So what lies ahead for the generic drug market? DCAT Value Chain Insights (VCI) examines the market and upcoming regulatory considerations. 

A recent IMS study estimate that nearly 90% of all drugs dispensed in the United States are generic drugs. As the market penetration of generic drugs increases on a volume basis, what can the pharmaceutical industry expect this year? DCAT Value Chain Insights takes a look at the market numbers and key issues on the regulatory front, including the reauthorization of the Generic Drug User Fee Amendments. 

 A look at the numbers
A recent analysis by the IMS Institute for Healthcare Informatics, Global Medicines in 2020: Outlook and Implications, projects that total spending on medicines will reach $1.4 trillion by 2020 due to greater patient access to chronic disease treatments and breakthrough innovations in drug therapies. Global spending is forecast to grow at a 4-7% compound annual growth rate over through 2020. Total global spend for pharmaceuticals will increase by $349 billion in the forecast period of 2016-2020 on a constant-dollar basis, compared with $182 billion during the past five years (2010-2015). Spending is measured at the ex-manufacturer level before adjusting for rebates, discounts, taxes, and other adjustments that affect net sales received by manufacturers. The impact of these factors is estimated to reduce growth by $90 billion, or approximately 25% of the growth forecast through 2020.

So what piece of the pie will generics occupy? The IMS report points out that more than 90% of US medicines will be dispensed as generics by 2020. Generic medicines will continue to provide the vast majority of the prescription drug usage in US, rising from 88% to 91-92% of all prescriptions dispensed by 2020. Patent expiries are expected to result in $178 billion in reduced spending on branded products, including $41 billion in savings on biologics as biosimilars become more widely adopted, according to the IMS report. Small-molecule patent expiries are expected to have a larger impact in the 2016-2020 period than in the prior five years.

Examining the regulatory front
As market penetration of generic drug increases, keeping pace with regulatory reviews and approvals is a key issue for the generic drug industry. Janet Woodcock, director, Center for Drug Evaluation and Research, US Food and Drug Administration (FDA), testified before the Committee on Health, Education, Labor and Pensions in the United States Senate on January 28, 2016, to provide an update of the Generic Drug User Fee Amendments of 2012 (GDUFA). GDUFA requires industry to pay user fees to supplement the costs of reviewing generic drug applications and inspecting facilities. The additional resources were intended to reduce a backlog of pending applications, cut the average time required to review generic drug applications for safety, and increase risk-based inspections. GDUFA also requires that generic drug facilities and sites around the world self-identify. GDUFA is modeled after the Prescription Drug User Fee Act (PDUFA). PDUFA was created by Congress in 1992 and authorizes the FDA to collect fees from companies that produce certain human drug and biological products. PDUFA must be reauthorized every five years, and was renewed in 1997 (PDUFA II), 2002 (PDUFA III), 2007 (PDUFA IV), and 2012 (PDUFA V). The Food and Drug Administration Safety and Innovation Act, signed into law in 2012, includes the reauthorization of PDUFA through September 2017. The current legislative authority for GDUFA also expires at the end of September 2017. At that time, new legislation will be required for the FDA to continue to collect generic drug user fees for future fiscal years.

A key component of GDUFA is to apply funds collected through user and facility fees to decrease the backlog of abbreviated new drug applications (ANDAs) under review by the FDA. At the time of the enactment of GDUFA in 2012, the FDA estimated that there were 2299 ANDAs pending at the FDA that have been pending for 180 or more days. Under GDUFA, industry agreed to pay approximately $300 million in fees each year of the five-year program. In exchange, the FDA committed to performance goals, the specifics of which are contained in the Generic Drug User Fee Act Program Performance Goals and Procedures agreement that was negotiated with industry (GDUFA Commitment Letter). Because of the amount of hiring, restructuring, and catch-up needed, performance goals were set to commence in the later years of the program. The GDUFA performance goals with respect to ANDAs, amendments to ANDAs, and prior approval supplements (PAS) are timeframes by which the FDA is to take a “first action” on an application, by either granting an approval or tentative approval or, if there are deficiencies that prevent approval, identifying those deficiencies to the applicant in a complete response letter or in a refusal to receive the application. When deficiencies are identified, industry usually responds by correcting them and resubmitting the application.

