```

[Senate Hearing 113-448]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 113-448
 

                   ANIMAL DRUG USER FEE AGREEMENTS:
                 ADVANCING ANIMAL HEALTH FOR THE PUBLIC

=======================================================================

                                HEARING

                                 OF THE

                    COMMITTEE ON HEALTH, EDUCATION,
                          LABOR, AND PENSIONS

                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                                   ON

EXAMINING ANIMAL DRUG USER FEE AGREEMENTS, FOCUSING ON ADVANCING ANIMAL
                      HEALTH FOR THE PUBLIC HEALTH

                               __________

                           FEBRUARY 27, 2013

                               __________

 Printed for the use of the Committee on Health, Education, Labor, and
                                Pensions

      Available via the World Wide Web: http://www.gpo.gov/fdsys/

                         U.S. GOVERNMENT PRINTING OFFICE

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                          Washington, DC 20402-0001

          COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS

                       TOM HARKIN, Iowa, Chairman

BARBARA A. MIKULSKI, Maryland            LAMAR ALEXANDER, Tennessee
PATTY MURRAY, Washington                 MICHAEL B. ENZI, Wyoming
BERNARD SANDERS (I), Vermont             RICHARD BURR, North Carolina
ROBERT P. CASEY, JR., Pennsylvania       JOHNNY ISAKSON, Georgia
KAY R. HAGAN, North Carolina             RAND PAUL, Kentucky
AL FRANKEN, Minnesota                    ORRIN G. HATCH, Utah
MICHAEL F. BENNET, Colorado              PAT ROBERTS, Kansas
SHELDON WHITEHOUSE, Rhode Island         LISA MURKOWSKI, Alaska
TAMMY BALDWIN, Wisconsin                 MARK KIRK, Illinois
CHRISTOPHER S. MURPHY, Connecticut       TIM SCOTT, South Carolina
ELIZABETH WARREN, Massachusetts

           Pamela J. Smith, Staff Director and Chief Counsel

                 Lauren McFerran, Deputy Staff Director

               David P. Cleary, Republican Staff Director

                                  (ii)

                            C O N T E N T S

                               __________

                               STATEMENTS

                      WEDNESDAY, FEBRUARY 27, 2013

                                                                   Page

                           Committee Members

Harkin, Hon. Tom, Chairman, Committee on Health, Education,
  Labor, and Pensions, opening statement.........................     1
Alexander, Hon. Lamar, a U.S. Senator from the State of Tennessee     9
    Prepared statement...........................................    10
Burr, Hon. Richard, a U.S. Senator from the State of North
  Carolina.......................................................    11
Roberts, Hon. Pat, a U.S. Senator from the State of Kansas.......    14

                            Witness--Panel I

Dunham, Bernadette M., D.V.M., Ph.D., Director, Center for
  Veterinary Medicine, Food and Drug Administration, Silver
  Spring, MD.....................................................     2
    Prepared statement...........................................     4

                          Witnesses--Panel II

Carnevale, Richard, A., V.M.D., Vice President, Regulatory,
  Scientific and International Affairs, Animal Health Institute,
  Washington, DC.................................................    16
    Prepared statement...........................................    18
Johansson, Jennifer, J.D., Vice Chair, Generic Animal Drug
  Alliance, Bel Air, MD..........................................    21
    Prepared statement...........................................    23

                                 (iii)

 
                   ANIMAL DRUG USER FEE AGREEMENTS:
                 ADVANCING ANIMAL HEALTH FOR THE PUBLIC

                              ----------

                      WEDNESDAY, FEBRUARY 27, 2013

                                       U.S. Senate,
       Committee on Health, Education, Labor, and Pensions,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:04 a.m. in
room SD-430, Dirksen Senate Office Building, Hon. Tom Harkin,
chairman of the committee, presiding.
    Present: Senators Harkin, Alexander, Burr, and Roberts.

                  Opening Statement of Senator Harkin

    The Chairman. The Senate Committee on Health, Education,
Labor, and Pensions will come to order.
    We have convened this hearing this morning to examine the
animal drug and animal generic drug user fee agreements that
are due to be reauthorized this year. The Animal Drug User Fee
Agreement, called ADUFA, and the Animal Generic Drug User Fee
Agreement, called AGDUFA; we have a lot of ``UFA's'' around
here. These programs mirror the fee programs for human medical
products that this committee shepherded through the Senate last
Congress as part of the FDA Safety and Innovation Act.
    Both ADUFA and AGDUFA allow FDA to collect user fees from
sponsors of animal drug and animal generic drug applications,
and the Agency uses those fees to help fund the review of
animal drug applications.
    At today's hearing, we will discuss the history and purpose
of these agreements between FDA and the animal drug industries
that it regulates. We will delve into the agreements themselves
to better understand the revenue that the fees provide and the
performance standards that will benefit the industries paying
those fees.
    We will also learn about the importance of animal drug user
fees to ensure that both pioneer and generic animal drugs are
approved in a timely way. A fast, predictable approval of
animal drugs, and their generic equivalents, benefits both the
animals themselves and the people who depend on them.
    As was true of the user fees for human medical products,
both ADUFA and AGDUFA are negotiated between FDA and the
industry subject to the fees, and we will hear today from the
parties involved in those negotiations.
    On our first panel, we will hear from Dr. Bernadette
Dunham, the Director of FDA's Center for Veterinary Medicine.
Dr. Dunham will discuss the critical role that the ADUFA and
AGDUFA fees play in helping the Center for Veterinary Medicine
ensure that animal drugs are safe and effective, and that they
are made available as quickly as possible.
    On the second panel, we will hear from the organizations
that negotiated with FDA to reach these agreements that we are
considering. In the negotiations with FDA, the pioneer animal
drug industry was primarily represented by the Animal Health
Institute. We have Dr. Richard Carnevale, AHI's vice president
for Regulatory, Scientific, and International Affairs will
discuss the past successes of the ADUFA program and the
features of the new agreement.
    He will be joined on the panel by Ms. Jennifer Johansson,
the vice chair of the Generic Animal Drug Alliance. This
Alliance represented the generic animal drug industry during
these negotiations. And Ms. Johansson will talk to us about her
industry's experience with the AGDUFA program and about the new
agreement.
    The testimony of today's witnesses will reflect consensus
that the animal drug user fee programs are essential to FDA's
timely review of pioneer and generic animal drugs. The
agreements were carefully negotiated and it is important that
we pass them this year.
    I will leave the record open at this point for any opening
statements by Senator Alexander when Senator Alexander arrives.
He is just held up a little bit.
    The Chairman. On our first panel, I would like to then
invite to take the witness stand, Dr. Bernadette Dunham, the
Director of the Center for Veterinary Medicine at the Food and
Drug Administration. In this position, she works to foster
animal and public health by ensuring the availability of safe
and effective animal products. Dr. Dunham has over three
decades of experience working in veterinary medicine, both in
private practice and academia, and with the FDA.
    Welcome to the committee, Dr. Dunham. Your statement will
be made a part of the record in its entirety. If you could take
5 minutes or so to sum it up, I would appreciate it.
    Welcome. Please proceed.

  STATEMENT OF BERNADETTE M. DUNHAM, D.V.M., Ph.D., DIRECTOR,
 CENTER FOR VETERINARY MEDICINE, FOOD AND DRUG ADMINISTRATION,
                       SILVER SPRING, MD

    Ms. Dunham. Thank you. Good morning, Chairman Harkin.
    I am Dr. Bernadette Dunham, Director of the Center for
Veterinary Medicine at the Food and Drug Administration. Thank
you for the opportunity to discuss FDA's proposals for the
reauthorization of the Animal Drug User Fee and the Animal
Generic Drug User Fee Act.
    As you know, these fee programs are designed to expedite
access to new therapies for food-producing animals and
companion animals, and foster innovation in drug development by
enabling FDA to maintain a stable workforce to provide a
predictable and timely review process.
    These programs have been highly successful and have enabled
FDA to eliminate a backlog in applications, dramatically reduce
the time needed to review animal drug applications and other
submissions, improve timely communication with drug sponsors,
and achieve other efficiencies in the drug-approval process
while still ensuring the drugs are safe and effective.
    In my testimony today, I will provide the status of FDA's
reauthorization activities. I will also provide some
information about each program, our achievements to date, and
our proposed changes.
