Generic Drug User Fees: Application Review Times Declined, but FDA Should Develop a Plan for Administering Its Unobligated User Fees
Published: 2017-05-25T00:00:00

Fast Facts:
Nearly 90% of the prescription drugs dispensed in the United States are generics. The Food and Drug Administration must approve these drugs before they are marketed.
In 2012, a law allowed FDA to collect fees from drug manufacturers to support the review process. FDA committed to improving its process and meeting specific performance goals such as decreasing review times.
We found that FDA's reliance on user fees increased and that it surpassed many of its performance goals. However, we recommended that FDA make a plan for the fees it doesn't spend in the same year they're collected.

Highlights:
section_title: Why GAO Did This Study
paragraphs: Nearly 90 percent of prescription drugs dispensed in the United States are generic drugs. According to FDA, an increasing volume of generic drug applications over the past decades stressed its ability to review applications efficiently. GDUFA granted FDA the authority to collect user fees from the generic drug industry to supplement resources for the generic drug program. In return, FDA committed to meeting certain performance goals related to the timely review of generic drug applications and to implementing review process improvements.
GAO was asked to examine FDA's implementation of GDUFA. In this report, GAO (1) examines how user fees supported the generic drug program, (2) describes FDA's improvements to the generic drug application review process, and (3) analyzes changes in generic drug application review times. GAO reviewed laws and regulations; FDA policy, guidance, the GDUFA Commitment Letter, and GDUFA financial reports from fiscal years 2013 through 2016; FDA data on application review times from fiscal years 2012 through 2015; and interviewed officials from FDA, generic drug manufacturers, and trade associations.
section_title: What GAO Found
paragraphs: Since the enactment of the Generic Drug User Fee Amendments of 2012 (GDUFA), the Food and Drug Administration's (FDA) reliance on user fees has increased from $121 million in fiscal year 2013 to $373 million in fiscal year 2016, or 45 percent of total program obligations in fiscal year 2013 to 76 percent in fiscal year 2016. FDA carried over $174 million in unobligated user fees at the end of the fourth year of the GDUFA 5-year period. GAO found that although FDA uses an internal management report to track user fee cash flows for internal purposes, it lacks a plan for administering its carryover—one that includes a fully-documented analysis of program costs and risks to ensure that program operations can be sustained in case of unexpected changes in collections or costs. GAO previously found that it is important for entities with carryover to establish appropriate target amounts based on program needs, risks, and contingencies. FDA's approach is inconsistent with best practices for managing federal user fees. Without a carryover plan, FDA lacks reasonable assurance that the size of its carryover is appropriate to ensure the efficient and responsible use of resources.
Dollars in millions
FDA took steps to improve the timeliness and predictability of generic drug application reviews. FDA restructured the generic drug program by building a more robust organizational infrastructure, upgrading information technology systems, and implementing communication reforms. As FDA implemented these changes, it made additional refinements in response to applicants' feedback.
Generic drug application review times have improved under GDUFA. FDA's review time for a new generic drug application (known as an Abbreviated New Drug Application (ANDA)) decreased from 28 months for applications submitted in fiscal year to 2012 to about 14 months for those submitted in fiscal year 2015. FDA also surpassed multiple GDUFA performance goals. For example, FDA committed to reviewing 60 percent of ANDAs submitted in fiscal year 2015 within 15 months of their receipt. GAO found that FDA had taken action on 89 percent of such ANDAs for which it committed to conducting a substantive review by December 31, 2016, thereby surpassing this goal.
section_title: What GAO Recommends
paragraphs: GAO recommends that FDA develop a plan for administering user fee carryover that includes analyses of program costs and risks and reflects operational needs and contingencies. HHS agreed with GAO's recommendation.

section_title: Letter
paragraphs: Nearly 90 percent of prescription drugs dispensed in the United States  are generic drugs. A generic drug is essentially a copy of an approved  brand-name drug. They typically have the same active ingredients,  strength, dosage form, route of administration, and intended conditions of  use as their brand-name counterparts but generally cost less, yielding  savings for consumers and public and private health plans. Generic drugs  become available to consumers when brand-name drugs’ patents and  other periods of market exclusivity expire and generic manufacturers  obtain approval to market their drugs. The Food and Drug Administration  (FDA) within the Department of Health and Human Services (HHS) is  responsible for protecting the public’s health by overseeing the safety,  effectiveness, and quality of domestic and imported pharmaceutical  products marketed in the United States, including generic drugs. The  generic drug industry’s rapid global expansion in the past several  decades has resulted in an increase in the volume of generic drug  applications submitted to FDA for scientific review and approval and the  number of manufacturing facilities in need of inspection. FDA officials  have stated that this growth stressed FDA’s ability to review applications  efficiently.
