FDA User Fees To Speed Drug Review

Despite some concerns over the potential for harm to innovation at small firms and undue influence and increased bureaucracy at the agency, government and industry analysts are expressing enthusiasm for a statute requiring pharmaceutical companies to pay "user fees" to the United States Food and Drug Administration. The additional 600 reviewers the fees will finance, they say, will result in decreased review time that will reduce corporate cost, increase government efficiency, and, ultimately, get needed drugs to market faster. There is even the possibility--though no drug maker will commit to it--that savings will be passed on to the consumer in terms of lower prices on pharmacy shelves. The new legislation, aimed at clearing the logjam of drugs waiting for approval at FDA, requires pharmaceutical firms to pay $330 million in user fees directly to the agency over the next five years. With the additional reviewers these fees will provide, the agency has pledged to cut the time it takes to review new products in half by October 1997. Testifying on the bill before the Senate Committee on Labor and Human Resources, Irwin Lerner, president and CEO of Hoffmann-La Roche, Inc., Nutley, N.J., commented: "It has been refreshing to see how well the private and public sector can work together for the public good." But other observers, including some physicians and legislators, are uncomfortable with the close ties the bill could promote between the pharmaceutical industry and one of the leading government agencies assigned the task of policing it, claiming that even the appearance of undue influence will taint the approval process. According to the new statute, drug companies will pay a one-time fee for each application to FDA, starting at $100,000 in fiscal year 1993 and increasing to $233,000 in FY 1997 (see chart on page 10). In addition, corporations will pay an annual fee for each drug currently on the market and each manufacturing plant in operation. In return for this revenue, estimated to be $36 million in FY 1993 and projected to grow to $84 million by FY 1997, FDA has promised to cut review time from an average 23 months--11 months for high-priority drugs aimed at AIDS and cancer--to 12 and 6 months, respectively. FY1993 (10/1/92-9/30/93): NDA/PLA application fees (per co.)*: $100,000 Supplemental application fees (per co.): $50,000 Annual establishment fees (per co.)**: $60,000 Annual product fees***: $6,000 Total fee revenues: $36,000,000 FY1994 (10/1/93-9/30/94): NDA/PLA application fees: $150,000 Supplemental application fees: $75,000 Annual establishment fees: $88,000 Annual product fees: $9,000 Total fee revenues: $54,000,000 FY1995 (10/1/94-9/30/95): NDA/PLA application fees: $208,000 Supplemental application fees: $104,000 Annual establishment fees: $126,000 Annual product fees: $12,500 Total fee revenues: $75,000,000 FY1996 (10/1/95-9/30/96): NDA/PLA application fees: $217,000 Supplemental application fees: $108,000 Annual establishment fees: $131,000 Annual product fees: $13,000 Total fee revenues: $78,000,000 FY1997 (10/1/96-9/30/97): NDA/PLA application fees: $233,000 Supplemental application fees: $116,000 Annual establishment fees: $138,000 Annual product fees: $14,000 Total fee revenues: $84,000,000 * = Applied per number of New Drug Approval/Product License Approval applications ** = Applied per number of manufacturing plants in operation *** = Applied per number of drugs on the market Source: Industrial Biotechnology Association The problems dogging FDA are longstanding and well-documented. The number of investigational new drug applications to the agency has grown from 66 in 1980 to 504 in 1991; FDA anticipates more than 3,000 by 1998. Despite these statistics, the current staffing level (excluding reviewers for AIDS-related applications) is on par with that of FDA in 1979. "We have [new drug applications] that have been sitting there since 1988 for which we still haven't heard if they need more data. These are drugs that treat serious diseases, such as bulemia, that have already been approved in other countries," says Edward West, a spokesman for Indianapolis-based Eli Lilly & Co. According to FDA, most of the 600 new reviewers will be M.D.'s and Ph.D.'s with experience in a variety of medical and scientific disciplines. They must be familiar with the conduct of scientific research and procedures in the medical community. Most will be located at the Center for Drug Evaluation and Research and the Center for Biologics Evaluation and Research at FDA in Gaithersburg, Md.; all will be charged with reviewing clinical and laboratory data and rendering expert judgment on the safety and efficacy of new pharmaceuticals. Despite the cost of user fees, estimated by one executive at Hoffmann-La Roche to be $1 million per year for his firm, industry analysts claim that the new law will save drug companies a lot of money. According to the Washington, D.C.