    The user fee provisions, of ADUFA II and AGDUFA I, will
sunset on October 1, 2013 if not reauthorized. Timely
reauthorization is needed to ensure there is no disruption to
these important programs.
    FDA began the reauthorization process with a public meeting
held on November 7, 2011 and began discussions with
stakeholders in February 2012. FDA published the negotiated
recommendations in the Federal Register on December 5, 2012 and
posted for public comment. Another public meeting, to get input
on the recommendations, was held December 18, 2012. The final
recommendations transmitted to Congress include, for each
program, the goals letter outlining the performance metrics,
the proposed legislative language, and a summary of the public
comments.
    FDA considers the timely review of the safety and
effectiveness of new animal drug applications to be central to
the Agency's mission to protect and promote public health.
    Under the original Animal Drug User Fee Act enacted in
2003, the Agency agreed to meet a comprehensive set of
performance goals established to show significant improvement
in the timeliness and predictability of the new animal drug
review process.
    The additional funding enabled FDA to increase the number
of review staff by approximately 30 percent. In 2008, before
ADUFA I expired, Congress passed ADUFA II, which included an
extension of the program for an additional 5 years. And I am
pleased to report that FDA has exceeded all of the performance
goals established under ADUFA for each year of this critical
program.
    During the first 5 years of the program, the Agency was
able to dramatically reduce review times from 500 to 180 days,
and completely eliminate a backlog of 833 submissions within
the first year. Due to the current success of the program, FDA
and industry agree that only minor refinements to the
performance goals that ADUFA II established were necessary.
    Our recommendations relating to the financial enhancements
of the program include a new statutory inflation adjuster, a
new provision for recovering collection shortfalls, and
modification of the workload adjuster. To increase revenue
stream availability, reduce application fee costs, and minimize
potential for collection shortfalls, the recommendations also
modify the fee revenue distribution.
    FDA's recommendation to Congress, after consultation with
the regulated industry, is that the total fee revenue estimate
for 2014 will be $23.6 million, which includes a one-time
information technology funding in the amount of $2 million.
    AGDUFA I authorized FDA's first-ever generic animal drug
user fee program, and additional funding enabled FDA to
increase the number of review staff by approximately 45
percent. Furthermore, the authorization of AGDUFA I enabled
FDA's assurance that generic animal drug products are safe and
effective to provide pet owners, ranchers, and farmers with
greater access to lower cost therapeutic drugs. FDA agreed to
meet performance goals and expedite the review of generic
applications and submissions without compromising the quality
of the Agency's review.
    During the 4 years of AGDUFA I, FDA has exceeded every
performance goal every year with one minor exception. We missed
a performance goal by 1 day for one submission of an
investigational generic and animal drug in 2009.
    The additional resources provided under AGDUFA I enabled
FDA to completely eliminate a backlog of 680 submissions in 22
months. In addition, the Agency has been able to dramatically
reduce review times from 700 days to 270 days.
    FDA's goals for AGDUFA II are to sustain and enhance the
core programs, operation, and performance while providing
predictable review times and resources sufficient to keep pace
with actual costs. FDA and industry agree to shorter review
times for certain reactivations and resubmissions, and to
implement a process for timely foreign inspections.
    Our recommendations for financial enhancements for AGDUFA
II include a fixed inflation adjuster of 4 percent each year to
achieve the proposed revenue levels, and a modification of the
workload adjuster to ensure that it adequately captures FDA's
workload. We also recommend modifying the fee revenue
distribution to increase stability of the revenue stream and to
reduce application fee costs.
    The total 5-year revenue for AGDUFA I was $27.1 million.
The proposed total 5-year revenue for AGDUFA II will be $38.1
million, which also includes a one-time IT funding of $850,000
for fiscal year 2014, the first year planned total of $7.328
million.
    FDA's ADUFA and AGDUFA legislative proposals represent
considerable input from an agreement of stakeholders, the
public, and the Agency. ADUFA and AGDUFA are widely regarded as
extremely successful programs. The recommendations we have
submitted for reauthorization of these programs will ensure FDA
has a stable workforce to provide the predictability and timely
review process that drug sponsors need in order to foster
innovation. They will also provide for expedited access to new
therapies for food-producing animals and companion animals,
while still ensuring the drugs are safe and effective.
    Thank you for the opportunity to discuss the ADUFA and
AGDUFA programs, and I look forward to your questions.
    [The prepared statement of Ms. Dunham follows:]
       Prepared Statement of Bernadette M. Dunham, D.V.M., Ph.D.
                              introduction
    Good morning, Chairman Harkin, Ranking Member Alexander, and
members of the committee. I am Dr. Bernadette Dunham, Director of the
Center for Veterinary Medicine (CVM) at the Food and Drug
Administration (FDA or the Agency), which is part of the Department of
Health and Human Services (HHS). Thank you for the opportunity to
discuss FDA's proposals for the reauthorization of the Animal Drug User
Fee Act (ADUFA III) and the Animal Generic Drug User Fee Act (AGDUFA
II).
    As you know, these fee programs are designed to expedite access to
new therapies for food-producing animals and companion animals and
foster innovation in drug development by enabling FDA to maintain a
stable workforce to provide a predictable and timely review process.
These programs have been highly successful and have enabled FDA to
eliminate a backlog in applications, dramatically reduce the time
needed to review animal drug applications and other submissions,
improve timely communications with drug sponsors, and achieve other
efficiencies in the drug approval process, while still ensuring that
the drugs are safe and effective.
    In my testimony today, I will provide the status of FDA's
reauthorization activities. I will also provide some information about
each program, our achievements to date, and our proposed changes.
               status of fda's reauthorization activities
    The user fee provisions of ADUFA II and AGDUFA I will sunset on
October 1, 2013, if not reauthorized. Timely reauthorization is needed
to ensure there is no disruption to these important programs. FDA began
the reauthorization process with a public meeting held on November 7,
2011. In February 2012, FDA began discussions to get input from our
stakeholders to help us develop our recommendations for
reauthorization. FDA consulted with representatives of patient and
consumer advocacy groups, veterinary professionals, scientific and
academic experts, and industry associations. FDA then published the
negotiated recommendations in the Federal Register (FR) on December 5,
2012, and solicited public comment. We also held a second public
meeting to get input on the recommendations on December 18, 2012. The
final recommendations transmitted to Congress include, for each
program, the goals letter outlining the performance metrics, the
proposed legislative language, and a summary of public comments.
                            adufa background
    FDA considers the timely review of the safety and effectiveness of
new animal drug applications (NADA) to be central to the Agency's
mission to protect and promote public health. One way we protect animal
and human health is by approving safe and effective and properly
labeled new animal drugs. Prior to 2004, the timeliness and
predictability of the new animal drug review program was a concern. The
original Animal Drug User Fee Act enacted in 2003 (ADUFA I) authorized
FDA to collect user fees that were to be dedicated to expediting the
review of NADAs in accordance with certain performance goals and to
expand and modernize the new animal drug review program. The Agency
agreed, under ADUFA I, to meet a comprehensive set of performance goals
established to show significant improvement in the timeliness and
predictability of the new animal drug review process. The
implementation of ADUFA I provided a significant funding increase that
enabled FDA to increase the number of staff dedicated to the review of
animal drug applications by approximately 30 percent since 2003.
    In 2008, before ADUFA I expired, Congress passed ADUFA II, which
included an extension of the program for an additional 5 years (fiscal
year 2009 to fiscal year 2013), as well as several enhancements to the
program.
                           adufa achievements
    I am pleased to report that FDA has exceeded all of the performance
goals established under ADUFA for each year of this critical program.
Under the performance goals of ADUFA, FDA agreed to review and act on
submissions within shorter periods of time each successive year. During
the first 5 years of this program, the Agency was able to dramatically
reduce review times from 500 days to 180 days and completely eliminate
a backlog of 833 submissions within the first year.
    With ADUFA II, FDA agreed to further enhance the review process. A
key improvement under ADUFA II is the ``end-review amendment'' (ERA)
process that allows FDA reviewers to work with the drug sponsor to
amend certain pending submissions. By enhancing communication early in
the process, the ERA process allows FDA to decrease the number of
review cycles, which ultimately leads to a shorter time to approval and
significant cost-savings for the sponsor. The greatest impact of this
new tool has been with submissions of investigational new animal drug
(INAD) studies and study protocols. Greater than 90 percent of ERAs
resulted in a favorable outcome in the first cycle.