To address these issues, Congress passed, and the President signed into  law, the Generic Drug User Fee Amendments of 2012 (GDUFA), which  provided additional resources to facilitate FDA’s review of generic drug  applications in less time. GDUFA granted FDA the authority to collect  approximately $1.5 billion in user fees from the generic drug industry over  a 5-year period to supplement FDA’s regular appropriations for the  agency’s generic drug program. In return, FDA committed to  implementing program enhancements and meeting certain performance  goals related to the review of applications, which are intended to improve  the efficiency, quality, and predictability of generic drug program activities  that, in turn, could accelerate FDA’s review of generic drugs. In 2013,  FDA negotiated certain commitments with industry that were transmitted  to Congress in a Commitment Letter. The Commitment Letter, which  covers the 5-year period, includes GDUFA performance goals, as well as  user fee collection amounts that were negotiated between FDA and  industry stakeholders (e.g., manufacturer associations and individual  companies). FDA’s authority to collect user fees for generic drugs will  expire on October 1, 2017, and GDUFA will need to be reauthorized in  order for FDA to continue to collect user fees on generic drugs.
You asked us to examine FDA’s implementation of GDUFA and its impact  on application review times. This report addresses  1.  how FDA used generic drug user fees to support the generic drug  2.  FDA’s efforts to improve the generic drug application review process;  3.  how, if at all, FDA’s review times for generic drug applications  changed since the enactment of GDUFA.
You also asked us to provide information on regulatory science research  priorities that support the development of generic drugs. Appendix I  includes a discussion of regulatory science and lists regulatory science  research projects funded by GDUFA.
To examine how generic drug user fees were used by FDA to support the  generic drug program, we reviewed relevant laws and regulations; FDA  policy and guidance documents; agency presentations to the generic drug  industry; and reports on agency and program appropriations and generic  drug user fees, such as FDA’s budget justification reports and GDUFA  financial reports. We interviewed FDA officials about user fee collections,  allocations, obligations, and carryover amounts, including the methods  used to plan for and record financial decisions. We analyzed financial  data and information provided by FDA that disclosed allocations and  obligations for the generic drug program from fiscal years 2013 through  2016. We compared FDA documents and practices to findings from our  prior work on managing and evaluating user fees and to federal internal  control standards. We assessed the reliability of FDA data we received  by reviewing related documentation, performing data reliability checks  (such as examining the data for missing values and checking values  against other documentation), and interviewing relevant agency officials  with knowledge of the generic drug program and how user fees are being  used. On the basis of these steps, we determined that the data were  sufficiently reliable for the purposes of our reporting objectives.
To describe FDA’s efforts to improve its generic drug application review  process, we reviewed relevant laws, agency policies, procedures, and  regulations, as well as other relevant reports and guidance documents.  We interviewed FDA officials about their improvement initiatives and also  interviewed representatives from the generic drug industry to obtain their  perspectives. Specifically, we interviewed officials from five trade  associations that represent various aspects of generic drug  manufacturing, as well as six generic drug manufacturing companies, to  obtain a wide range of stakeholder perspectives about FDA’s  implementation of GDUFA. We selected manufacturers that varied in  terms of the number of generic drug application submissions and  approvals since the implementation of GDUFA. All selected trade  associations participated in meetings held by FDA to discuss the  reauthorization of the generic drug user fee program. To describe steps  FDA has taken to address industry concerns about changes made to the  generic drug application review process, we examined FDA documents  and interviewed FDA officials.
To examine whether FDA’s review times for generic drug applications  have changed, we examined FDA data on generic drug submissions for  fiscal years 2012 through 2015 that FDA determined were sufficiently  complete to permit a substantive review to identify trends in FDA’s review  times for generic drug applications. Our analysis focused on FDA’s time  for completing the first review cycle. We also reviewed the GDUFA  performance goals outlined in FDA’s Commitment Letter to Congress,  examined FDA’s performance reports to Congress, and analyzed FDA  data to assess whether FDA met its GDUFA performance goals for fiscal  year 2015. Specifically, we analyzed the proportion of sufficiently  complete generic drug applications and the proportion of communications  for which FDA met or did not meet the applicable performance goal.   We reviewed the data for reasonableness and consistency, including  screening for missing data, outliers, and obvious errors. We also  interviewed FDA officials about steps the agency has taken to ensure  data reliability. On the basis of these steps, we determined that the data  were sufficiently reliable for the purposes of our reporting objectives.
We conducted this performance audit from April 2016 through May 2017  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
subsections: section_title: FDA’s Generic Drug Program Organization
paragraphs: Four components within FDA have primary responsibility for ensuring the  safety and effectiveness of generic drugs. Among other activities, these  components evaluate the safety and effectiveness of generic drugs prior  to marketing, monitor the safety and effectiveness of marketed products,  oversee the advertising and promotion of marketed products, formulate  regulations and guidance, set research priorities, and communicate  information to industry and the public.
The Center for Drug Evaluation and Research (CDER) is  responsible for overseeing drugs and certain therapeutic biologics. It  coordinates federal government efforts to ensure the safety and  efficacy of generic drugs as well as new and over-the-counter drugs.
The Center for Biologics Evaluation and Research (CBER) is  responsible for overseeing generic drug applications for biologics,  which are products such as blood, vaccines, and human tissues.  These products make up a smaller proportion of the generic drug  applications than those reviewed by CDER.
The Office of Regulatory Affairs (ORA) is responsible for  conducting field activities for all of FDA’s medical product centers,  which include CDER and CBER, such as inspections of domestic and  foreign establishments involved in manufacturing medical products.
