Generic Drug User Fees: How FDA Funding Powers Faster Access to Affordable Medicines

Every year, Americans fill over 4 billion prescriptions for generic drugs. These medications make up 90% of all prescriptions but cost just 23% of what brand-name drugs do. Behind this massive access to affordable medicine is a quiet but powerful system: the Generic Drug User Fee Amendments, or GDUFA. This isn’t just a bureaucratic program-it’s the financial engine that keeps the FDA’s generic drug review machine running. Without it, waiting months-or even years-for a generic version of a life-saving drug to hit the market would be the norm, not the exception.

How GDUFA Keeps the FDA Working

Before 2012, the FDA’s generic drug review process was slow, unpredictable, and underfunded. Companies submitted applications for generic versions of brand-name drugs, but the agency often took 30 to 36 months just to respond. Many applications sat untouched for years. The system was drowning in paperwork, with no clear way to pay for the staff, inspections, or technology needed to process them.

That changed with GDUFA, passed as part of the Food and Drug Administration Safety and Innovation Act in 2012. The idea was simple: let generic drug manufacturers pay fees to help fund the FDA’s review of their applications. It’s not a bribe. It’s not a shortcut. It’s a performance-based funding model. The FDA still makes approval decisions based on science, safety, and quality. But now, it has the resources to do so faster.

Today, about 75% of the budget for the FDA’s Office of Generic Drugs comes from these user fees. That means companies pay for the reviewers who read their data, the inspectors who check their factories, and the IT systems that track every submission. Without these fees, the FDA would have to rely almost entirely on Congress for funding-and that money hasn’t kept up with demand.

The Four Types of Fees

GDUFA doesn’t charge one flat fee. It’s broken into four clear categories, each tied to a specific part of the approval process:

• Application fees: Every time a company submits a new generic drug application (called an ANDA), they pay $124,680 in FY 2023. This covers the cost of reviewing the chemistry, manufacturing, and clinical data.
• Program fees: Every company with an approved generic drug pays $385,400 annually. This helps fund the overall infrastructure-staff, training, compliance, and oversight.
• Facility fees: If a factory makes the active ingredient or the final pill, and it’s referenced in an approved application, the facility pays $25,850 per year. This ensures manufacturing sites meet quality standards.
• DMF fees: A Drug Master File (DMF) contains detailed info about ingredients or processes. If a company references a new DMF in their application, they pay $25,850. This helps the FDA review the source material before approving the drug.

These fees are updated yearly and adjusted for inflation. The FDA publishes exact amounts in its annual guidance documents. Companies pay through an online system called EUF, and deadlines are strict. Missing a payment can delay or even block approval.

Why This Matters for Patients

The real impact of GDUFA isn’t in the numbers-it’s in the pills on pharmacy shelves. Before GDUFA, the average time to approve a generic drug was over 3 years. Today, the FDA aims to review 60% of original applications within 15 months. In 2021, they hit 52%-a big improvement from the pre-GDUFA era, even if they missed the target.

More approvals mean more competition. More competition means lower prices. Since GDUFA started, the number of generic drugs approved each year has jumped by 22%. That’s thousands of new options for patients. For example, when the patent expired for a popular cholesterol drug, four generic versions hit the market within 18 months thanks to faster reviews. The price dropped by over 80%.

The Federal Trade Commission estimates GDUFA has helped save consumers $1.7 trillion over the past decade. That’s not a guess-it’s based on tracking price drops after generic entries. When a generic arrives early, brand-name companies can’t keep prices high.

Who Pays and Who Struggles

The biggest generic manufacturers-Teva, Mylan, Sandoz-pay millions in fees each year. But they also have dozens of approved drugs and multiple factories. For them, the fees are a predictable cost of doing business.

Smaller companies don’t have the same cushion. A small manufacturer with just one facility and three approved drugs might pay over $300,000 a year in fees. That’s a huge chunk of their budget. In a 2022 comment to the FDA, the Generic Pharmaceutical Association pointed out that 75% of small firms operate only one facility, making the facility fee disproportionately heavy.

One company told the FDA their facility fee alone was 15% of their annual regulatory budget. That meant they couldn’t expand production, even when demand grew. The FDA offers a 75% fee reduction for qualifying small businesses, but only 18 such reductions were granted in 2022. Many small firms don’t even know they qualify-or find the paperwork too confusing.

What’s Still Broken

GDUFA has fixed a lot, but not everything. A major problem is the backlog of old applications. Before GDUFA, over 1,500 generic drug applications were stuck in limbo. Even today, some of those are still pending. The FDA has pledged to clear them all by September 2024, but progress has been slow.

Another gap? Over-the-counter (OTC) drugs. GDUFA doesn’t cover them. That’s a $117 billion market-think pain relievers, antacids, cough syrups. These products follow different rules and aren’t reviewed by the same team. Critics say this creates a two-tier system where prescription generics get fast reviews, but common OTC drugs don’t.

There’s also the issue of transparency. While 85% of industry respondents say GDUFA improved communication, 40% still struggle to understand how fees are calculated for affiliated companies. If two companies share ownership, the FDA treats them as one entity for fee purposes. But figuring out who’s connected to whom isn’t always clear.

What’s Next for GDUFA

GDUFA III runs through 2027. But conversations are already happening about GDUFA IV. One big idea: expand the program to include OTC drugs. A Congressional report estimated that could bring in $150-200 million more per year. Another proposal: use real-world data-like patient outcomes from electronic health records-to inform post-market safety checks. That could help catch problems faster.

The FDA is also working on a new tool: DMF completeness assessments. Before, a company would submit a drug application and wait months to find out if the ingredient data was incomplete. Now, manufacturers can submit just the DMF first. The FDA reviews it separately and gives feedback before the full application is even filed. This cuts delays and saves companies time and money.

The Congressional Budget Office says GDUFA is one of the most cost-effective programs the FDA runs. For every dollar the agency spends on generic reviews, it gets $1.20 back in fees. That’s why experts expect it to be renewed again in 2032.

What You Should Know

If you’re a patient, GDUFA means faster access to cheaper drugs. If you’re a manufacturer, it’s a complex but necessary system. If you’re a policymaker, it’s proof that industry funding can improve public health without compromising safety.

The bottom line: GDUFA isn’t perfect. But it’s working. It turned a broken, slow system into one that’s predictable, transparent, and scalable. And for millions of Americans who rely on generic drugs every day, that’s everything.