While CRISPR (Clustered Regularly Interspaced Short Palindromic Repeats) is getting a lot of attention as this year’s potential wonder therapy, the generics industry continues to undergo change. Positive change.
And that’s despite higher fees generated by GDUFA that will hurt smaller generics companies.
On the plus side, GDUFA is bringing about a speedier approval process and more but-not-enough inspections of foreign facilities, which is good news for U.S.-based CROs and CMOs.
At the same time, the private investment and public markets will continue to drive for capital efficiency. That pressure will result in more outsourcing, especially as investors and board members tell smaller firms to not build labs and plants, and to find alternatives to more costeffectively complete projects.
Here are the list of trends likely to affect the outsourcing sector this year:
A challenge to the CRO/CMO base, however, is that there will be a continued shortage of employees with highly technical skills. While big pharma continues the trend of downsizing its lab facilities and the people who staff them, CROs and CMOs need to find innovative ways to recruit and find people with the right set of skills. Developing training programs for junior staffers will become more important because, otherwise, it can be difficult finding seniorlevel, experienced managers and technical people. The lack of experienced senior people has a limiting effect on growth because it takes time to bring junior staff up to speed.
GDUFA has either kept fees high or has raised them for applications and Drug Master Files (DMFs). For example, the Abbreviated New Drug Applications (ANDA) fee went up from $58,730 in FY2015 to $76,030 in FY2016 and DMF fees climbed from $26,720 in FY2015 to $42,170 in FY2016. (By contrast, the API Domestic fees and FDF Domestic fees each declined $1,059.)
Ultimately drug companies have to pass along to patients the cost of those higher fees, which hurts patients. And even before those drugs get approved, the high fees represent another significant risk to smaller companies since manufacturers must pay a facility fee even if they haven’t yet received approval. Higher fees and increased risk are two factors that have pushed out smaller companies, thereby reducing competition, which can lead to greater scarcity and higher prices.
Strangely, while the number of international inspections has increased, the percentage of problems identified has remained relatively stable; over a three-year period, 51-52% of firms passed the inspection while 41-43% of firms were asked to take voluntary action to resolve minor problems. One would have expected to see a correlation between the increase in inspections and an increase in the number of issues to be addressed. The lack of an increase in foreign enforcement recommendations is problematic at best.
Looking beyond this year, GDUFA is set to expire in 2017. We think that Congress will renew it because, while there have been some negative unintended consequences, the faster approval process and increase in international inspections represent a significant achievement.
That said, GDUFA favors larger, multi-product companies, and to spur innovation, a new version of GDUFA is really what’s needed – one that mitigates the pressure placed on small companies. The FDA needs to find a way to speed the approval process for small, one-product companies even as it must find a way for big companies to spin off each drug into a single entity that could then take advantage of the speedier approval process. The FDA also needs to allow small firms to defer paying a facility fee before it has an approved drug. After all, even with a two-year approval process, an annual facility charge of approximately $250,000 adds up to half a million before you include any of the actual development costs. And the FDA must continue to increase the number of foreign inspections and ensure those inspections are on par with those conducted inside the U.S. to ensure quality control of the ingredients and drugs that reach our shores.