    Also as part of ADUFA II, FDA developed an electronic submission
tool, which has enabled sponsors to submit applications and submissions
electronically, allowing FDA reviewers to evaluate the submissions and
correspond with sponsors electronically. Electronic submissions have
provided substantial cost savings for both FDA and animal drug
sponsors. Approximately 18 percent of submissions were electronic in
2011, the program's first year, and over 50 percent were electronic in
2012. Submissions are received by FDA in minutes rather than days, and
correspondence back to sponsors occurs in minutes rather than the
several days required for mailing responses.
    Further, FDA and the regulated industry participated in eight joint
public workshops on mutually agreed-upon topics. This collaboration
enhanced communication and transparency on topics critical to the
animal drug review process. The workshops discussed in detail the data
requirements necessary for drug evaluation and explored scientific
approaches to challenges in pharmacokinetics, new emerging issues
relative to antiparasitic resistance, and a novel question-based-review
(QbR) process for certain reviews. The final two public workshops for
fiscal year 2013 will address the evaluation of drugs for use in animal
production and data quality for animal drug submissions from sponsors.
    ADUFA II also enabled FDA to improve the animal drug review and
business processes by facilitating the timely scheduling and conducting
of foreign pre-
approval inspections. Because of processes developed under ADUFA II,
sponsors are now able to voluntarily submit an annual facilities list
and notification 30 days prior to submitting an NADA, a supplemental
NADA, or an INAD submission to inform FDA that the application or
submission includes a foreign manufacturing facility. This advance
notice gives FDA more time to plan for any necessary foreign
inspections, thus helping to reduce costs and prevent delays during the
review of an application or submission.
                         proposal for adufa iii
    FDA is proposing changes to the performance goals that ADUFA II
established to further enhance the process for review of animal drug
applications. Due to the current success of the program, FDA and
industry agreed that only minor refinements were necessary.
    The ERA procedure implemented as part of ADUFA II resulted in an
increase in the number of one-cycle reviews; however, certain
challenges associated with the process restricted its full utilization.
The Agency is proposing, among other changes, to further improve the
review process by replacing the ERA with shorter review times for
certain resubmissions and reactivations beginning in fiscal year 2015.
To allow time for the programming and information management system
changes required to make this and other changes, we are proposing to
maintain the ADUFA II ERA process and associated review performance
goals for fiscal year 2014 for most applications.
    FDA agrees to maintain the ADUFA II performance goals regarding
work queue procedures, timely meetings with industry, review of
administrative NADAs, and pre-approval foreign inspections. To enhance
the exchange of scientific information, the Agency and industry agree
on the need for industry to submit information earlier in development
to enable the parties to reach agreement at a pre-submission conference
or begin the review of study protocols. Additionally, FDA will provide
increased flexibility for sponsors to submit scientific data or
information concurrent with study protocol review.
    Our recommendations relating to the financial enhancements of this
program include a new statutory inflation adjuster that accounts for
changes in FDA's costs related to payroll compensation and benefits as
well as changes in non-payroll costs through use of a prescribed
methodology that uses the Consumer Price Index as a guide. We also
recommend modifying the base years for calculating the workload
adjuster to ensure that it adequately captures changes in FDA's
workload during ADUFA III.
    Additionally, ADUFA III offers the following financial
recommendations:

     A new provision for recovering collection shortfalls to
ensure adequate funding for the animal drug review process. For
example, when FDA sets fees for fiscal year 2016, it may add to the fee
revenue the amount of any shortfall in fees collected in fiscal year
2014. This process would follow in subsequent years through the final
year adjustment.
     A modified fee revenue distribution to increase revenue
stream stability, reduce application fee costs, and minimize the
potential for collection shortfalls. The proposed distribution will
shift from 25 percent for each fee type in ADUFA II to 20 percent for
application fees, 27 percent for product fees, 27 percent for sponsor
fees, and 26 percent for establishment fees.

    FDA's recommendation to Congress, after consultation with the
regulated industry, is that the total fee revenue estimate for fiscal
year 2014 will be $23,600,000, which includes one-time Information
Technology (IT) funding in the amount of $2,000,000. The proposed
statutory language specifies annual revenue of $21,600,000 for each of
fiscal year 2015 through fiscal year 2018; however, this amount is
subject to a number of possible adjustments, including for inflation,
workload, and collection shortfall.
                           agdufa background
    AGDUFA I authorized FDA's first-ever generic animal drug user fee
program. AGDUFA I provided a significant funding increase that enabled
FDA to increase the number of staff dedicated to the new generic animal
drug application review process by approximately 45 percent.
Furthermore, the authorization of AGDUFA I enabled FDA's continued
assurance that generic animal drug products are safe and effective and
provided consumers with greater access to lower-cost therapeutic drugs.
    Under AGDUFA I, FDA agreed to meet performance goals for certain
submissions over 5 years from fiscal year 2009 through fiscal year
2013. The purpose of establishing these performance goals was to
expedite the review of abbreviated new animal drug applications (ANADA)
and reactivations, supplemental ANADAs, and generic investigational new
animal drug (JINAD) submissions without compromising the quality of the
Agency's review.
                          agdufa achievements
    AGDUFA I established increasingly stringent review performance
goals. In the 4 years of AGDUFA I review performance evaluated to date
(fiscal year 2009 to fiscal year 2012), FDA has exceeded every
performance goal every year with one minor exception. During the
program's first year, the Agency missed the performance goal by 1 day
for one submission of an investigational generic new animal drug. Most
importantly, the additional resources provided under AGDUFA I enabled
FDA to completely eliminate a backlog of 680 submissions in 22 months.
In addition, the Agency has been able to dramatically reduce review
times from 700 days to 270 days. The timely approval of generic new
animal drugs continues to be a critical component of animal health
because it provides quicker access to additional sources of animal
drugs at lower cost for ranchers, farmers, and pet owners.
                         proposal for agdufa ii
    FDA's goals for the legislative proposal to reauthorize AGDUFA I
are to sustain and enhance the core program's operation and performance
while providing predictable review times and resources sufficient to
keep pace with actual costs. The Agency is proposing to maintain the
AGDUFA I goals regarding work queue procedures, timely meetings with
industry, review of administrative ANADAs, review of protocols without
substantial data, and amendments of similar applications and
submissions.
    FDA and industry agreed to shorter review times for certain
reactivations and resubmissions. The Agency also agreed to increased
communication and transparency with industry through timely meetings
and question-based-review (QbR) for bioequivalence submissions, which
are most often used when a sponsor proposes manufacturing a generic
version of an approved off-patent product. The QbR incorporates the
most important scientific and regulatory review questions that focus on
critical pharmaceutical attributes essential for ensuring generic drug
product quality. In addition, FDA further agreed to implement a process
for timely foreign inspections as provided in ADUFA II.
    Similar to AGDUFA I, our recommendations for financial enhancements
for AGDUFA II include a fixed inflation adjuster of 4 percent each year
to achieve the proposed revenue levels. We also recommend modifying the
base years for calculating the workload adjuster to ensure that it
adequately captures changes in FDA's workload during AGDUFA II.
Additionally, the fee revenue distribution has been modified from 30
percent for application fees, 35 percent for product fees, and 35
percent for sponsor fees under AGDUFA I to 25 percent for application
fees and 37.5 percent for both product fees and sponsor fees under
AGDUFA II. The purpose of changing the fee distribution is to increase
the stability of the revenue stream and reduce application fee costs.
    The total 5-year revenue for AGDUFA I was $27,100,000. The proposed
total 5-year revenue for AGDUFA II will be $38,100,000, which also
includes one-time IT funding in the amount of $850,000 for fiscal year
2014 for a first-year planned total of $7,328,000.
                               conclusion
    FDA's ADUFA and AGDUFA legislative proposals represent considerable
input from and agreement of stakeholders, the public, and the Agency.
ADUFA and AGDUFA are widely regarded as extremely successful programs.
The recommendations we have submitted for reauthorization of these
programs will ensure FDA has a stable workforce to provide the
predictable and timely review process that drug sponsors need to foster
innovation. They also will provide for expedited access to new
therapies for food-producing animals and companion animals, while still
ensuring that the drugs are safe and effective. FDA looks forward to
working with you and your staff to achieve a timely reauthorization of
these important human and animal health programs.
    Thank you for the opportunity to discuss the ADUFA and AGDUFA
programs. I would be happy to answer any questions.

    The Chairman. Thank you very much, Dr. Dunham. And we will
start a round of 5 minute questions.
