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February 2002

Drug Approval Times Rise As FDA Exhausts PDUFA Funds - Mary Ellen Butler

WASHINGTON-The Prescription Drug User Fee Act (PDUFA), the law that calls for a combination of government and industry funds to run the review process for new prescription drug applications, is set to expire this fall, and Congress will once again need to determine how much the drug industry should contribute to the review process and what those fees should support.

That debate will likely be influenced by the fact that the Food and Drug Administration, which manages the program, says that the current user fees generated will not be adequate to support the program this year, and by the time PDUFA expires on Sept. 30, 2002, it will have exhausted even its reserve funds in running the program.

In a notice published in the Federal Register on Nov. 19, 2001, FDA said it had underestimated the costs of some of the new goals set out under PDUFA's second five-year phase, which began in 1997, in particular the new requirements do not have direct fees to support them.

For example, there has been a recent increase in commericial investigational new drug applications, efficacy and manufacturing supplements, and requests for formal meetings with drug sponsors, which demand staff time and resources.

In addition, the collected fees have been less than expected because about 30 per cent of the applications coming in had waivers in FY 2001. As a result of these factors, FDA reported that it collected $22 million less than what it needed to run the program in FY 2001. Already, FDA estimates that it will collect almost $30 million less than originally estimated in fees for this fiscal year.

Theresa Mullin, PhD, associate commissioner for planning in the FDA Commissioner's office, said waivers came in the areas of small business, orphan drug and pediatric supplement exemptions. In particular, there were a high number of pediatric applications in FY 2001, before FDA received authority to begin collecting those fees.

"Although FDA has been able to meet most of its performance goals despite these challenges, we do not believe this will continue in the future," FDA reported in the Federal Register statement on Nov. 19, 2001. "We do not foresee increasing or even maintaining performance levels until resources are available to meet the increased workload. These resources can be provided either from appropriated dollars or from user fees. However, to date we have not seen increases in appropriated dollars needed to meet the shortfalls we have experienced."

In fact, FDA speculates that the lack of resources has had the unintended consequence of actually setting back approval times for new drug applications. The approval times are increasing because FDA reviewers who are rushing to accommodate industry requests for consultations, an unfunded requirement of PDUFA, have had less time to devote to standard application problems, resulting in multiple rounds of reviews.

FDA is currently in discussions with stakeholders about how best to continue the program. Dr. Mullin said there are various ways to provide financing for the program and they are looking into all of those with input from industry and others.

PDUFA History
When Congress passed PDUFA in 1992 it authorized the agency to collect fees from companies that produce certain human drug and biological products. The main fee, the application fee, is submitted any time a company wants FDA to approve a new drug or biologic product prior to marketing, and the fee supports the review of that product. Companies also pay annual fees for each of their manufacturing facilities and a fee for each prescription drug product that they market.

Prior to the passage of PDUFA, the review process was funded entirely through the federal appropriations process. With the goal of accelerating the time it takes for new drugs to reach the marketplace, FDA and the drug industry struck a deal in which industry would provide funding for the drug review program and FDA would agree to meet drug-review performance goals.

In addition, PDUFA includes a statutory provision that user fees can only be collected and spent by FDA if a "large, inflation-adjusted portion of drug review costs" would be funded through appropriations, according to FDA. The idea is that the fees would add value to the program, not simply take over the funding responsibility from the government.

Fees and Performance Goals
For the current fiscal year, the application fees amount to about $313,000 per application for a new drug or biologic product with clinical data, and about $156,000 per application without clinical data or per supplemental application with clinical data. Annual establishment fees cost about $140,000 per facility, and product fees are about $21,000 for each product marketed.

These fees are expected to generate about $135 million in FY 2002, a figure that is down from an initial estimate of $162 million.

Although FDA has had success in meeting the goals set up under PDUFA, under new standards that go into effect in 2002, FDA will have to speed overall reviews of drugs for 90 per cent of new applications. New drug approval times will be expected to fall from a little over a year to ten months and priority applications will be expected to be approved in six months instead of a year.

Also, the second phase of PDUFA aims to increase FDA's communications with drug sponsors and to set timeframes for scheduling meetings and responding to sponsor requests. The idea behind this is that it would help to speed up the entire drug development process, not simply the review process, by addressing FDA concerns before the application process even begins.

Impact Of PDUFA
Both industry and FDA agree that PDUFA has made a major impact on the timeliness of the drug review process. According to FDA, the total amount of resources for drug review activities has risen from $120 million in 1992 to an expected $325 million this fiscal year, with about half of that funding coming from fees paid by the drug industry.

FDA increased its review staff by nearly 60 per cent between 1993 and 1997 (the first phase of PDUFA), or about 660 staff years and by the end of the second phase will have added an additional 313 staff years to the program. This has enabled FDA to speed approval times, as well as provide more attention to applications, resulting in more drugs gaining approval and reaching the market.

But while FDA considers the program a success and hopes to see it continue, it has had problems managing it and its other public health priorities outside of the drug review process within recent tight budget constraints.

For example, in order for FDA to have sufficient government funding for the drug review process, as required under PDUFA, those funds often are taken away from other programs within FDA.

"Each year, the amount that FDA must spend from appropriations on the drug review process is increased by an inflation factor. Yet, since 1992 FDA has not received increased appropriations to cover the costs of the across-the-board pay increases that must be given to all employees," FDA said. "We are increasingly concerned that spending enough appropriations on the drug review process to meet the statutory conditions makes FDA less able to manage the resources available in a way that best protects the public health and merits public confidence."

FDA points to the lack of funding for the post-market review of drugs as one area that has suffered in the recent budget crunch. Although FDA has the money to review and approve new drugs going to the marketplace, it has inadequate resources to then monitor their safety once they are available to consumers.

Others have pointed to the area of generic drugs as another FDA priority that receives less money due to the need to channel appropriations into the new drug review program. Although generic applications are simpler to review than new drugs, the process takes longer because the agency lacks the resources to devote to that area.

Industry Viewpoint
For the industry, reauthorization of PDUFA is a top priority since user fees currently support 900 reviewers at FDA. If that program does not continue, then those jobs would no longer be funded and "drug reviews will grind to a halt," said Alan Goldhammer, associate vice president for regulatory affairs at the Pharmaceutical Research and Manufacturers of America (PhRMA).

Goldhammer said FDA's funding problem is one that needs to be addressed in Congress with additional appropriations for the agency. He said user fees provided by industry have been generous, contributing close to $1 billion over ten years.

Although the industry will continue to support user fees, they estimate that $650 million over five years from the industry is a fair sum. PhRMA's position, Goldhammer said, is that the user fees were created to augment the federal appropriations process, not to replace government funding of these services.

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