FDA headquarters (HQ), specifically the Office of the Commissioner,  includes several offices that perform a variety of activities that  contribute to indirect costs related to the GDUFA program. FDA HQ  provides agency level shared services; policy, financial, and legal  support; and other overhead support that is provided to all FDA  programs and activities.
Within CDER, the Office of Generic Drugs (OGD) is responsible for  providing regulatory oversight and strategic direction for FDA’s generic  drug program to expedite the availability of safe, effective, and high- quality generic drugs to patients. These activities include reviewing  generic drug applications, which comprises such actions as examining  bioequivalence data and evaluating proposed drug labeling. In addition, the Office of Pharmaceutical Quality, also within CDER, is responsible for  examining chemistry-related data and providing quality control across all  manufacturing sites, whether domestic or foreign, across all drug product  areas.
section_title: Generic Drug Review Activities
paragraphs: FDA begins review of a generic drug when a generic drug applicant  submits an Abbreviated New Drug Application (ANDA). Generic drug  applications are termed “abbreviated” by FDA because they are generally  not required to include preclinical study data (studies involving animals)  and clinical trial data (studies involving humans) to establish safety and  effectiveness. Because generic drugs must be bioequivalent to a brand- name drug already approved by the FDA, and because animal studies  and clinical trials have already been conducted for the brand-name drug,  generic drug applicants do not need to repeat these animal or human  studies.
FDA’s approval of a drug’s application is required before a generic drug  can be marketed for sale in the United States. FDA will meet the  performance goals outlined in its Commitment Letter when it completes  its review and issues an action letter for a specified percentage of  applications within a designated period of time. An action letter is an  official statement informing a drug applicant of the agency’s decision  about an application review. FDA can issue four types of action letters:
Refuse to receive letter: FDA issues a refusal to receive letter when  it determines that an application is not sufficiently complete to permit a  substantive review.
Approval letter: FDA issues an approval letter to an applicant when  the agency has concluded its review of a generic drug application and  the applicant is authorized to commercially market the drug.
Tentative approval letter: FDA issues a tentative approval letter  when the agency has completed its review of an application, but  patents or other exclusivities for the original, brand-name product  prevent approval. A tentative approval letter does not allow the  applicant to market the generic drug product until the related patents  and other exclusivities no longer prevent approval.
Complete response letter: FDA issues a complete response letter to  an applicant at the completion of a full application review where  deficiencies are found—the complete response letter describes any  deficiencies that must be corrected in order for an application to be  approved.
In order to close the review cycle, FDA must complete its review and  issue an approval, tentative approval, or a complete response letter. If  the agency has not issued one of these letters, the application is  considered a pending application. (See fig. 1 for a summary of the  generic drug application review process.)
Once an ANDA is filed, an FDA review team—medical doctors, chemists,  statisticians, microbiologists, pharmacologists, and other experts— evaluates whether scientific data in the application demonstrates that the  drug product meets the statutory and regulatory standards for approval.  For example, applicants must, in most cases, demonstrate that the  generic product, in relation to an already-approved brand-name drug  contains the same active ingredient(s);  is identical in strength, dosage form, and route of administration;  is labeled for conditions of use approved for the brand-name drug;  is bioequivalent to an already-approved brand-name drug; meets the same requirements for identity, strength, purity, and quality;  is manufactured under the same strict standards of FDA’s good  manufacturing practice regulations required for brand-name  products.
The application must also contain information to show that, with permitted  deviations, it has the same labeling as the brand-name product.
FDA communicates with applicants when issues arise during its review of  an application that may prevent the agency from approving the  application. In response, applicants can submit additional information to  FDA in the form of amendments to the original application. FDA review  time for an original application (i.e., the first review cycle) is calculated as  the time elapsed from the date FDA receives the application and  associated user fee to the date it issues an action letter. The application  review process will also be closed if the application is withdrawn by the  applicant. The date on which one of these actions occurs is used to  determine whether the review cycle was completed within FDA’s  committed time frames. If FDA issues a complete response letter listing  the deficiencies in the application that were encountered by FDA’s  reviewers, the applicant may choose to submit a revised application to  FDA. Resubmissions and their review are covered under the user fee  paid with the original submission, but a new review cycle with its own  performance goals is started.
If an applicant wants to change any part of its original ANDA after its  approval—such as changes to the manufacturing location or process, the  type or source of active ingredients, or the labeling—it must submit an  application supplement to notify FDA of the change. If the change has a  substantial potential to adversely affect factors such as the identity,  quality, purity, or potency of the drug, the applicant must obtain FDA  approval for the change through submission of a Prior Approval  Supplement (PAS).
