January 1995
FDA Consumer special report

The road to gaining FDA approval to market a new prescription drug or biologic can be a lengthy one. By law, FDA must review clinical test results for any new drug or biologic to ensure the product is safe and effective. Because of staff shortages, limited resources, and incomplete submitted applications, it takes an average of 22 months for approval from the time companies apply to market products. But that is changing.

Resources provided by the Prescription Drug User Fee Act of 1992 will help FDA shorten review time significantly over the next five years. The agency has started collecting "user fees"--charges levied on pharmaceutical companies for certain new drug and biologic applications, drug products, and manufacturing establishments covered under the act. FDA will use these funds to hire more reviewers to assess applications. At the same time, the agency is streamlining drug and biologic review processes.

FDA hopes to employ about 600 new drug reviewers and support staff by the end of fiscal year 1997, nearly half of whom are now on the job. To support these new staffers, the agency expects to collect more than $325 million in user fees over the five years covered by the 1992 act. Unless Congress renews the act, the user fee law will expire at the end of FY 1997.

New employees are working in either FDA's Center for Drug Evaluation and Research or Center for Biologics Evaluation and Research. They include medical officers, chemists, microbiologists, and pharmacologists, along with other professionals and support staff. They also are helping FDA with its backlog of overdue applications.As of Nov. 30, 1994, FDA had cleared all but nine applications from the backlog. Agency officials say the backlog should be completely eliminated ahead of the mid-1995 target date.

As for new applications, FDA aims to reduce review times to 12 months for "standard" applications and to six months for "priority" applications. Applications for drugs similar to those already marketed are designated standard, while priority applications represent drugs offering significant advances over existing treatments. (Drugs for AIDS and cancer typically fall into the priority category.) Goals for shortening review times and for hiring more staff will be phased in gradually over the five-year statutory period.

User fees are funding a way to accelerate reviews through use of computer technology. Through this program, dubbed the "Smart Initiative," FDA is establishing standards for the software drug companies use in preparing data for submission to the agency. Eventually electronic data submission is expected to virtually eliminate the need for huge paper submissions and also to reduce the application review time. In a 1994 pilot program, FDA was able to approve electronic submissions 11 months faster than similar submissions on paper.

Although FDA is accelerating its review time, the agency remains committed to high review standards. Newly initiated programs are helping ensure the quality and integrity of the review process.

The prescription drug and biotechnology industries, particularly the Pharmaceutical Research and Manufacturers of America (PhRMA) and several biologic product trade associations, support user fees to bolster FDA's review process. About 175 drug and biologic companies are affected by the user fee law.

The pharmaceutical industry also will play a major part in helping the agency achieve user fee performance goals. For example, FDA will depend on companies to improve the overall quality of submissions and to provide timely responses to questions about applications. The agency plans to work closely with industry on programs to improve the quality of the drug and biologic submissions. FDA also will enlist information technology to help speed review of the massive amounts of data submitted in drug and biologic applications.

A Long History

User fees are not a new concept. FDA has charged fees for color certification and insulin certification for more than 40 years. FDA first considered drug review fees in 1971 when the General Accounting Office recommended to Congress that FDA charge such fees. GAO's report cited the authority federal agencies were given to levy user fees under the Independent Offices Appropriation Act of 1952. But after weighing pros and cons--such as whether fees would burden small businesses or be passed on by firms that pay them in the form of higher prices--FDA's parent agency, the former Department of Health, Education, and Welfare, rejected the proposal.

The idea of FDA user fees resurfaced beginning in 1982 but failed to gain significant support. In 1992, things changed.

As budget proceedings for FY 1993 began, FDA Commissioner David A. Kessler, M.D., testified before Congress that the user fee issue was one of critical importance to FDA's future and that it should be considered "very seriously." FDA worked with the pharmaceutical industry to create performance goals and determine what fees would be needed to reach those goals. Though earlier fee suggestions encompassed numerous FDA-regulated products, the final proposal included only prescription drugs and certain biologics. (Biologics exempted were whole blood products or blood components for transfusion, some human therapies made from bovine blood products, allergenic extract products, and in vitro diagnostics. Large-volume parenterals and generic drugs also were excluded.)

FDA and Congress then drafted legislation that said user fees would be used strictly to augment regular funds, which could not fall below the previous year's level. The drafts did not incorporate goals for improved performance, such as reducing drug application review times, an issue important to industry.

The PhRMA said it would support legislation only if fees:

• supplemented existing FDA appropriations
• were fully dedicated to reviewing new drugs and biologics
• were reasonable
• were based on a long-term government commitment to improving the drug review process.

By Aug. 10, 1992, FDA and industry had reached a consensus. A bill emerged from committee on Sept. 15 that included the PhRMA provisions. The House passed an early version of the User Fee Act on Sept. 22. On Oct. 5, the House passed H.R. 6181, which became the Prescription Drug User Fee Act of 1992. The Senate passed the bill Oct. 7, and President George Bush signed it into law Oct. 29.

Fee Structure

Before FDA can collect any fees, Congress must appropriate the anticipated user fee revenue annually. For FY 1995, Congress enacted the necessary user fee appropriation and President Clinton signed it on Sept. 30, 1994.

The law provides for three categories of user fees:

• fees for drug and biologic applications and supplements
• annual establishment fees
• annual product fees.

All application and supplemental fees are paid 50 percent at the time of submission and 50 percent upon receipt of an FDA "action letter." (Action letters indicate either approval or deficiencies that must be corrected for approval.)

Some drug approval applications require more resources than others to review. The fee structure takes into account the application's complexity based on whether or not clinical data are included. It makes no distinction based on application size.

The other two components of the fee structure--the annual establishment and product user fees--are set fees charged to the 200 drug establishments that manufacture drugs covered by the user fee law and on some 2,000 drug products in commercial distribution. The Prescription Drug User Fee Act defines an establishment as a business that makes at least one prescription drug product at one location (buildings within five miles of each other). A prescription drug product is defined as a specific strength or potency of a prescription drug, in final dosage form, that has an approved human drug application.

Under the law, fees will increase each year. By FY 1997, FDA should collect $28 million per category, making total revenue for that year $84 million.

User Fee Estimates FY 1995-1997

• Table

• Chart for browsers that don't support tables

The law provides for waivers and fee reductions if:

• the waiver is necessary to protect the public health
• the fee presents a "significant barrier" to innovation
• the fee exceeds FDA's cost of the review process
• the fee would be inequitable because the product is similar to certain generic drugs that are not part of the user fees program.

Businesses with fewer than 500 employees and without another prescription product on the market will be charged half the application fee, which will be due one year after submission.

FDA officials say if the current drug and biologic user fee program goes well, the agency might seek congressional authorization to expand it to medical devices and other areas.

John Henkel is a staff writer for FDA Consumer.

"User Fees to Fund Faster Reviews" originally appeared in the October 1993 FDA Consumer and was revised and reprinted in July 1993. It was substantially revised for the FDA Consumer Special Report on New Drug Development in the United States (January 1995). The article is no longer being updated.