FDA plans huge fees, yet drug cos happy

My colleague KV Ramana co-authored this story appearing in DNA Money edition on Monday July 30, 2012.

The US Food & Drug Administration is set to charge up to $100,000, or over Rs50 lakh, for each abbreviated new drug application (Anda) and $35,000, or over Rs17 lakh, for drug master files (licence to make bulk drugs) from zero now.

It’s a good thing, say Indian pharmaceutical companies.

That’s because the money would be used by the FDA to reduce the time taken to approve drugs from the current 27-30 months to just 7-8.

The current timeline costs a lot to drugmakers, say analysts, because it can delay launches and manufacturing plans.

“Basically, the FDA wants to collect $299 million through Anda approvals, facility visits, inspections etc, as that is the sum it spends annually to run the department in the US. And since economic conditions are difficult in the US, it wants to collect the money from the generic manufacturers,” said Manoj Garg, analyst with Edelweiss Securities.

On an average, the FDA approves 1,500 to 2,000 applications every year.

About three quarters of the target amount will be collected from plant visits, inspections etc and the rest by way of approvals.

“So about 25% of $299 million i.e, $75 million, divided by the annual Anda applications, gives a range of $25,000 to $45,000 per application approval charges (from the generic manufacturer) depending on the complexity of the molecule,” Garg calculates.

A spokesperson for Dr Reddy’s said, “As long as it speeds up the process, the fees is not a major issue”.

“The FDA is keen on ramping up its infrastructure by deploying the funds raised through the user fees. If that happens, most of us would be willing to pay the fees in order to take the products to the market earlier. There is an opportunity cost and we don’t mind paying,” a senior official another generic drug major said.

However, analysts are not very confident about the timelines getting reduced immediately. According to them, it would take more time for the systems to set in and the results would be seen only after that.

“While FDA wants to improve on the time taken for approving an ANDA, it will not be able to do it within a year as recruiting the staff, training them enhancing the infrastructure etc will take time. As a result, it is expected that timelines will come down over a period of 4-5 years. The target, it is understood, is to bring down the timelines to 10-12 months from the current 27-30 months,” Garg said.

Dr Reddy’s has filed about 4 Andas in the first quarter of the current financial year and about 73 are pending with the regulator for approval.

“We see this as a positive development as the move is intended to speed up the process of approvals. The FDA has a significant backlog of pending approvals. Also, we feel the fees will act as a deterrent forcing a lot companies to be selective about their filings. This again will hasten the process as lesser filings will also imply quicker approvals,” Glenn Saldanha, chairman and MD of Glenmark, said.

According to him, Glenmark’s US business strategy is based on Anda filings in niche segments like dermatology, hormones, controlled substances and modified release categories.

“We intend to initiate 15-20 products filings each year. We have 38 Andas pending approval with the FDA. Hence, we view any move to speed up the approval process as a positive one. Glenmark has received close to 80 approvals till date. About 38 are pending approval with the FDA,” he said.