    My first is this: congratulations on reducing the amount of
time for these applications, cut down in half on both ADUFA and
AGDUFA. Can you assure us, and the public, that even with this
reduction in time that safety has not been compromised?
    Ms. Dunham. Yes, sir. I can assure you that our reviewers
are very experienced, and our whole focus is absolutely to do
what FDA does very well: assure the safety and effectiveness of
these drugs through critical review, making sure the
manufacturing and the labeling of these products is absolutely
correct to ensure that safety.
    The Chairman. But is the reduction in time that is taken
due to the fact that because of the increased funding through
the fees, you have been able to hire more staff, and that has
enabled you to reduce that time, but still maintain the safety
factor. Is that correct?
    Ms. Dunham. That is correct, sir.
    The Chairman. The point I'm trying to make is that the
increased funding has allowed you to hire the competent staff
in order to get the job done in a reduced amount of time.
    Ms. Dunham. In reduced time and not be able to jeopardize
anything on safety and effectiveness when we do the reviews.
Yes, sir.
    The Chairman. If we did not reauthorize ADUFA by October 1
of this year, and AGDUFA fees if we did not reauthorize these
fees, briefly tell us what repercussions would that have for
FDA and ultimately for animal and public health.
    Ms. Dunham. The concern that we would have is that we would
end up going back to the days that we have mentioned before. We
would have longer review times. We would lose approximately
about 100 of the staff that we have had an opportunity to hire
through the ADUFA program, and that really would set us back. I
would be very concerned that we would not be able to continue
providing safe and effective drugs to address the animal health
needs of the Nation.
    The Chairman. And last, just briefly again, how do
producers of food animals benefit from ADUFA and AGDUFA?
Briefly, how do they benefit from this?
    Ms. Dunham. They are going to benefit because part and
parcel is to make sure we keep all of our animals healthy. And
for that, to be able to access the safe and effective drugs,
work with their veterinarians, as well as the generic animal
drug side, which still allows them access to safe and effective
drugs, sometimes at reduced cost, is something that helps them
with their entire operation. So ensuring not only the health of
the animals, but more importantly, any of the food items from
those animals and that is their livelihood, of which we have a
very important role in protecting public health and animal
health.
    The Chairman. Thank you very much, Dr. Dunham.
    I will now yield to Senator Alexander.

                     Statement of Senator Alexander

    Senator Alexander. Thanks, Mr. Chairman.
    Just to go back over the point that you made and that the
Chairman mentioned. You have reduced--you've got a 450-day
reduction time in the average time you spend reviewing new
drugs, and you have eliminated the backlog, is that right?
    Ms. Dunham. Yes, sir, we have. Over the years that we have
had, this is our second authorization period of ADUFA and it
would be, sorry, this is our third; we have had it two times.
    Over the 9 years, we have tremendously accomplished meeting
all of our performance goals and having reduced that backlog,
actually, during the very first authorization of ADUFA, and the
same happened with AGDUFA, our generic drug fee user program.
Once we had an opportunity to really get staff onboard, we
managed to reduce the backlog.
    Senator Alexander. How many applications did you have in
backlog when there was a backlog?
    Ms. Dunham. We had over 700 that we managed to drop with
that backlog when we had the staff.
    Senator Alexander. Go through the time sequence today. If I
had an application for approval of a new drug, take me through
the time sequence, about the average amount of time it might
take.
    Ms. Dunham. When a sponsor comes to us with their proposal,
there are a number of aspects that have to be reviewed, and we
have broken these down into technical sections. Based upon the
time that it takes the company to come in with each one of
these sections, that will determine the review time.
    At the very end, when the entire package is ready to
review, we are now meeting on the ADUFA side the statutory
review time of 180 days. And the time that it takes is all
dependent upon the complexity of that particular drug that we
are reviewing.
    Senator Alexander. So you are within the 180 day
statutory----
    Ms. Dunham. Now we are. We were not before, and that is
what this ADUFA fee program has enabled us over these years to
meet, which has been a success story. And it really helps the
companies because now they are going to have reliable
performance goals with our steady increased stability of
revenue to meet that, and to understand what it takes to get us
there. And before that, there were a lot of delays and
unknowns, and now we have managed to fine tune all of that and
enhance this.
    Senator Alexander. And the 180 days, is it part of the
proposal for the reauthorization?
    Ms. Dunham. Yes, to sustain those performance review times.
    Senator Alexander. What is the greatest difficulty that
applicants have in that period before you get all the
documents? Do you get complaints about complexity or difficulty
of providing that information? And if so, what are you doing
about that?
    Ms. Dunham. Actually, through the program, we have had an
opportunity to work very closely in enhancing communication,
working very closely with industry.
    We have had 10 workshops scheduled; we have completed eight
of them. Whereby you do have an opportunity to really have an
exchange back and forth from our reviewers to the industry to
fine tune some of the complexities that they are addressing in
the review that we would like them to work with us on so that
we enhance that clarity and expectations, and by doing that,
fine tune so that everything comes through with a goal of one
cycle review. And through those dialogs, we have really had a
terrific----
    Senator Alexander. One cycle, you mean, so you don't have
to send it back and start over.
    Ms. Dunham. Right, exactly, and that is the whole purpose
of enhanced communication. So that you are not caught with
surprises, so we understand expectations. We do a tremendous
amount now with----
    Senator Alexander. Do you catch them doing things wrong, or
do you talk with them ahead of time and say, ``Fill it out this
way instead of that way,''?
    Ms. Dunham. That is the open dialog so that there is a free
exchange that we can go back and forth to understand if we have
hit an issue or they have had a delay on something. So we know
that and we can work that time into the plan.
    Senator Alexander. How many pending applications do you
have or, however you measure, the number of applications that
you are working on today?
    Ms. Dunham. I would have to get back to you to give you
that exact number. I don't know off the top of my head.
    Senator Alexander. I am just trying to get an idea of how
much business you have in a year or how many applications you
review in a year.
    Ms. Dunham. Well, we have managed to basically, even over
the past 9 years, we have had about 3,600 drugs and supplements
be approved through ADUFA. And over the last 4 years of the
program with AGDUFA, we have had about 500. So in that sense,
some can be very complex new applications and innovative drugs,
others can be a lot of supplements that we deal with as well.
    Senator Alexander. Well, Mr. Chairman, based upon what I
have heard so far, maybe we ought to put them in charge of some
other parts of the Government as well.
    [Laughter.]
    The Chairman. I will second that.
    Ms. Dunham. Thank you very much.
    [The prepared statement of Senator Alexander follows:]

                Prepared Statement of Senator Alexander

    Mr. Chairman, thank you for holding a hearing today on
these successful programs. It has been 5 years since the last
round of animal drug and animal generic drug user fee
negotiations, and I look forward to hearing about the impact of
the fees on animal drug approvals.
    Keeping animals healthy is imperative for public health.
And as we spend this morning learning more about the process
and benefits of these two user fee programs I would like to
tell a story about why the success of these programs is
important.
    I know a farmer in East Tennessee who buys calves from
local livestock markets to raise on grass and grain. He checks
on his calves two or more times per day. When he detects a calf
that is not feeling well, he pulls him out of the group into
another area where he gives him a drug.
    How does this farmer know the calf isn't feeling well? He
says it is like how you know your child is not feeling well. He
says the calf just doesn't look ``right''. A calf might have
droopy ears or his eyes might not be as bright.
    This farmer needs to be able to have access to the proper
drug in order to get his calves back healthy as quickly as
possible. My constituent, along with 17,500 other Tennessee
beef cattle farmers, has been Beef Quality Assurance Certified.
This means that they have the proper training and knowledge to
handle and administer animal drug products. This Tennessean
wants to do all that he can do to produce a safe and wholesome
product to feed not only to others, but also to his family.
    Without access to safe and effective animal medicines that
are also studied for their impact on the food supply, farmers
would be severely hampered in their ability to help animals
that become sick. So when we see the results of this program,
such as a 450-day reduction in the average time the Food and
Drug Administration (FDA) spends reviewing new generic animal
drugs over the last 5 years, and that FDA has eliminated the
backlog of 680 applications, that means improved care for
animals and faster access to animal medicines for this farmer
and many like him. Since the animal drug user fees have been in
place many new products have been approved, including a product
to control fever in pigs suffering from pneumonia and iron
supplements for newborn piglets.