In her testimony, Woodcock said that the FDA had met or exceeded all performance goals outlined in the GDUFA Commitment Letter. A major commitment of GDUFA was to take a “first action” on 90% of the “backlog” applications, defined as pre-GDUFA applications pending before the agency on October 1, 2012, by the end of fiscal year (FY) 2017. As of October 1, 2012, the backlog included 2866 ANDAs and 1873 PASs. According to the FDA, it has completed first actions on 84% of ANDAs and 88% of PASs. Woodcock said that the filing backlog for ANDAs has been eliminated. “Filing” refers to when the FDA evaluates whether a drug sponsor’s submitted application is sufficiently complete to permit FDA’s substantive review. In August 2014, the FDA had a filing backlog of over 1,100 applications, and Woodcock said that backlog is gone. First generic versions, defined as the name implies, the first generic of a drug to the market, are another important measure for the FDA. Under GDUFA, beginning in FY 2015, each of these first generic submissions automatically received a 15-month goal date for FDA review. Applications submitted in FY 2016 also have a first-action goal date of 15 months. Potential first generics are approximately 15% of the FDA’s overall workload.

Not everyone, however, agrees with the FDA’s assessment of its performance. Sen. Lamar Alexander (R-Tenn.), chairman of the Senate Committee on Health, Education, Labor and Pensions, in an oversight hearing of GDUFA, said: “Despite the FDA receiving nearly $1 billion in user fees since 2012 as a result of these user fee agreements, performance is not living up to Congress’ or patients’ expectations as the number of generic drugs approved per year remains about the same… [T] he troubling news is that it is taking longer for the FDA to get drugs through the approval process, and according to a survey of generic drug makers, the median approval times have slowed from 30 to 48 months…What matters to the American people are generic drug approval times and the number of approvals, which to them mean increased market competition, a reduction in drug shortages, and more, lower-cost drugs available for patients.”

In her testimony, Woodcock did not specifically address approval review times but noted that in December 2015, the FDA had a record of 99 approvals and tentative approvals for generics. Woodcock explained that the FDA made several organizational changes to address its GDUFA obligations. It reorganized the Office of Generic Drugs and elevated it to “Super-Office” status, on par with the Office of New Drugs. Moreover, it established a new Office of Pharmaceutical Quality to integrate the quality components of the review. She also noted that the agency developed an integrated informatics platform to support the generic drug review process and hired and trained over 1,000 new employees.

She added that the agency faces ongoing challenges with one being submission quality. She said that historically, it has taken on average about four review cycles to approve an ANDA as a result of deficiencies by generic drug sponsors in submitting complete and quality applications. This has resulted in the submission of numerous amendments to correct deficiencies in the original ANDAs and comprises a huge amount of re-work for FDA and industry alike. Currently, for example, nearly 900 applications are back with industry awaiting resubmission to correct deficiencies in the original applications. “New filing policies will help, but more work by both the agency and industry will be necessary to have the filings be ‘right the first time,'” she said.

In a statement, the Generic Pharmaceutical Association (GPhA) addressed several issues. “FDA has expressed concerns regarding the quality of generic drug applications, and GPhA is supportive of efforts to improve submissions,” said the association in a statement. “However, the agency has not defined or provided data on what constitutes ‘quality’ or completeness of generic drug applications. Further, the FDA continues to deem applications submitted three to four years ago to be of ‘poor quality’ because they don’t meet new, more recent standards updated while these applications sit in the backlog.”

GPhA also expressed an interest in having generic drug approvals be increased. “With more than 3,800 generic applications stalled at FDA, it is increasingly important to distinguish between actions taken on an application and approval of that application,” said GPhA in a statement. “Meaningful actions are important, and progress toward the stated metric of agency actions taken on 90% of backlog applications is laudable. GPhA is eager to see these actions translate to approvals.” To substantiate its position, GPHA offered the following information. In 2011 when GDUFA began, median review time to approval was at 30 months.Since then, median review times increased to 31 months in FY2012, 36 months in FY2013 and an estimated 42 months in FY2014. “At the industry’s best estimate, current fiscal year median approval times will be 48 months—the slowest it has ever been,” said GPhA.

With respect to inspections, Woodcock outlined the agency’s progress. One goal addressed risk-based inspection parity for foreign and domestic facilities. Before 2012, the law required the FDA to inspect domestic facilities at a two-year interval, but it did not address frequency for foreign establishments, regardless of their relative risk. GDUFA directs the FDA to target inspections globally on the basis of risk. She said that the FDA is on track to achieve the goal of risk-based inspection parity between foreign and domestic facilities by the end of FY 2017. GDUFA also established goals for the FDA’s review of PASs. PASs are important because they enable flexibility and improvements for generic drug manufacturing. To date, Woodcock said that the agency exceeded the GDUFA PAS goal of 60% reviewed within six months if an inspection is not required and 10 months if an inspection is required.