Outside of the application review process, FDA also responds to  correspondence submitted to the agency by, or on behalf of, an applicant  requesting information on a specific element of generic drug product  development. This communication between FDA and applicants, known  as controlled correspondence, allows applicants to submit formal  questions seeking the agency’s input on issues capable of affecting the  review of a product prior to their submission of an ANDA.
section_title: Funding for the Generic Drug Program
paragraphs: The generic drug program is supported by both regular appropriations  and generic drug user fee appropriations. Generic drug user fees provide  funds to FDA to support its efforts to review applications for generic drugs  in a timely manner. GDUFA authorizes FDA to collect from the generic  drug industry $299 million in user fees annually through September 30,  2017, adjusted for inflation, to supplement the regular appropriations the  agency receives to support the generic drug program. GDUFA  established several types of fees associated with generic drug products  that together generate the annual collections. These include fees for (1)  ANDAs in the backlog as of October 1, 2012 (assessed in fiscal year  2013 only); (2) ANDAs and PASs submitted after October 1, 2012; (3)  facilities where active pharmaceutical ingredients and finished dosage  forms are produced; and (4) Drug Master Files that are associated with  generic drug products. Although GDUFA authorizes FDA to collect user  fees, the law specifies that the total amount of user fees collected for a  fiscal year be provided in appropriations acts. FDA establishes the  generic drug user fee collection amounts annually to generate revenue  levels as specified in appropriations acts. Once appropriated and  collected, user fees are available for obligation by FDA until expended. As a result, any user fees not obligated in the fiscal year in which they were  appropriated and collected may be carried over into subsequent fiscal  years (referred to as a carryover). In addition, GDUFA specifies that user  fees may be spent only for generic drug activities, including the costs of  reviewing and approving generic drug applications.
Each year as part of the annual appropriations process, FDA develops  and submits supporting information for its funding request, which includes  user fee and non-user fee funds, in the budget justification that is  submitted to the congressional appropriations committees. This  information reflects how FDA proposes to meet its mission, goals, and  objectives, and it assists Congress in determining how much funding to  appropriate for FDA. This information also includes an estimate of how  many generic drug applications are likely to be received in the coming  year.
section_title: GDUFA Reporting Requirements and Reauthorization
paragraphs: Authority for the generic drug user fee program established under  GDUFA expires at the end of fiscal year 2017. During the 5-year period of  the current authorization, FDA has been required to submit two annual  reports to its oversight committees: (1) a report on the progress made and  future plans toward achieving the performance goals identified in its  Commitment Letter, and (2) a report on the financial aspects of FDA’s  implementation efforts. These reports contain descriptions of relevant  oversight activities over the previous year, data on FDA’s performance  toward meeting the commitments, and information about how FDA  addressed the implementation and use of the user fees over the previous  year.
In addition, to facilitate Congress’s reauthorization of the program,  GDUFA requires FDA to develop recommendations to present to  Congress with respect to the goals, and plans for meeting those goals,  during fiscal year 2017 through fiscal year 2022. FDA is to develop  these recommendations in consultation with various stakeholders,  including the generic drug industry. FDA and generic drug industry  stakeholders conducted negotiations regarding the program’s  reauthorization, which is referred to as GDUFA II, in October 2015  through August 2016. According to FDA, the negotiated objectives of  GDUFA II differ from the objectives of the original GDUFA agreement  (i.e., GDUFA I). While the primary objective of GDUFA I was to  restructure FDA’s generic drug program to improve the speed and  predictability of reviews, the primary objective for GDUFA II, as outlined in  the proposed Commitment Letter negotiated by FDA and the generic drug  industry, is to improve the completeness of drug application submissions  and reduce the number of review cycles. Other features include  enhanced review pathways for complex drugs, enhanced accountability  and reporting, and modifications to the user fee structure.
section_title: GDUFA Increased Generic Drug Program Resources Significantly, but the Agency Lacks a Plan for Administering Its Carryover User Fees Supported an 85 Percent Increase in Generic Drug Program Obligations, Increasing FDA’s Reliance on Such Fees During the Implementation Period
paragraphs: GDUFA supported an 85 percent increase in total FDA obligations for its  generic drug program in the first 4 years of implementation. User fees  primarily supported generic drug application evaluation and review  activities. FDA has accumulated carryover balances from unobligated  user fee collections, but it lacks a plan for administering the carryover,  which is inconsistent with best practices identified in our prior work on the  management of user fees and federal internal control standards.
Total obligations for FDA’s generic drug program (from both regular  appropriations and generic drug user fee appropriations) increased by  about 85 percent in the 4 years following GDUFA’s implementation, from  about $267 million in fiscal year 2013 to about $494 million in fiscal year  2016. (See table 1.) FDA’s reliance on generic drug user fees increased  throughout this period. Obligations from generic drug user fees grew in  both absolute terms and as a share of total program obligations, from  about $121 million (45 percent of total obligations) in fiscal year 2013 to  about $373 million (76 percent of total obligations) in fiscal year 2016. In  contrast, obligations from regular appropriations decreased as a share of  total program obligations during this period, and while these regular  appropriations increased in absolute terms from fiscal years 2013 to  2014, they declined afterwards.
section_title: User Fees Primarily Supported Generic Drug Evaluation and Review Activities
paragraphs: In the first 4 years of the generic drug user fee program, FDA obligated  over $1 billion (about 70 percent) of the anticipated 5-year, $1.5 billion in  user fee collections. CDER, the office with responsibility for drug  evaluations and generic drug submission reviews, obligated the largest  share of user fees—almost 70 percent—while the three other FDA  components with responsibility for the generic drug program obligated  smaller shares. Figure 2 shows cumulative user fee obligations by each  FDA component and account in fiscal years 2013 through 2016.  According to FDA officials, the percentage of user fees allocated to each  of these four components did not vary much from year to year. However,  FDA officials also reported that each year the agency allocated a  percentage of the user fees to centrally managed accounts that are used  for rent, utility costs, telecommunications, and other support costs such  as information technology (IT) investments that support FDA programs  and activities, but which do not necessarily align with the four offices  supporting the generic drug program. User fee obligations from the  centrally managed account were the second largest component of such  obligations each fiscal year since the implementation of GDUFA, trailing  only CDER.