    When discussing the technical details of the FDA and
industry user fee agreement we need to keep in mind the people
affected at the end of the process: the farmers and animal
owners who use these products to keep their animals healthy and
our food supply safe. We plan to mark up legislation on these
agreements soon and hope to pass this quickly to ensure the
staff at the Center for Veterinary Medicine can continue their
good work. These are important agreements that Congress should
reauthorize quickly without complications that could jeopardize
swift passage of the bill. I hope that we keep the lessons from
our last animal drug and animal generic drug user fee
legislation in mind as we work on these important agreements. I
thank Chairman Harkin for his leadership, commitment and look
forward to learning more about the programs' success from
today's witnesses.
    The Chairman. Thank you.
    Senator Burr.

                       Statement of Senator Burr

    Senator Burr. Thank you, Mr. Chairman.
    Dr. Dunham, congratulations on not only a great
performance, but the ability to come up and have industry
support for a reauthorization like this. I am curious, off of
the Chairman's points to you, how have you been able to
accomplish through ADUFA what you have, while user fees in
other areas of FDA providing additional FTE's only increased
the review time versus decrease the review time? What is
different that you have done than the other areas at FDA?
    Ms. Dunham. That is a very good question. I think we have
always struggled to be as expeditious as we can. And this
additional user fee program just made that opportunity of
enhancing the wonderful staff that we have--their dedication is
incredible--to be able to provide them with the tools they
need. And having done that, the energy is there, and working
with industry so that we are really striving to have this be as
clear as we possibly can, to understand the challenges.
    It has been a win across the board, and it is really
through the availability of the dedicated staff that we have,
and the opportune program you have provided which really helps
us to----
    Senator Burr. If I understand this reauthorization, there
are no additional FTE's being hired.
    Ms. Dunham. We are going to continue because we have
managed to fine tune the process, and we have now also gone
electronic. And I think that is the biggest boost in enhancing
our review times now because we can suffice that so quickly
electronically back and forth. That has given a tremendous
advantage to us on obtaining the data and reviewing the data.
    Senator Burr. Part of this agreement requires the industry
to pay $2 million up front in one-time IT funding. What are the
specific goals that you have for that $2 million worth of IT
payment? And what are the benchmarks that the Agency will use
to track the success of these goals?
    Ms. Dunham. Where we are going to be using the dollars for
IT, as we have mentioned, moving into electronic submission
form, a number of the various codes and software coordination
of that documentation requires us to work with the IT folks to
make those changes in the business process. So that when a
reviewer receives a supplement, you code it in, coordination of
the technical sections, all of that needed to fine tune now
with the business operation.
    We took advantage of requesting and working with the
industry because now that we are moving electronically, we
needed to make a few changes, literally, that only IT could
handle. And it is more or less just fine tuning the business
process side of that, and it is just changing some of those
codes that we have.
    Senator Burr. Dr. Carnevale says in his testimony that
increases in regulatory costs and burden are contributing to a
declining number of new animal drug approvals. As CVM Director,
what are you and your staff doing to increase the regulatory
certainty and predictability of the Agency and to decrease
regulatory costs and burden, which have had somewhat of a
chilling effect on innovation? Or, would you agree with that?
    Ms. Dunham. I think any time we are facing challenges of
finances that does, and that is really why this user fee
program has acknowledged how to help our industry come forth
with, still, the innovative products that we need. By
minimizing, potentially, having multiple cycles is a benefit to
them, so that you are not going to have additional costs; that
is a win.
    That enhanced communication that we talked about, so there
is clarity of what we are striving to obtain, has really
minimized it. We also have an opportunity for waivers. If we
have some small businesses that are coming onboard, we have
worked through the user fee program to acknowledge that and
assist them. So anything that flags up as a potential barrier
to innovation, we put a waiver in because we understand how
important that is to continue to support them.
    On the generic user fee program, we've also got a three-
tier program. Again, trying to work with our companies,
understanding where they are. Some of them are not multiple,
big applications. And I think that fairness, and listening to
them, and working through that is how we both work together.
    That is another reason why, as you asked originally, what
is part of our success story? It is really trying to understand
that we all want to ensure safe and effective drugs, and to
understand what it takes to have the industry come in the front
door, and for us to do those reviews and work with them.
    Senator Burr. Part of this agreement deals with conditional
approvals, and it is for the Agency to explore in concert with
the industry the feasibility of pursuing statutory revisions
that may expand that use of conditional approvals. Yet, there
is not much specificity in how that is going to happen. Can you
sort of explain to me what the matrix is that we should look at
to see if this is successful or not?
    Ms. Dunham. This was actually started with our minor use
minor species animal drug development program whereby, you can
imagine, we may not have sufficient numbers and I will give you
a simple example, going to the zoo animals.
    How many elephants would we have, how many tigers if we
want to get this drug reviewed for safety and effectiveness? So
we may be able to get all of the safety done, first and
foremost. But the effectiveness, do we have sufficient numbers
of those animals? We may then allow the company to take a
little bit longer to access the effectiveness data just because
they may not have sufficient numbers.
    Senator Burr. Under a conditional approval?
    Ms. Dunham. Under a conditional approval, and so the safety
has to be there. The only layer of the conditional approval is
fine tuning the last bit of the effectiveness. And that has
been a tremendous asset to help with those products as we have
seen them coming through for minor species.
    So the scenario was: is there a venue possibly? Could we
look at that for some areas in our major species? This is just
to take a look and see, is there any possibility that that
could be another way of helping to, again, take a look at the
cost of the drug review, the timing, and some of the more
challenging issues, would that work or not?
    There is no guarantee, but it has been a very successful
program on the minor use species side. We thought, they asked.
I think it is very good that we always try to embrace new ideas
and let's see if this is going to work.
    Senator Burr. Great. Thank you.
    Thank you, Mr. Chairman.
    Ms. Dunham. Thank you.
    The Chairman. Senator Roberts.

                      Statement of Senator Roberts

    Senator Roberts. Thank you, Mr. Chairman. Thank you for
holding the hearing. Dr. Dunham, I may nominate you for the
Freedom Medal; that's a pretty prestigious award. I don't know
of anybody else in the regulatory business--and virtually every
agency that we have in the Government today--who has done a
better job than you in following the law. Mr. Chairman, just
let me go down the list.
    First, these folks had public hearings. So people came in
from the antibiotic arena, said what they had to say, made
suggestions. Then these folks had an Advanced Notice of
Proposed Rule Making; the acronym for that is ANPRM. I did not
know that, A-N-P-R-M. I thought it was something that you took.
    [Laughter.]
    Senator Roberts. Which, in this case, is probably a
commonsense pill to get the cost benefit worked out and really
let people know. So that was a heads up.
    First you had the hearings. They testified. Then you had a
heads up on Advanced Notice of Proposed Rule Making. Then you
had a notice of proposed rulemaking, which we are into right
now. So after hearing from the public and then giving them an
advanced notice of what you have in mind, now we have a notice
of proposed rulemaking and you are getting feedback. Then you
go to the final rule. OK? And I would tell my colleagues, and I
want to thank you, that this is the way it is supposed to work.
    That over a period of time that is appropriate that you
tell the industry, or you ask the industry, ``Is this going to
work? Is there a better way we can do it? Maybe we can tweak
it, maybe not.'' But you have done all that. As opposed to
almost virtually every other agency that my colleagues and I
wrestle with, trying to make some kind of a cost-benefit
criteria apply, even though we have an Executive order that
says that that is the case, it is not happening.
    Classic case is with regards to PPACA or the Affordable
Care Act, where the rules have gone to OMB and they are final.
But upon questions, CMS will tell us that, ``Well, we've talked
to all the providers,'' and that is a long list of providers in
terms of health care.
    On sub-regulatory guidance, the problem is nobody knows
about the sub-regulatory guidance. You don't operate that way.
You are going out to the people going to be affected and trying
to get a better sense in regards to the regulations that you
are issuing. That is why we have a clean bill.
    And the sub-regulatory guidelines can now be bulletins. Who
has time to look at bulletins? How do you get a hold of the
bulletins if you are a small, rural hospital in Kansas,
Tennessee, Iowa, wherever, North Carolina? You don't have time.
How do you gain access to the bulletins? Well, it is on their
Web site. Well, who is going to be the bad-news-bearer sitting
there at the hospital looking at bulletins every day?
    You have Frequently Asked Questions, I love that, FAQ,
frequently asked questions. Boy, there's a bunch of those. And
so, they get the questions and then they come back and say,
``Here's a bunch of frequently asked questions,'' but I am not
sure that they really answer the questions.
    Then you have a Web site, of course, and then you finally
have guidance documents. So I guess, if you ask guidance on a
particular item, they will send you a document on their Web
site and you're supposed to wade through that.
