FDA User Fee Churn

by Erika Lietzan — Sunday, June 11, 2017@lietzan

(Cross posted from Objective Intent)

This post is one of several this summer that will focus on the pending FDA user fee reauthorization legislation.  It starts with a basic introduction: what is “user fee reauthorization,” and why must it pass?

The short version:  this summer we are talking about FDA’s medical product user fee legislation, which authorizes the agency to collect user fees from drug and device manufacturers.  The first medical product user fee law, in 1992, was the Prescription Drug User Fee Act (PDUFA).  The statutory provisions in question expire every five years, which means Congress must reenact them every five years if FDA is to continue collecting fees.  The process used to be called “PDUFA reauthorization,” but now user fees apply to more than prescription drugs.  This summer’s legislation relates to MDUFA (medical devices) and GDUFA (generic drugs), as well as BsUFA (biosimilars).  All must be renewed on the same five-year cycle, and the process is called “UFA reauthorization.”

Because the agency is now heavily dependent on these user fees, many view the reauthorization legislation as “must pass” — and that makes for an interesting legislative process.

When does FDA’s current authority to collect medical product user fees expire?  September 30.  In theory, the new law needs to be in place by October 1.

How dependent is FDA on medical product user fees?  Perhaps more than the average person realizes.  Take prescription drug fees.  In 1993, user fees accounted for less than ten percent of the costs of the drug review process.  By 2009, they contributed 60 percent.  (See Heritage Foundation report.)  In 2016, they provided nearly 70 percent (here).

What happens if the user fees aren’t reauthorized?  The staff whose positions are funded by those user fees will (eventually) face layoffs.  These individuals review marketing applications.  Thus the inference is not only that some federal employees will be out of work, it is also that FDA’s ability to review pending applications — to approve new medical products in a timely fashion — would be jeopardized.  Moreover, the agency must send advance notice of possible layoffs in advance of any reduction in force — this could be before the legislative deadline of September 30.

How serious is the threat of furloughs?   There appears to be a surplus to tide the agency over for a while, if the user fee provisions are not reauthorized on schedule.  In July 1997, when PDUFA II was in jeopardy, the agency reported to Congress that its carry over funds could fund another 3 to 6 months of operations after the original user fee authorization expired.  At the time, it claimed 24 million in carryover fees.  (In 2002, by way of contrast, the agency reported that it had no carryover funds, and as many as 2400 employees would need to be furloughed.)

What about this year?  In August of 2016, DC-based consulting firm Avalere Health reported that the user fee programs for prescription and generic drugs had a carryover balance of nearly $300 million.  If this is still true, then concerns that drug application reviews would grind to a halt on October 1 without a new user fee law would probably be misplaced.

Doesn’t Congress just re-enact the same provisions every five years?  How hard could it be?  It’s less about the user fee language itself, and more about the rest of the legislation.  The user fee provisions are part of FDA’s organic statute, and the user fee reauthorization bills have historically proven to be attractive vehicles for more substantial programmatic changes.  Once lawmakers and staff start tinkering with the user fee provisions of the statute, the urge to tinker with other provisions has proven impossible to resist. Sometimes it seems like the user fee bill is a snowball rolling downhill, growing fatter and fatter.  As it gets closer to the bottom of the hill, it can seem both fat and inevitable — especially when people start throwing around the word “furlough.”

Why does the blog post title refer to user fee “churn”?  The decision to enact fee authority for only five years at a time has created a “rinse, repeat” cycle, in which policymakers are continuously reworking FDA’s statute, the scope of its authority, and its responsibilities.  Sometimes massive overhauls are made.  For instance, the 2007 user fee statute (PDUFA IV, also known as FDAAA) gave FDA significant new powers with respect to the safety of new drugs already on the market.  The 2012 user fee statute (PDUFA V, also known as FDASIA) included eighteen sections with new authority over the drug supply chain.

Is that such a problem?  Honestly, I don’t know.  Changes require resources and time to implement, and each user fee reauthorization results in a complex multi-year implementation plan (e.g., this).  Policymakers are often drafting the next round of changes to the statute while the agency is still sorting out the last round.  Bills are drafted, circulated, and even introduced in the intervening years with the understanding that — depending on their reception — some version may be dropped into the final user fee bill at the end of the day.

On the one hand, the rinse, repeat cycle may have an upside.  After all, it requires policymakers, the agency, industry, and other stakeholders to engage in regular and focused discussions about the agency’s responsibilities, priorities, and constraints (legal and practical).  One tangible outcome (in addition to new legislative provisions) is a side letter of agency performance goals that accompanies each user fee reauthorization.  On the other hand, perhaps a “clean” user fee bill — just user fees, nothing more — from time to time would give the agency some breathing room to finish implementing the last round of reforms and give policymakers a chance to step back and consider how the statute as previously amended will actually function.  Views on this are mixed.

And this year?  So far, the PDUFA VI legislation has been comparatively clean. Although some discrete changes have now been proposed, at this time there is no proposed overhaul of FDA authorities.  This may be at least in part because the lame duck Congress addressed some issues in the 21st Century Cures Act in December 2016.  Whether the legislation will continue to stay reasonably clean remains to be seen.

My next post will take up the Administration’s proposal that medical product reviews be fully (100 percent) user-fee funded.

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About Erika Lietzan

Professor Lietzan is an Associate Professor at the University of Missouri-Columbia and an Affiliate Scholar at the Center for Protection of Intellectual Property of the Antonin Scalia Law School (George Mason University). She also blogs at Objective Intent. She researches and teaches primarily in the areas of drug and device regulation, intellectual property, and administrative law. Her primary research focus lies at the intersection of intellectual property law and FDA regulation of medical products. Her scholarship has focused on the new drug research and development paradigm and its impact on incentives to innovate, innovation and competition in the marketplace for biological medicines, the incentive for generic drug applicants to challenge innovator patents, data exclusivity for drug and biological medicine innovators, and mandatory public disclosure of clinical data in drug applications, among other issues. Her scholarly articles can be downloaded here. Professor Lietzan brings to her scholarship and teaching eighteen years of private practice experience, eight of them as a partner in the Food & Drug Group at Covington & Burling in Washington, DC. Professor Lietzan is an elected member of the American Law Institute. She also serves in the leadership of the Food & Drug Law Institute and served for many years in the leadership of the Science and Technology Section of the American Bar Association. She is also an active member of the American Health Lawyers Association, the American Intellectual Property Law Association, and the American Society of Law, Medicine, and Ethics. Professor Lietzan received her law degree from Duke University, a master’s degree in history from UCLA, and bachelor’s degree in history from the University of North Carolina.

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