Obamacare Ties Up Small Medical Packagers with Licensing Fees

They’re something you never think about:  the bottles, boxes, and blister packs in which your medicine and vitamins are packaged.  Or about the companies that produce them.  But the Food & Drug Administration has and how much many they can extort from these small companies.

Recently, the FDA decided that small medical packagers will be required to pay $175,000 per year as a licensing fee in order to package generic drugs.  While these companies are not manufacturers, for this fee purpose, the FDA is treating them as if they are.  Not only will these companies have to pay the $175,000 for 2013 (by mid-March) but the fee is retroactive; companies will have to pay another $175,000 for the year 2012.

One company wrote to the Small Business Assistance Division of Drug Information at the Center for Drug Evaluation and Research at the Food and Drug Administration.

The company must keep its anonymity if it is to stay in business.  The FDA and the DEA have created a minefield of regulations, any which of companies like this could easily trip over and be shut down in an instant.  In any case, all these small packagers are in the same boat.

They contacted ASK GDUFA (Generic Drug User Fee Amendments) about fees for contract packagers.

‘We need to speak with someone about the $175,000 annual GDUFA manufacturing facility fee as it applies to small contract packaging service providers; companies that do not own, manufacture, or distribute drug product; companies that strictly provide packaging service.  Can you please direct me to the appropriate person or team to help us determinate what our company is responsible for:  the entire amount, a reduced fee, or a complete waiver?

‘Our small contracting business does not manufacture anything, own any brands or products, or distribute anything.  We merely provide a packaging service to generic drug companies.  We are primary packagers, not re-packagers; we put tablets into the primary container – a bottle or blister pack – and apply the primary label.  According to information released by the FDA that for the purposes of GDUFA fees, packagers are being treated as manufacturers.  We are mandated to pay an annual fee of $175,000 per year.  This fee is farm more than our annual profit.  If we cannot pay the fee, we will have to shut down our company overnight, terminate our employees, and inform our customers who have named us in their ANDA (Abbreviated New Drug Applications) applications that they will now need to refile with another packager.

“The GDUFA guidance literature and note says that no small businesses are exempt because the benefits of faster processing will be received by all.  Small contract packaging companies like ours will not receive any benefit however; all the benefit will go to the drug owners; we will still receive the same amount per bottle, of which our profit is about a half-penny.  Hundreds of business like ours does not make enough profit, either, to pay such a heft annual fee.  By the March deadline, we’ll be forced either shut down and lay of tens of thousands of employees, or be out of compliance and have hundreds of ANDAs rejected.

“We would appreciate it if someone drafting GDUFA guidance will consider the plight of small business service providers like contract packagers who do not make enough profit to pay even a small portion of the annual fee and certainly will not see any benefits of GDUFA licensing fees.  We would also be grateful if they consider the different between a drug producer and a packager.  The difference is between many small businesses thriving and employing thousands of people in bad economic times and shutting our doors, to the detriment of our employees, our business partners, and their customers, to whom the increased prices will be passed.

‘Your website suggests that the FDA will address this issue more comprehensively in future guidance.  However, the fees are due in less than a month.  Even if we could get a loan to pay this fee in time, borrowing money would only create a riskier future for our business.

‘Who may I contact for further help?’

The following was the answer from the Small Business Assistance Division, with a disclaimer at the bottom stating, “This communication is consistent with 21CFR10.85(k) and constitutes an informal communication that represents our best judgment at this time but does not constitute an advisory opinion, does not necessarily represent the formal position of the FDA, and does not bind or otherwise obligate or commit the agency to the views expressed.”

“Dear Packager:

“Thank you for writing to AskGUDFA.  Your inquiry is being handled by the Division of Drug Information, Small Business Assistance, in the FDA’s center for Drug Evaluation and Research.

“We appreciate your contacting the FDA to express concern about the financial burden of GDUFA fees on your company.  We understand that various, additional financial obligations represent differing relative costs to industry participants – and may be absorbed more easily by larger entities.

“Industry and FDA GDUFA negotiators sought, however, to keep fees low by spreading the costs of the entire GDUFA program over a large fee-paying base of all manufacturers to reduce administrative costs and complexity.  Both Congress and GDUFA negotiators specifically considered the issue of a fee waiver or reduction mechanism and decided not to include either for traditional drug products.

“The statute requires that fees be paid; it does not, however, mandate who pays the fees.  Some manufacturers may choose to pay the fees for their partners.

“Unfortunately, at this time, there are no small business waivers or exemptions available for GDUFA.  You are correct in that packagers are required to pay facility fees under GDUFA.  Please note that firms identifying as packers are considered Finished Dosage Form (FDF) manufacturers under GDUFA and are required to pay the appropriate fees.

“Links to information about self-identification and fees are available online at:

http://www.fda.gov/ForIndustry/UserFees/GenericDrugUserFees/default.htm

 and

http://www.fda.gov/ForIndustry/UserFees/GenercDrugUserFees/ucm319566.htm

“We are taking industry’s thoughts into consideration as we move forward.”

Yes, it’s so very thoughtful of the FDA to extort money not just out of small packaging companies but through them, out of the bigger pharmaceutical companies as well.  The small packagers have not one but two federal agencies breathing down their necks – the FDA and the DEA, who show up at company doors for surprise inspections, flashing their badges menacingly as though they were the FBI not the FDA.

If imposing this licensing fee on companies that don’t even produce the drugs wasn’t bad enough, they’re enacting the fee retroactively for 2012.  Small companies can’t possibly come up with that $350,000 in a matter of three weeks.  At best, they must hope that their customers, the pharmaceutical companies will share the costs with them (there’s that notion of spreading the wealth again) all in the name of protecting the consumer.  Against what?

Ultimately, the consumers will pay the price and they will shake their clenched fists not at the government that imposed these outrage fees, but at companies big and small that were compelled to pay them and pass the costs on in order to stay in business.

Wasn’t Obama just boasting in State of the Union address how he believed in the small businesses of America that are the foundation of the country’s success?

Where’s my bottle of Alleve?

 

 

 

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Published in: on February 20, 2013 at 9:07 am  Leave a Comment  

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