumbai-based Lupin is also one among those companies aggressively pursuing the U.S. market.

Small-Timers Under Pressure
According to Mr Saldanha, the substantial increase in GDUFA fees will make smaller companies think strategically about their product filings in the U.S.  Some smaller companies, however, look at the user fee hike as another opportunity for getting more serious about their business. “The US FDA is expected to review the user fee after a year. If it is going to increase year after year, then there should be a corresponding rise in the prices of medicines as well,” said a senior executive from a API CMO located in Ahmedabad.

The increasing user fee is definitely a concern, but it doesn’t mean that exporters will immediately rethink and exit the market. It may take some time for the operating companies to get adjusted with the developing situation, said the API executive.

It is not obviously the case that all the small-timers have received a clear signal in GDUFA’s ‘prohibitive user fee’ to close up shop and ship out from a business that is notoriously price-sensitive.

Of course, the cost of APIs is a determining factor for generics pricing. It also remains a fact that CMO margins are squeezed quite often, as several API suppliers compete themselves on the pricing turf. Sourcing companies are also look for “competitive” price points to clinch supply deals. Hence, unlike suppliers with exclusive customers that cover the filing costs, the fee hikes could spell trouble for those CMOs catering to multiple, short-term buyers and those that are not able to absorb the escalated filing costs and decide to transfer it to the buyer. Such a scenario could eventually result in fewer number of suppliers and less competition in the marketplace, warn experts.