In addition, approximately 60 percent of cumulative user fee obligations  supported non-personnel activities and about 40 percent supported  personnel-related activities, such as employee salaries and benefits, in  the first 4 years of GDUFA’s implementation (see table 2). In addition to  IT investments and capital asset purchases, CDER also obligated funds  for non-personnel activities such as consulting services to integrate  GDUFA requirements into its new IT system and regulatory science  projects with the potential to improve the development of generic drugs.  (See Appendix I for more information on GDUFA-supported regulatory  science projects.)
User fee obligations for personnel-related activities increased from fiscal  year 2013 to fiscal year 2016, both in absolute numbers and as a  percentage of total user fee obligations. Personnel-related obligations  increased sharply in the first 4 years of GDUFA, from about $18 million  (14 percent) of all user fees obligated in fiscal year 2013, to about $181  million (49 percent) in fiscal year 2016. According to FDA officials, the  increase in personnel-related spending was due, in part, to hiring for the  generic drug program consistent with the agency’s GDUFA goals.
section_title: FDA Accumulated a User Fee Carryover from Unobligated Collections but Lacks a Plan on How it Will Administer the Carryover
paragraphs: FDA has accumulated a large unobligated user fee carryover balance,  which it uses as an operating reserve. At the beginning of fiscal year  2017, FDA had a carryover of approximately $174 million. During the first  two years of GDUFA’s implementation, FDA had obligated about half of  the user fees it had collected and thereby amassed a cumulative  carryover of about $278 million by the end of fiscal year 2014—an  amount nearly as great as the annual, inflation-adjusted user fee  collection amount of $299 million. In fiscal years 2015 and 2016, FDA’s  program obligations from user fees exceeded the amount collected and  FDA used part of the carryover to make up for the gap. (See table 3.) In  fiscal year 2015, FDA obligated about $47 million from its carryover in  addition to its total generic drug user fee appropriation for that year, and  in fiscal year 2016, the agency obligated about $58 million from its  carryover in addition to its total generic drug user fee appropriation for  that year, yielding a carryover balance of about $174 million.
Despite the large carryover amounts, FDA has not developed a planning  document on how it will administer its carryover—one that includes a fully  documented analysis of program costs and risks to ensure that its  carryover reflects expected operational needs and probable  contingencies. Although FDA uses an internal management report to  show GDUFA collection amounts, obligations, and end-of-year carryover  amounts, the agency was unable to produce evidence describing whether  the carryover of $174 million at the beginning of fiscal year 2017 (or  carryover amounts in other years) was within a targeted goal, and it does  not have targets for future years in general. We have previously found  that when unobligated balances are used as carryover, it is important for  entities to establish a target range for the carryover to ensure user fee  resources are used efficiently and responsibly and that the amounts  carried over into the following year are reasonable to meet program  needs, risks, and probable contingencies. In addition, the lack of such a  planning document is inconsistent with federal internal control standards,  which state that management should have a control system in place to  communicate necessary quality information externally to help the agency  achieve its objectives and address related risks.
During GDUFA II negotiations, FDA officials acknowledged the need for  more fiscal transparency and accountability and announced plans to build  financial systems to facilitate operational and fiscal efficiency and  reporting. However, agency officials also stated that their internal  management report, which is used to report its user fee cash flows, was  sufficient to analyze the program’s needs. By not developing a planning  document FDA cannot effectively communicate to external stakeholders  the amount of its carryover balance and its plans for using it. These  external stakeholders include Congress, which determines the total  amount of generic drug user fees FDA is to collect through the annual  appropriations process. Likewise, Congress also considers GDUFA  reauthorization levels based on recommendations that FDA is to develop  in consultation with other external stakeholders, who do not have access  to FDA’s internal reports.
section_title: FDA Implemented Various Changes to Improve the Generic Drug Application Process and Made Additional Refinements in Response to Applicant Concerns
paragraphs: FDA has made changes to the generic drug program since the enactment  of GDUFA in order to establish a better-managed drug application review  process. In response to stakeholder input, FDA incorporated additional  changes to the application review process.
subsections: section_title: FDA Made Changes to Its Organizational Infrastructure, Information Technology, and Communication Processes
paragraphs: Key changes to FDA’s generic drug review process have included  revising its organizational infrastructure, upgrading IT, and formalizing  external communication processes.
subsections: section_title: Organizational Infrastructure
paragraphs: To enable FDA to meet the evolving needs of application review and  GDUFA performance goals, the agency undertook steps to reorganize  OGD in December 2013. Specifically, under this reorganization OGD was  elevated to the status of a “super office” within CDER, providing OGD  with centralized administrative support and its own governance  structure. Under the reorganization, OGD was given the responsibility to  coordinate and manage the application review process; provide safety,  surveillance, clinical, and bioequivalence reviews for generic products;  and develop policy and regulatory science for generic drugs. Four  subordinate offices within OGD were created to fulfill these  responsibilities: the Office of Research and Standards, the Office of  Bioequivalence, the Office of Regulatory Operations, and the Office of  Generic Drug Policy. Additionally, in January 2015 FDA established a  new Office of Pharmaceutical Quality—another “super office” within  CDER—to provide better alignment among all drug quality review  functions, including application reviews, inspections, and research.