    You don't have an ambulance driver, a hospice director, a
home health care person, a nurse, a doctor, a hospital,
everybody that receives Medicare, and I am just picking on that
because it is an example. And then you have regs going over to
OMB, and I suspect that this committee does not know all of the
ramifications of those, we will. But with the Chairman's
leadership, that is for sure, and we are doing the same thing
in the finance committee.
    But you, doctor, have done it the right way, and I want to
congratulate you for that.
    Ms. Dunham. Thank you.
    Senator Roberts. Because we need regulatory framework to
protect the public, and you are doing that, but you are asking
the industry, ``How can we do it in the best possible way?''
Now that is a long speech, but I think you deserve a big pat on
the back.
    Mr. Chairman and Ranking Member, thank you for having a
clean bill, and if we have a clean bill with appropriate
comment, that is what we are supposed to be doing. So thank you
both, and thank you, doctor.
    Ms. Dunham. Thank you very much. I really appreciate that.
    The Chairman. Thank you, Senator Roberts. Well, I hope we
can keep it a clean bill as it weaves its way through that
place over there in the Capitol called the Senate floor. I hope
we can keep it clean.
    Dr. Dunham, thank you very much.
    Ms. Dunham. Thank you very, very much.
    The Chairman. We will call our second panel, Dr. Richard
Carnevale and Dr. Jennifer Johansson.
    Mr. Carnevale. Good morning.
    The Chairman. The second panel of the committee has invited
Dr. Richard Carnevale, the vice president for Regulatory,
Scientific, and International Affairs with the Animal Health
Institute, an animal pharmaceutical trade association. Dr.
Carnevale has worked for 35 years in the animal health and food
safety industry, and has previously held positions with both
the FDA and USDA, and holds a doctorate in veterinary medicine
from the University of Pennsylvania.
    Also Jennifer Johansson, the vice chair of the Generic
Animal Drug Alliance. In addition to her role with GADA, Ms.
Johansson is the senior vice president of Putney Generic
Veterinary Pharmaceuticals where she leads their regulatory
affairs efforts. Ms. Johansson has 16 years of experience in
the pharmaceutical and research industry including physicians
in a human specialty pharmaceutical company in private legal
practice, and is a laboratory researcher at NIH.
    We thank you both for being here. Your statements will be
made a part of the record in their entirety. We will start with
you, Dr. Carnevale. Welcome. Please proceed.

  STATEMENT OF RICHARD A. CARNEVALE, V.M.D., VICE PRESIDENT,
REGULATORY, SCIENTIFIC AND INTERNATIONAL AFFAIRS, ANIMAL HEALTH
                   INSTITUTE, WASHINGTON, DC

    Mr. Carnevale. Good morning. Thank you, Mr. Chairman and
members of the committee. Thank you for holding this hearing on
this important piece of legislation, and the opportunity to
speak to you today about the important human and animal health
benefits that result from using medicines to keep animals
healthy.
    I am Dr. Richard Carnevale. I am a veterinarian by training
with a degree from the University of Pennsylvania School of
Veterinary Medicine. And I am here today on behalf of the
Animal Health Institute, the trade association that represents
companies that make medicines for animals.
    Our companies share a common mission: we contribute to
public health by protecting animal health. Animal health
products also give veterinarians, and livestock, and poultry
producers the necessary tools to protect the health and well-
being of food-producing animals.
    Veterinarians work hard to prevent disease in animals, but
it is important for them to have medicines available when
needed to treat a disease or disease threat. The FDA animal
drug approval process looks much like the human drug approval
process. Animal drug companies submit data packages to
demonstrate safety, efficacy, and the ability to meet the same
stringent FDA manufacturing standards.
    It is a costly process requiring as much as $100 million,
and 7 to 10 years to bring an animal drug to market. The market
for animal drugs, however, is nothing like the market for human
drugs. Our products are used to treat seven different major
species of animals and many more minor species. A blockbuster
animal drug is considered one with sales of around $100 million
with the vast majority of animal health products averaging
about $1 million or less in gross sales. There is no Medicare
or Medicaid, and except in rare cases, no employer-supported
health insurance. The cost of animal drugs is primarily borne
fully by the animal owner.
    Passage of this legislation will have important benefits.
FDA-CVM benefits by having additional resource needs to meet
its mission of protecting public health. Animal health sponsors
benefit from a stable and predictable review process allowing
them to make more informed decisions about the investment risks
of research and development dollars.
    Veterinarians benefit from having new and innovative
medical advances available to treat, control, and prevent
diseases in their patients. And livestock and poultry producers
and the veterinarians on whose advice they rely, also have the
tools needed to keep food animals healthy.
    And pet owners, let's not forget them, will benefit by
having their animals live longer and healthier lives,
increasing their enjoyment of these companions.
    And finally consumers reap the food safety benefits that
come as a result of the availability of additional tools to
keep food animals healthy.
    AHI believes that the funding agreed to by the industry
over the next 5 years is based on an objective assessment of
Agency resource needs, and will allow the Agency to maintain
all current standards, and also improve performance in key
areas. The agreement calls for approximately $118 million in
funding over the 5 years and uses a variable rather than a
fixed inflation factor.
    The financial agreement seeks to reduce the impact that
fees may have on small businesses and smaller product markets
by reducing the total percentage of fees coming from new animal
drug applications and supplements from 25 percent to 20
percent. This agreement also includes a provision for FDA to
make up potential fee shortfalls that may be experienced by
allowing for adjustments to levied fees in the out years of the
program.
    FDA has consistently met all timeframes for all sentinel
submissions identified in the goals letter that was submitted
to Congress the past two ADUFA's, and we are confident that the
Agency will continue to do so over the next 5 fiscal years.
    The new agreement continues all current submission review
timeframes mandated in ADUFA II. However, the new agreement
adds important enhancements to the review process.
    Animal drugs generally go through a phased review process,
which is different from human drugs whereby each specific area
called technical sections of the new animal drug application
are submitted and reviewed independently. Once the technical
sections for safety, efficacy, manufacturing, and environmental
impact are complete, an administrative NADA is filed
referencing those sections, and approval of the product occurs
within 60 days.
    If technical sections can be completed more rapidly, it
will lead to earlier filing of the administrative NADA, and
therefore reduce overall time to the marketing of safe and
effective animal medicines. This will be accomplished under the
new agreement by FDA agreeing to significantly shorten the
review times of the second pass submissions that ordinarily are
reviewed in the same timeframe as the original or first pass
submissions. Now that will occur when certain criteria in the
goals letter are met.
    Depending on the type of submission, this can result in up
to a 4-month or 120-day decreased review time, which is very
important and could be critical in moving an important medicine
to market sooner. The new agreement also commits the Agency to
work with the industry to examine longer term goals. First, AHI
and FDA will enter into discussions on how to more broadly
extend the conditional approval process currently available for
all practical purposes only to minor species to major species
applications.
    Second, FDA will enter into a discussion with the animal
drug and feed industry, and State regulatory authorities
overseeing animal feed, to determine how requirements for
combination medicated feed approvals might be modified.
    This could have a significant future importance with the
advent of the FDA proposal to move more antimicrobials used in
feed to a Veterinary Feed Directive program by allowing
veterinarians to more efficiently write VFD orders for
antibiotics to be mixed into feed with other non-VFD drugs.
Eliminating the requirement for combination feed approvals
could pave the way for a smoother implementation of the VFD
program, and ensure that antimicrobials that are added to feed
are being used for therapeutic purposes only under the order of
a veterinarian.
    Mr. Chairman, CVM has a rigorous science-based approval
process that provides to the American public the products
necessary to protect public health by protecting animal health.
Every year, scientists uncover new diseases in animals, some of
which potentially pose a threat to human health. As more
animals are raised to feed the planet, and as animals are
reared closer to people, we will continue to need new medicines
to protect animal and human health.
    The reauthorization of ADUFA will continue to provide the
Agency the resources necessary to maintain and improve this
approval process, provide new and innovative products to allow
our pets to live longer and healthier lives, and contribute to
food safety by keeping food animals healthy.
    I urge you to move a clean ADUFA bill in a timely manner so
this program can continue without interruption.
    Thank you, Mr. Chairman. I would be happy to take
questions.
    [The prepared statement of Mr. Carnevale follows:]
           Prepared Statement of Richard A. Carnevale, V.M.D.
