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FDA Adapts to an Expanding Generic Drug Industry

The large manufacturers shouldn't have much trouble with the new requirements, though.

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The global expansion of the generic drug industry and the flood of applications for drugs losing patent protection have led to a backlog of drug approvals for the resource-constrained Food and Drug Administration. While new generic drug bioequivalency and stability requirements will raise the bar for approvals, a new generic user fee program and agency reorganization should enable the FDA to reduce the drug backlog. We don't think the large generic drug manufacturers, such as  Teva Pharmaceutical (TEVA),  Novartis (NVS) subsidiary Sandoz,  Mylan (MYL),  Watson Pharmaceuticals (WPI),  Hospira (HSP), and  Perrigo (PRGO), will have any significant issues navigating new FDA requirements.

The FDA must adapt to the changing generic drug industry. The globalization of the pharmaceutical supply chain, a multitude of new international generic manufacturers, and the increasing complexity of drugs have amplified the oversight responsibilities of the FDA. The agency is reorganizing and putting in place new operating procedures for coping with the generic drug global supply chain. While some of the FDA's changes should increase generic manufacturer costs and drug approval times, we think industry efforts to increase resources and streamline the approval process at the agency should eventually reduce the large backlog of generic drug applications. In general, we think the largest generic drug manufacturers will be able to smoothly transition to new FDA requirements on generic drugs.

Michael Waterhouse does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.