As part of its GDUFA hiring goals, FDA planned to hire approximately 923  new staff by the end of fiscal year 2015 and to this end established  incremental goals to hire 231 (25 percent), 462 (50 percent), and 231 (25  percent) of the 923 total new staff during the first 3 fiscal years of the  program, respectively. However, FDA surpassed the targeted goal in  total, hiring nearly 1,200 new staff over the 3 year period (227, 562, and  387 in each fiscal year, respectively). (See fig. 3.) Additionally, in fiscal  year 2016 FDA hired 346 new staff to support the GDUFA program,  although there was no associated GDUFA hiring goal for that fiscal year.  The majority of these new hires support generic drug program evaluation  activities within CDER, with additional hires distributed across other FDA  offices.
To fulfill its GDUFA commitments, FDA established a new Informatics  Platform to improve the efficiency of application reviews and to support  the agency’s ability to track its performance. Prior to rolling out this  platform in fiscal year 2015, FDA officials said that the agency used many  disparate and disconnected databases, systems, and spreadsheets to  manage different aspects of the generic drug review program. Officials  said that the new platform integrates all these review functions, tracking  the work flow from the time FDA receives an application until a decision is  made on it. Furthermore, officials told us the platform can provide  information on an application as it proceeds through the review process,  and agency officials can also track when each assignment related to this  process has been completed. Backlog applications are also tracked by  the platform. During the initial launch, officials said that the platform was  able to track the application review process and its related work flow,  including analytics and metrics reporting. Since then, FDA has also  incorporated data about facility inspection decisions as well as provided  access to historical reviews and actions taken by FDA on generic drug  applications submitted prior to fiscal year 2015. FDA officials said that the  agency has plans to expand the use of the platform in the future to track  additional incoming submissions, such as reports of drug shortages and  applications for brand-name drugs. According to FDA officials, the launch  of the platform has provided the following benefits to FDA and to  stakeholders: (1) faster review times, (2) easier collaboration and  communication with industry, (3) improved application review  consistency, and (4) more predictable application review times and target  completion dates due to having all pertinent information regarding an  application in one location that is accessible to all FDA reviewers.
section_title: External Communication
paragraphs: As part of FDA’s GDUFA commitments to streamline the review process,  the agency took steps to change how it communicates with generic drug  applicants. According to FDA officials, prior to GDUFA, deficiency letters  were sent to applicants by specific types of reviewers within CDER—such  as labeling reviewers or chemistry reviewers—in an uncoordinated  fashion, making it difficult for applicants to obtain a comprehensive picture  of their application’s status. Starting in fiscal year 2013, FDA committed to  consolidating all application deficiencies into one letter to the applicant,  called a complete response letter. According to FDA officials, this  systemic approach to provide a single deficiency letter was one of the  biggest changes the agency made to the review process since the  enactment of GDUFA.
Additionally, in September 2013, OGD issued guidance that established  regulatory project managers as the central point of contact for each  application throughout its lifecycle. FDA officials said that regulatory  project managers are also responsible for overseeing the review of each  application across all disciplines. Prior to GDUFA, FDA officials said that  no one individual at the agency had responsibility for an application  throughout its entire lifecycle.
FDA has also issued new and revised guidance documents to educate  applicants about changes to the generic drug application review process  made in response to GDUFA. According to FDA officials, since fiscal year  2013 FDA has issued 31 new and revised draft or final guidance  documents related to the application review process. Additionally, officials  said that FDA has also issued almost 600 new or revised product-specific  recommendations to assist the applicants with identifying the most  appropriate methodology for developing generic drugs and generating  evidence needed to support application approval.
section_title: FDA Has Made Additional Refinements to Its Generic Drug Program in Response to Applicants’ Concerns about Program Changes
paragraphs: FDA has made additional refinements to its application review program in  response to applicant concerns about program changes. Specifically, to  provide more timely communication on individual applications, FDA  instituted a mechanism known as real time communication in late 2014.  As described above, as one of its initial changes, FDA identified all  deficiencies found in its review of an application in a single, complete  response letter to the applicant. However, applicants told us that they  found that only providing information in the complete response letters  resulted in fewer informal communication opportunities with FDA and  requested that FDA send information concerning individual application  deficiencies on a rolling basis so that they could address deficiencies in  real time. FDA acknowledged that the initial changes to how it  communicated to applicants made it harder for applicants to assess the  status of their applications and to plan the market launch of generic  medicines. To remedy applicants’ concerns and to enhance the review  process by increasing transparency and decreasing the number of review  cycles, FDA implemented real-time communications—specifically  “information requests” and “easily correctible deficiencies.” According to  FDA officials, information requests are used by application reviewers to  informally notify applicants of any preliminary application concerns as well  as to seek resolution and clarification on some of the minor issues related  to the application. Similarly, application reviewers communicate easily  correctible deficiencies to applicants to obtain missing information that  should be readily available, to seek clarification of data already submitted,  or to request final resolution of technical issues. FDA data show that the  numbers of information requests and easily correctible deficiencies  substantially increased in the first 9 months following their inception in  early 2015 and have decreased somewhat since then, suggesting that  both FDA and applicants have found these new forms of communication  useful. (See fig. 4.)
