The Generic Drug User Fee Amendments: An Economic Perspective

Regulation can influence the structure, conduct and performance of consumer product markets and the structure of product markets can influence regulation. Since the vast majority of prescription drugs consumed by Americans are generic, the structure of the U.S. generic prescription drug market is of wide interest. The supply of prescription drugs in the U.S. is also heavily regulated by the U.S. Food and Drug Administration (FDA). We describe events leading up to the passage and implementation of the Generic Drug User Fee Amendments in 2012 (GDUFA I), and compare its FDA commitments, provisions, goals and fee structure to that of the 1992 Prescription Drug User Fee Act (PDUFA) for branded drugs. Although GDUFA I expires September 30, 2017, reauthorization for GDUFA II is currently underway and is likely to shift the user fee structure away from annual facility fees to annual program fees. We explain how the fee structure of GDUFA I, and that being considered for GDUFA II, erects barriers to entry and creates scale and scope economies for incumbent manufacturers of generic drugs. Furthermore, in order to implement fees under GDUFA I, FDA required the submission of self-reported data on generic manufacturing practices including domestic and foreign active pharmaceutical ingredient (API) and finished dosage form (FDF) facilities. These data provide an unprecedented window into the recent evolution of generic drug manufacturing markets. Our analyses of these data suggest that generic drug manufacturing in 2017 is quite concentrated: a very large portion of ANDA holders have small portfolios consisting of less than five ANDAs, while a small number of very large ANDA holders have portfolios consisting of hundreds or even thousands of ANDAs. The number of API and FDF facilities have each declined by approximately 10-11% between 2013 and 2017. Furthermore, in 2017, generic manufacturing is largely foreign and has become increasingly so since 2013. We discuss the implications of the current structure of the U.S. generic prescription drug market for GDUFA II ratification and implementation.