                                summary
    The Animal Health Institute (AHI) is the trade association
representing research-based companies that make medicines for animals,
both companion animals and farm animals.
    Passage of the Animal Drug User Fee Act will assist FDA's Center
for Veterinary Medicine by providing additional resources to meet its
mission of protecting public health. Animal health sponsors benefit
from a stable and predictable review process, allowing them to make
more informed decisions about the investment risks of research and
development dollars. Veterinarian and animal owners benefit from a
critical supply of new and innovative medicines to keep animals
healthy. Consumers reap the food safety benefits that come as a result
of the availability of additional tools to keep food animals healthy.
    The funding agreement, based on an objective assessment of agency
resource needs, calls for approximately $118 million in funding over
the 5 years, and uses a variable rather than fixed inflation factor.
The financial agreement seeks to reduce the impact that fees may have
on small businesses and smaller product markets by reducing the total
percentage of fees coming from new animal drug applications and
supplements from 25 percent to 20 percent. The agreement also includes
a provision for FDA to make up potential fee shortfalls that may be
experienced by allowing for adjustments to levied fees in the out years
of the program.
    The new agreement continues all current submission review
timeframes mandated in ADUFA II. One enhancement added by this
agreement is to significantly shorten the review times of the second
pass submissions that ordinarily are reviewed in the same timeframe as
the original or first pass submissions, when certain criteria in the
goals letter are met. Depending on the type of submission this can
result in up to a 4-month (120 day) decreased review time and could be
critical in moving an important animal medicine to the market sooner.
    The new agreement also commits the agency to work with industry to
examine longer term goals: First, AHI and FDA will enter into
discussions on how to more broadly extend the conditional approval
process currently available only to minor species to major species
applications. Second, FDA will enter into discussion with the animal
drug and animal feed industry and State regulatory authorities
overseeing animal feed to determine how requirements for combination
medicated feed approvals might be modified. Eliminating the requirement
for combination feed approvals could pave the way for a smoother
implementation of the VFD program and ensure that antimicrobials added
to feed are being used for therapeutic purposes only under the order of
a veterinarian.
    The reauthorization of ADUFA will continue to provide the agency
the resources necessary to maintain and improve this approval process,
provide new and innovative products to allow our pets to live longer
and healthier lives and contribute to food safety by keeping food
animals healthy. AHI urges Congress to move a clean ADUFA bill in a
timely manner so this program can continue without interruption.
                                 ______

    Mr. Chairman and members of the committee, thank you for holding
this hearing on this important piece of legislation, and for the
opportunity to speak to you today about the important human and animal
health benefits that result from using medicines to keep animals
healthy.
    I am Dr. Richard Carnevale. I am a veterinarian by training with a
degree from the University of Pennsylvania and I am here today on
behalf of the Animal Health Institute (AHI), a trade association that
represents companies that make medicines for animals. Our companies
share a common mission: we contribute to public health by protecting
animal health. With food animals in more demand from our growing global
population, the importance of the nexus between animal health and human
health has never been greater, and is one of the driving forces behind
the Center for Disease Control's ``One Health'' initiative. As
companion animals have become a more important part of our everyday
lives they have moved from the backyard into our living rooms and
bedrooms, increasing their importance to humans and requiring greater
attention to their health needs. As medical breakthroughs from human
medicine are adapted to animal medicine, our pets are living longer and
healthier lives.
    Animal health products also give veterinarians, and livestock and
poultry producers, the necessary tools to protect the health and well-
being of food producing animals. More and more evidence demonstrates
that a vital first step in producing safe meat, milk and eggs is
keeping animals healthy. Veterinarians work hard to prevent disease in
animals, but it is important for them to have medicines available when
needed to treat a disease or disease threat.
    The statutory standard for FDA approval of animal drugs under the
Federal Food, Drug and Cosmetic Act is the same as that for human
drugs: they must be proven to be safe and effective. As a result, the
animal drug approval process looks much like the human drug approval
process: animal drug companies submit data packages to demonstrate
safety, efficacy, and the ability to meet the same stringent FDA
manufacturing standards. It is a costly process, requiring as much as
$100 million and 7-10 years to bring an animal drug to market. In the
case of food animals, the standard to ensure that meat, milk, and eggs
are safe for human consumption adds an additional set of requirements
that increases the cost and time to market.
    The market for animal drugs, however, is nothing like the market
for human drugs. Our products are used to treat seven different major
species of animals and many more minor species. A blockbuster animal
drug will have sales of $100 million, and the vast majority of animal
health products have a market size of around $1 million. There is no
Medicare or Medicaid and, except in rare cases, no employer-supported
health insurance--the cost of animal drugs is borne in full by the
animal owner.
    One significant challenge we face in animal health is the declining
number of new animal drug approvals. The data we collected in
preparation for ADUFA III clearly showed that while we significantly
increased the amount of user fees going to the agency in ADUFA II, the
workload has substantially declined. There are likely many reasons for
this, but a big reason is the ever-increasing regulatory cost and
burden. In a market as fractured as the animal health market, this
increased regulatory burden results in fewer live-saving and extending
drugs being brought to market. We hope Congress will consider ways to
incentivize animal health research and provide for a regulatory
environment that increases the availability of animal health products.
    Animal health companies rely on a rigorous, efficient, predictable
and science-based review process at the Food and Drug Administration's
Center for Veterinary Medicine (CVM) to provide these products. That's
why our companies supported the first authorization of the Animal Drug
User Fee Act 10 years ago. The Animal Drug User Fee Act of 2003 (ADUFA
I) made it possible for our companies to bolster funding at CVM so that
they could meet performance standards to improve the efficiency and
predictability of the animal drug approval process and ADUFA II, passed
in 2008, continued that progress.
    Passage of this important legislation will have several benefits:

    1. FDA/CVM benefits by having additional resources to meet its
mission of protecting public health.
    2. Animal health sponsors benefit from a stable and predictable
review process, allowing them to make informed decisions about the
investment risks of research and development dollars.
    3. Veterinarians benefit from having new and innovative medical
advances available to treat, control and prevent diseases in their
patients.
    4. Livestock and poultry producers, and the veterinarians on whose
advice they rely, also have the tools needed to keep food animals
healthy.
    5. Pet owners benefit by having their animals live longer and
healthier lives, increasing their enjoyment of these companions.
    6. Consumers reap the food safety benefits that come as a result of
the availability of additional tools to keep food animals healthy.

    AHI believes that the funding agreed to by the industry over the
next 5 years is based on an objective assessment of agency resource
needs and will allow the agency to maintain all current standards and
also improve performance in key areas. The agreement calls for
approximately $118 million in funding over the 5 years, depending on
inflation. The funding agreement going forward differs from the funding
provided over the last 5 years. AHI has agreed to an annual fee level
adjusted by a variable rather than the fixed annual inflation factor
utilized in ADUFA II. The variable rate will be more closely aligned
with actual cost increases that FDA might realize from year to year.
    The financial agreement seeks to reduce the impact that fees may
have on small businesses and smaller product markets by reducing the
total percentage of fees coming from new animal drug applications and
supplements from 25 percent to 20 percent. This should result in a
substantial reduction in an individual application fee in fiscal year
2014 and beyond. The 5 percent reduction is then distributed among the
three remaining fee areas--sponsor, product and establishment. Since
smaller companies have fewer products and facilities, they are hit
hardest by the application fee. The agreement also includes a provision
for FDA to make up potential fee shortfalls that may be experienced by
allowing for adjustments to levied fees in the out years of the
program.
    FDA has consistently met timeframes for all sentinel submissions
identified in the goals letter submitted to Congress and we are
confident that the agency will continue to do so over the next 5 fiscal
years. The new agreement continues all current submission review
timeframes mandated in ADUFA II. However, the new agreement adds
important enhancements to the review process.
    The process for reviewing and approving animal drugs has evolved
over the years and is somewhat different than that for human medicines.
Animal drugs generally go through a phased review process whereby each
specific area called technical sections of the new animal drug
application is submitted and reviewed independently. Once the technical
sections for safety, efficacy, manufacturing, and environmental impact
are complete an administrative NADA is filed referencing those sections
and approval of the product occurs within 60 days.
    If technical sections can be completed more rapidly it will lead to
earlier filing of the administrative NADA and, therefore, reduce
overall time to market of safe and effective animal medicines. This
will be accomplished under the new agreement by FDA agreeing to
significantly shorten the review times of the second pass submissions
that ordinarily are reviewed in the same timeframe as the original or
first pass submissions, when certain criteria in the goals letter are
met. Depending on the type of submission this can result in up to a 4-
month (120 day) decreased review time and could be critical in moving
an important animal medicine to the market sooner.