FDA also revised its policy outlining the roles and responsibilities of  various FDA staff in communicating with applicants during the application  review process in August 2015. FDA made this revision to address  stakeholder concerns that establishing regulatory project managers as  the primary point of contact for all communication with applicants limited  the opportunities for informal communication with FDA staff directly  responsible for reviewing applications. The revised policy expanded and  set forth responsibilities and procedures for communications between  FDA staff and applicants concerning the review status of applications.  Specifically, OGD’s regulatory project managers would remain  responsible for communicating the review status of applications they  manage, including transmitting complete response letters, while discipline  project managers and Office of Pharmaceutical Quality regulatory  business process managers—both of whom are more directly involved in  an application’s review—would be responsible for issuing all information  requests and easily correctible deficiencies. According to FDA officials,  these changes were made as part of a broader effort to bring  communications between the agency and applicants closer to “real-time.”
Lastly, FDA has communicated target action dates to applicants since  2015 at the request of industry stakeholders. Target action dates are the  agency’s internal deadlines for taking action on generic drug applications  pending with the agency on October 1, 2012, and those submitted in  fiscal years 2013 and 2014 (years for which there were no GDUFA  performance goals established). According to FDA, although GDUFA did  not require the agency to establish and communicate target action dates  to applicants, these dates help applicants plan product launches, which  promotes timely access to generic drugs.
section_title: Generic Drug Application Review Times Have Decreased, with FDA Meeting Its GDUFA Performance Goals for Fiscal Year 2015
paragraphs: FDA’s review times for generic drug applications have decreased since  the implementation of GDUFA, with FDA surpassing multiple fiscal year  2015 GDUFA performance goals as described in table 4.
With respect to ANDA review times, the average time for FDA to  complete the first review cycle decreased from 26 months for ANDAs  submitted in fiscal year 2013 to about 14 months for those submitted in  fiscal year 2015. Additionally, the dispersion in review times has  decreased. (See fig. 5.) However, as of December 31, 2016, 929 ANDAs  (34 percent) submitted since the start of the generic drug user fee  program in fiscal year 2013 were still pending review. As these  applications are reviewed, the average review time and the dispersion of  review times for each fiscal year will increase since all of the applications  that remained to be acted on are at least 15 months old. As of  December 31, 2016, FDA had also acted on 89 percent of all ANDAs  submitted in fiscal year 2015 within 15 months of receipt, exceeding its  GDUFA goal of acting on 60 percent of ANDAs received in fiscal year  2015 within 15 months.
For PASs, the average time for FDA to complete the first review cycle  also declined from 12 months in fiscal year 2013 to 4.5 months in fiscal  year 2015. Additionally, the dispersion in review times decreased, as  shown in figure 6.
FDA acted within 6 months on 95 percent of the PASs it received in fiscal  year 2015 not requiring a facility inspection, exceeding its GDUFA goal of  acting on 60 percent of PASs received within 6 months of receipt. For  PASs received in fiscal year 2015 that required a facility inspection, FDA  acted on 92 percent within 10 months, again exceeding its GDUFA goal  of acting on 60 percent within 10 months of receipt.
FDA has also met performance goals related to controlled  correspondences and its review of backlogged applications. As of  December 31, 2016, FDA acted on 97 percent of the 1,519 controlled  correspondences it received in fiscal year 2015 within 4 months,  exceeding its GDUFA goal of acting on 70 percent within 4 months of  receipt. FDA was unable to provide more detailed information on the  review times for controlled correspondences submitted in the first 2 years  of the program; however, according to FDA officials, 2,027 of the 2,040  correspondences submitted in that period have been reviewed as of  August 2016.
In addition, as of December 31, 2016, FDA had acted on 92 percent of  the 4,743 applications in the backlog pending review as of October 1,  2012, exceeding its GDUFA goal of acting on 90 percent of such  applications before the end of fiscal year 2017. Fifty-eight percent of  these applications were approved; approximately 20 percent were  withdrawn by the applicant; and the applicants for the remaining 12  percent received a complete response letter.
section_title: Conclusions
paragraphs: As with any appropriations, the user fee funding provided to FDA brings  with it a great responsibility to manage funds in a way that demonstrates  prudent stewardship of resources. FDA has used its user fee funding to  enhance OGD’s ability to increase hiring, and undertake numerous  activities to improve and speed-up the review of generic drug  applications. However, at the end of each fiscal year FDA has had large  GDUFA carryover balances, and FDA has not fully documented the  underlying assumptions for the size of the carryover, including anticipated  obligations. Such a documented plan could aid Congress in determining  the appropriate amount of user fees to be collected by the agency during  the annual appropriations process and when considering a  reauthorization of the user fee program. Making this information publicly  available would also help to ensure that FDA’s recommendations to  Congress are fully informed by the views of external stakeholders with  whom FDA has an obligation to consult.