-based Pharmaceutical Manufacturers Association (PMA), it takes an average of 12 years and $231 million to get a new medicine from lab bench to drugstore shelf. An average 30 months of this is "dead time," during which the compound is mired in the FDA backlog. This delay not only means a longer wait until the drug starts to earn revenue, but also has serious patent implications for a company. "Competition is so fierce these days that if a company is working with a promising compound, it will apply right away for a patent," says Jeff Trewhitt, spokesman for PMA. "The good news is that you will probably get the patent. The bad is that the approval process will then chew up a significant chunk of that time." This drastically reduces the amount of time the company has to recoup its investment in the drug, before competition from generic analogs and other name brands kicks in. The result is higher prices for U.S. consumers, say industry analysts. "U.S. citizens are penalized in that new and improved medications are delayed here," says Eli Lilly's West. "Lilly will spend over $10 billion in R&D on new drugs in the 1990s, and if our drugs have an effective patent life of only eight years, we have to price our drugs higher." And though none of the pharmaceutical firms will quote projected savings that will result from speedier FDA review nor commit to reducing drug prices, West notes: "Anything you can do to reduce our cost gives us the ability to pass the savings on to consumers." Despite its current enthusiasm for the bill as written and passed in October, industry itself had long blocked such a statutory solution for FDA's woes. "User-fee proposals have been submitted every year by the Reagan-Bush administrations for the past several years," says Trewhitt. But previous proposals contained no specific commitments that the user fees would be additive--in addition to the normal congressional appropriations, rather than replacing them--and that the fees would be dedicated specifically to speeding the review process at FDA. Another major concern was that large fees would place an undue burden on small biotech firms, and thus hinder innovation. The final version of the bill addresses all concerns, its proponents say: FDA can collect user fees only if its congressional appropriation increases are equivalent to those of other arms of government; the user fees will be dedicated to FDA; and small companies (those with fewer than 500 employees) whose first prescription drugs have not yet been approved pay one-half of the normal application fee, and can defer this payment up to one year. Additionally, FDA has the power to waive or defer fees if they threaten to stifle innovation at start-up firms. Though there is some precedent for user fees in both the dairy industry and the patent area, what was unprecedented about this bill, according to both industry and government sources, was the amount of time and effort invested in designing the law. "The industry took a very proactive role," says Ann LaBelle, minority chief health counsel for the Senate Labor Committee. She says that the bill went through some 100 drafts, and was the topic of dozens of meetings over several months involving up to 30 people at a time. "People were eager to get involved in the negotiations," LaBelle says. "We got 110 percent commitment to work together from industry, administration, and both houses of Congress. That is the only real way the bill could have gotten passed." But the unprecedented cooperation between government and industry in getting the user fee law passed is viewed by some critics as indicative of what is potentially wrong with the legislation. "Fundamentally, it is important that the regulator and the industry it is regulating remain distinct," says Joseph J. Fins, an M.D. and an associate for medicine at the Hastings Center in Briarcliff Manor, N.Y. The new bill, he feels, "blurs the boundaries between the agency and the industry it is charged with regulating." Fins's main concern, shared by some medical colleagues, is that fees passing directly from drug companies to the agency reviewing their products presents a serious potential for conflict of interest, and that there needs to be some review mechanism in place before any such conflict arises. "The FDA has traditionally been the arbiter for what is legitimate in the industry. To bring that legitimacy into question is dangerous for the industry and for the health of the nation," he says. The appearance of undue influence, realized or not, has some lawmakers concerned, as well. LaBelle says that Sen. Orrin Hatch (R-Utah), one of the bill's sponsors, has several reservations regarding what he dubbed this "grand experiment." Even more than undue influence, Hatch's concerns center on what legislators term "regulatory creep": that 600 additional bodies sitting at FDA will do anything but increase efficiency and shrink review time. "They have a difficult time handling what they have now," says LaBelle. "And this could just make things worse." But the five-year sunset clause included in the bill (the program will expire on Oct. 1, 1997, unless reauthorized by Congress) and the increasing public and legislative focus on health care assuages most concerns regarding potential improprieties, such as incomplete review or conflict of interest among reviewers, its supporters say. Trewhitt notes that "some very powerful lawmakers, Congressmen [John] Dingell [D-Mich.] and [Henry] Waxman [D-Calif.] and Sen. [Edward] Kennedy [D-Mass.], for instance, are deeply interested in this bill. They have been monitoring the FDA closely for years, and I don't think they'll let [anything improper] happen. "It isn't the inclination of our companies to play games," he says. "We want a legitimate, tough, fair, and efficient drug- approval process."

FDA User Fees To Speed Drug Review

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