VOI News

GDUFA leads to major efficiency gains in the FDA’s Office of Generic Drugs

For the first time since the FDA’s Office of Generic Drugs (OGD) was authorized to address its approval backlog with industry-paid user fees, the agency has provided a top-level view of activity in the form of its first annual report. The highlight for the generic industry is the 580 approvals (along with 146 tentative) that were issued in 2015, which includes a record-setting 99 combined approvals in December alone.

The agency, which is in negotiations with Congress to reauthorize the user fee project, can also point to dramatic operational improvements. With roughly $300 million per year provided through user fees, the agency has been able to clear almost 90% of the backlog in generic applications. The backlog, which is defined as applications that were received before October 1, 2012, initially included 2,866 ANDAs and around two-thirds as many applications for substantial changes on previously approved drugs. At the end of the reporting period, 84% of the former and 88% of the latter had been resolved in one way or another.

As is frequently the case, however, it pays to read the fine print: specifically, the most common form of ANDA-resolution by a substantial margin was “Complete Response with an Inspection.” According to the agency, this constitutes “a written FDA communication to an applicant usually describing all of the deficiencies that the agency has identified in an application that must be satisfactorily addressed before it can be approved.” If a high percentage of the sponsors of these applications take steps necessary to address the deficiencies identified in their complete response letters, a lot of the “resolved” applications could wind up back in the agency’s workload. Given the speed with which the generic industry changes, it is possible that many sponsors walked away from these applications years ago but the complete response approach does not have the same level of finality as one might expect.

Less ambiguous and of perhaps greater importance for the future is the fact that the ANDA filing backlog has been eliminated for all practical purposes. Filing can be thought of as a “pre-review review.” In other words, this is the period during which the FDA performs an initial audit of a submitted application in order to determine whether it can move forward to the substantive review phase. As recently as August 2014, more than 1,100 applications were stuck in this particularly frustrating form of limbo. In a very short period of time, the OGD addressed this backlog and is now making filing decisions in an average of 40 days, with only one percent taking longer than two months.

Diverging Brand and Generic Price Trends Mean Changing Pharmacy Incentives

Despite their substantially lower selling price, U.S. pharmacies have traditionally had significant financial reason to promote generics over brand drugs due to the offsetting effects of high gross margins on generics (typically around 50% but as high as 80% compared to approximately 10% for branded drugs). In recent years, however, brand drug makers have leaned heavily on price increases to drive growth while generic firms have faced an intensely competitive environment that keeps driving prices lower.

With that in mind, it’s a good time to revisit the truism that “pharmacies earn more from generics than brands.” As shown in the table below, which uses data from VOI’s new U.S. pharmahandbook® report, the price gap between the two categories has diverged to such a degree that one-tenth of the average brand price is now greater than half of the average generic price. Back in 2007, the average generic prescription resulted in $5.22 more in pharmacy gross profits than the average brand prescription; by 2012, this equation had completely reversed so that pharmacies were earning $10.27 more dispensing brands than generics.


Drug Type




% Change (Cumulative)


Average Price

$ 119.51

$ 206.10



Pharmacy Gross Margin





Pharmacy Gross Profit

$ 11.95

$ 20.61



Average Price

$ 34.34

$ 20.68



Pharmacy Gross Margin





Pharmacy Gross Profit

$ 17.17

$ 10.34



Difference in Gross Profit (Generic minus Brand)

$ 5.22




Of course, this won’t do much to affect generic penetration rates. There are too many other structural incentives for that to happen. Also, the above figures are averages for all brand and generic drugs sold through retail channels (there are considerable differences in the profitability of recently-launched versus commodity generics). In any case, however, it’s always good to know how the incentives are aligned, especially when they have realigned in an important way.