section_title: Recommendation for Executive Action
paragraphs: To ensure efficient use of generic drug user fees, facilitate oversight and  transparency, and plan for risks, we recommend that the Commissioner  of FDA develop a plan for administering user fee carryover that includes  analyses of program costs and risks and reflects actual operational needs  and contingencies.
section_title: Agency Comments
paragraphs: We provided a draft of this report to HHS for comment. In its written  comments, which are reproduced in appendix II, HHS concurred with our  recommendation. HHS agreed that it should incorporate an analysis of  program risks and contingencies into its existing 5-year financial planning  process and that it will review appropriate actions. HHS also provided  technical comments, which we incorporated as appropriate.
As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the appropriate  congressional committees, the Secretary of HHS, and other interested  parties. In addition, the report will be available at no charge on the GAO  website at http://www.gao.gov.
If you or your staff have any questions about this report, please contact  John E. Dicken at (202) 512-7114 or DickenJ@gao.gov. Contact points  for our Office of Congressional Relations and Office of Public Affairs can  be found on the last page of this report. Other major contributors to this  report are listed in appendix III.
section_title: Appendix I: Regulatory Science Projects Supported by G eneric Drug User Fees, Fiscal Years 20 13 through 2016
paragraphs: Regulatory science projects support the development of generic drugs in  part by helping to address gaps the agency faces between rapid changes  in science and technology and the agency’s capacity to regulate those  technologies. We previously reported that the Food and Drug  Administration (FDA) traditionally funds regulatory science projects with  resources from the agency’s regular appropriations, but projects funded  within the Center for Drug Evaluation and Research (CDER) have also  been supplemented by funds collected from user fee acts, such as the  Prescription Drug User Fee Act and the Generic Drug User Fee  Amendments of 2012 (GDUFA). GDUFA funds accounted for  approximately $20 million in annual obligations for regulatory science  projects from fiscal years 2013 through 2016.
The Office of Generic Drugs (OGD), located within CDER, established the  GDUFA Regulatory Science Research Program to support projects that  could potentially enhance the development of generic drugs. In fiscal year  2013, OGD created a list of GDUFA Regulatory Science Priorities that  includes five broad priority areas (see table 5). The list is based in part on  discussions with stakeholders during annual public meetings on GDUFA  and in part on stakeholder comments to FDA’s GDUFA regulatory  science funding announcements. However, generic drug industry  stakeholders have raised concerns about the need for more meaningful  scientific dialogue about FDA’s requirements for the development of  generic drugs, and for more clarity on how the agency develops its  regulatory science priorities list. FDA officials we interviewed were  cognizant of stakeholders’ concerns and noted that they have  reconsidered the five broad categories each year. However, officials told  us they have not made changes to the priority areas since they were  established in fiscal year 2013 and do not envision annual changes to the  broad categories, though the sub-priority areas in each category have  been revised from year to year. The officials acknowledged that while  some information about their process for judging the merit of regulatory  science proposals is public, details about how proposals are scored is not  public in order to promote a process whereby applications submitted are  evaluated free of bias from stakeholders. The officials explained that the  priorities list is created internally at FDA in part to protect the privacy of  applicants that submitted proposals, to avoid potential conflicts of interest  from stakeholders who may want to steer research away from  competitors, and to incorporate internal FDA capabilities to conduct  research at lower costs. Although the officials said that decisions about  which projects to fund is an inherently governmental function and should  be made internally to support public health, they noted plans to improve  communications with industry about the priorities list and plan to more  clearly announce the sub-priority areas available for research on the OGD  webpage.
In the first 4 years following GDUFA’s implementation, OGD obligated a  cumulative amount of about $77 million from generic drug user fee  collections for 103 regulatory science projects. Data provided by FDA  showed that 15 of these projects supported research into post-market  evaluation of generic drugs, 30 projects supported the equivalence of  complex drug products, 20 projects supported the equivalence of locally  acting products, 20 supported therapeutic equivalence evaluation and  standards, and 18 supported cross-cutting computational and analytical  tools. Obligations from user fees for regulatory science projects remained  relatively stable each year, from a low of $16 million in fiscal year 2016 to  a high of $24 million in fiscal year 2015. (See table 6). According to FDA  officials, the agency is not required by law or otherwise committed to  spend a certain amount on regulatory science projects, but agency  officials anticipate funding projects at similar levels in future years.
section_title: Appendix II: Comments from the Department of Health and Human Services
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
paragraphs: John E. Dicken, (202) 512-7114 or dickenj@gao.gov.
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, individuals making key  contributions to this report include Robert Copeland (Assistant Director);  Carolina Morgan (Analyst-in-Charge); Enyinnaya David Aja; Nick Bartine;  Taylor Dunn; Sandra George; Laurie Pachter; and Said Sariolghalam.  Muriel Brown and Laurel Plume also made contributions to this report.