FDA’s New Interpretation of GDUFA: It Depends Upon What the Meaning of the Word “New” IsJune 29, 2014
By Kurt R. Karst –
FDA’s recent posting of two Warning Letters (here and here) to companies that failed to pay Generic Drug User Fee Amendment (“GDUFA”) facility user fees for Fiscal Year 2014 (“FY14”) – for a grand total of three GDUFA Warning Letters thus far (see our previous post here) – reminded us of a new interpretation the Agency has arrived at after having initially issued Refuse-to-Receive (“RTR”) letters for scores of ANDAs submitted to the Agency by various companies because a facility user fee was not timely paid. FDA’s new interpretation of the GDUFA statute harkens back to the much-quoted statement from President Bill Clinton’s grand jury testimony in August 1998, arising out of the Monica Lewinsky scandal, that showed President Clinton questioning the use of the word “is”: “It depends upon what the meaning of the word ‘is’ is.” Well, under GDUFA, the extent to which the severe penalties of that law apply to a company for which facility fees were not timely paid depends upon what the meaning of the word “new” is.
GDUFA established four types of user fees that together generate funding for FDA each fiscal year. The annual facility fee must be paid by both Finished Dosage Form (“FDF”) and Active Pharmaceutical Ingredient (“API”) manufacturers. Facility fees are the most significant of all GDUFA user fees, and account for a large portion of annual GDUFA fee revenue. The API and FDF facility fees are based on information submitted to FDA by generic drug facility owners through the so-called self-identification process.
Once a facility owner has incurred a facility fee, the owner must pay that fee before the due date. Although normally the due date is the first business day on or after October 1st of each year, when there’s a delay past October 1st of the enactment of an appropriations act to fund FDA (and that provides for the collection and obligation of fees), the due date is the first business day after the enactment of such an appropriations act. That’s what happened in FY14. Due to delayed passage of a FY14 appropriations bill, FDA operated under non-standard operating status from October 1, 2013 to October 17, 2013 (see our previous post here). FDA returned to a standard operating status on October 17, when President Obama signed into law the Continuing Appropriations Act, 2014, funding the federal government at FY13 levels. As such, the due date for payment of the FY14 facility fees was set at October 18, 2013.
Under GDUFA (FDC Act § 744B(g)(4)(A)(i)), failure to pay the facility fee within 20 calendar days of the due date (i.e., November 8, 2013 for FY14) results in the following:
[FDA] shall place the facility on a publicly available arrears list, such that no new [ANDA] or [Prior Approval Supplement, or “PAS”,] submitted on or after October 1, 2012, from the person that is responsible for paying such fee, or any affiliate of that person, will be received within the meaning of [FDC Act § 505(j)(5)(A)]. [(Emphasis added)]
Importantly, GDUFA defines the term “affiliate” to mean “a business entity that has a relationship with a second business entity if, directly or indirectly—(A) one business entity controls, or has the power to control, the other business entity; or (B) a third party controls, or has power to control, both of the business entities.” In other words, if you are a large (or even a small or mid-size) generic drug manufacturer with several affiliates, which, in turn, have multiple FDF or API manufacturing facilities, you have to be particularly careful that all facility fees that are owed by those facility owners are timely paid, because the penalties from appearing on the arrears list (the current version is posted here) [http://www.fda.gov/forindustry/userfees/genericdruguserfees/default.htm] flow downstream to the the generic drug manufacturer and to all of its affiliates.
FDA originally interpreted GDUFA such that any generic drug submission pending at the time that a facility was placed on the arrears list should be subject to the RTR penalty specified at FDC Act § 744B(g)(4)(A)(i). That meant some companies (and their affiliates) received a stack of RTR letters from FDA’s Office of Generic Drugs (“OGD”) for all of their pending ANDAs and PASs stretching back to October 1, 2012, because there was a facility owned by one affiliate that failed to timely pay an applicable facility fee by November 8, 2013. As you can imagine, that didn’t settle well with generic drug companies – particuarly if one of the RTR’d ANDAs was a first-to-file opportunity with 180-day exclusivity eligibility on the line.
In a world where generic drug submissions to FDA are promptly reviewed and received or acted on by OGD, the pain of receiving one or two RTR letters for recently submitted applications may not be that bad . . . . but that’s not yet the world in which we live. Based on information published by FDA on its Paragraph IV Certifications List, OGD is still taking an initial filing (i.e., “receipt” in generic drug parlance) look at ANDAs submitted in early 2013. With a bolus of nearly 600 ANDA submissions so far in June 2014, as recently reported by Bob Pollock (Lachman Consultants Blog), it may be quite some time until the backlog of ANDAs awaiting a filing decision is resolved. That means companies need continue to be vigilant to ensure all facility fees are paid so that long-pending applications are not RTR’d . . . . unless FDA were to recognize a new interpretation of GDUFA that dampens the effects of the failure-to-timely-pay provision. And it just so happens that that’s exactly what FDA has done.
FDA has reconsidered its original position and has concluded that, in order to give the term “new” in the statutory provision (FDC Act § 744B(g)(4)(A)(i)) its proper effect, the statute should be interpreted to require RTR of an ANDA or PAS only if that application is submitted after the facility has been placed on the arrears list. This new interpretation is not only more consistent with the intent of the provision, but it’s more fair. FDA’s new interpretation should generally result in providing an opportunity for ANDA applicants that could be affected to assure that the facility fee is paid and the facility is removed from the arrears list before they proceed down the submission path, because they can refer to the arrears list before submitting an ANDA or PAS and thus know whether or not the application would be RTR’d on that basis.
Ahhhh . . . but what about all of those pending ANDAs and PASs that we heard about that were RTR’d on the basis of FDA’s prior interpretation of the GDUFA statute? FDA determined that they were improperly refused, rescinded the RTR letters, and reinstated their original submission dates. All’s well that ends well.