    The new agreement also commits the agency to work with industry to
examine longer term goals.

    AHI and FDA will enter into discussions on how to more broadly
extend the conditional approval process currently available only to
minor species to major species applications. The Minor Use/ Minor
Species Act of 2004 provided a new mechanism for the approval of animal
drugs. For minor species or minor uses, a sponsor can submit an
application to FDA allowing the firm to market the product while
continuing to collect effectiveness data to satisfy the ``substantial
evidence'' requirement under the FD&C Act, as long as enough data has
been submitted to allow the agency to determine there is a ``reasonable
expectation'' of efficacy before it goes on the market. Of course, the
application must still meet all requirements for animal, human, and
environmental safety, manufacturing quality, and be properly labeled
prior to marketing. The conditional approval lasts for 5 years after
which time the product is fully approved or withdrawn from the market
if the sponsor fails to demonstrate substantial evidence.
    AHI believes that a strong case can be made to extend this
provision to certain drugs proposed for major species other than those
specifically for minor use. This allows earlier marketing of important
products that can be studied and thoroughly tested for effectiveness
because the sponsor is adding revenue to fund such studies. The data
gathered under a conditional approval will be much more robust and
allow the agency to have better confidence in the safety and
effectiveness of the product before it issues final approval. The
advantage to FDA is that it can easily terminate the marketing of a
product if the sponsor fails to complete the data commitment. There is
no increased risk to animal for public health since safety will be
assured prior to marketing. Additionally, conditional approvals are
currently in place at USDA, which regulates animal vaccines and at EPA,
which regulates flea and tick products for animals. Conditional
approvals could be one mechanism to address the current decline in
animal drug submissions and bring much-needed new product development
to the market for major species.
    The other policy issue that will be discussed under the new
agreement will be the issue of combination medicated feed new animal
drug approvals. It is common practice in the field to combine two or
more drugs in a medicated feed being given to cattle, pigs, or poultry.
For the past 40-plus years FDA has required that two or more approved
drugs added to an animal feed must first also be approved by the agency
before they can be mixed concurrently. There is a long history of FDA
requiring this and dates back to a policy first established in the
1960s that considered animal feeds containing an animal drug to be a
finished drug formulation. A producer or feed manufacturer can only
combine approved animal drugs in feed if an application for that
combination has been approved by FDA. Therefore, an animal drug sponsor
obtaining an approval for a drug to be added to animal feed is
responsible for filing additional new animal drug applications
providing for the concurrent mixing in the feed of the newly approved
drug with other approved drugs. These are essentially administrative
NADA's that simply reference the approvals of the other products but
still require submission of some limited data and new labeling.
    This has been an onerous requirement since it can significantly
delay the ability of a sponsor to market a new product because the
sponsor may not submit the other application for review and approval by
FDA until the new drug is first approved. Some relief was realized in
1996 at the passage of the Animal Drug Availability Act, which lessened
the requirements for the approval of these combination applications,
but did not eliminate the need to submit an NADA for these
combinations. Experience has shown since the ADAA that few problems can
be identified by the mixing of two or more approved drugs concurrently
in the feed in the way of interference with the active ingredients or
with changes to animal safety or human food residues.
    FDA has agreed to enter into discussion with the animal drug and
animal feed industry and State regulatory authorities overseeing animal
feed manufacturers over the next 3 years to determine how these
requirements might be modified. This could have significant future
importance with the advent of the FDA proposal to move more
antimicrobials used in feed to a Veterinary Feed Directive program by
allowing for veterinarians to more efficiently write VFD orders for
antibiotics to be mixed into feed with other non-VFD drugs. Eliminating
the requirement for combination feed approvals could pave the way for a
smoother implementation of the VFD program and ensure that
antimicrobials added to feed are being used for therapeutic purposes
only under the order of a veterinarian.
    Mr. Chairman, CVM has a rigorous, science-based approval process
that provides to the American public the products necessary to protect
public health by protecting animal health. Every year scientists
uncover new diseases in animals, some of which potentially pose a
threat to human health. As more animals are raised to feed the planet
and as animals are reared closer to people, we will continue to need
new medicines to protect animal and human health.
    The reauthorization of ADUFA will continue to provide the agency
the resources necessary to maintain and improve this approval process,
provide new and innovative products to allow our pets to live longer
and healthier lives and contribute to food safety by keeping food
animals healthy. I urge you to move a clean ADUFA bill in a timely
manner so this program can continue without interruption.
    Again, thank you for holding this hearing and I would be happy to
answer any questions.

    The Chairman. Thank you, Dr. Carnevale.
    Now, Ms. Johansson, welcome. Please proceed.

  STATEMENT OF JENNIFER JOHANSSON, J.D., VICE CHAIR, GENERIC
               ANIMAL DRUG ALLIANCE, BEL AIR, MD

    Ms. Johansson. Good morning. I am Jennifer Spokes
Johansson, and I serve as the vice chair of the Generic Animal
Drug Alliance, or GADA.
    The GADA is an independent professional trade organization
that represents the interests of generic animal drug companies.
Our members are focused on the development, FDA approval, and
marketing of high quality generic drugs for livestock and pets.
    I would like to thank the committee for inviting me to
testify today on behalf of GADA in support of the
reauthorization of AGDUFA, the Animal Generic Drug User Fee
Act.
    Just like with human drugs, generic animal drugs provide
significant benefits to the public by providing cost-effective
alternatives to their pioneer drug counterparts. Lower cost
generic animal drug options help contribute to the safety of
the Nation's food supply, the treatment of diseases in animals
that can be transmitted to humans, and the ability of pet
owners to provide care to their pet family members.
    However, the potential cost savings to consumers from
generic animal drugs cannot be achieved without broad
availability of such drugs. Therefore, it is critical that the
CVM review and approval process for generic drugs is both
efficient and predictable.
    AGDUFA was a successful first step in achieving these
goals. Prior to the implementation of AGDUFA, a single CVM
review of a generic application could take longer than 2 years.
In most cases, multiple review cycles are needed, so if an
application required three review cycles, it could take more
than 6 years for that application to receive approval.
    In the time it took to get the application approved, the
entire market for the generic drug could change, making it no
longer cost-effective to market the drug. This created a
disincentive for companies to pursue generic animal drug
approvals and denied the public cost-effective generics to
treat their livestock and pets.
    During the time of AGDUFA, CVM eliminated the application
backlog and reduced the review time goal for a single review of
an application to the current 270 days. In addition, CVM
implemented several process enhancements and increased
communications with industry.
    While user fees are a significant cost to a small industry,
we believe the fees have not created too much of an impediment
to pursuing generic animal drug applications. In fact, we
believe user fees serve as a desired gating mechanism to ensure
sponsors are serious about their intent to pursue applications
to approval. Furthermore, we believe the shorter review times
and predictability of the review timeline are helping
contribute to the growth of our industry. This growth is
evidenced by the significant increase in our GADA membership,
as well as an increase in the number of application sponsors
paying user fees.
    AGDUFA II, as agreed upon, will continue the shortened
application review times from AGDUFA. While GADA would like CVM
to achieve the statutory 180-day review times, the additional
fees for CVM to obtain the resources needed to reach that goal
are not a viable option for the generics industry.
    The animal generics industry is comprised of small
companies and product markets that are much smaller than those
for human drugs. Therefore, we believe it is important that the
review of generic drug applications be primarily funded by
congressional appropriations. For this to be achieved,
appropriations must continue at a level that enables FDA to
meet its public health mission, and the important public policy
goal of providing generic drug options for farmers and pet
owners.
    Financially, we believe AGDUFA II strikes a balance between
the much-needed revenue stream for CVM and the realities of a
small, but growing, generics industry. However, another
important industry goal for AGDUFA II was to implement
additional review process enhancements that recognize high
quality submissions and shorten overall time to approval.
    The proposed AGDUFA II enhancements will make the approval
process easier to navigate, will help generic companies better
meet CVM's approval expectations, and should help reduce the
number of review cycles. We expect this will enable more
generic products to come to market sooner.
    In conclusion, it is extremely important to the generic
animal drug industry that AGDUFA be reauthorized. Without
timely reauthorization of AGDUFA, we likely will return to the
pre-AGDUFA days when lengthy application reviews served as a
disincentive to companies pursuing generic animal drugs.
Reauthorization of AGDUFA is critical to continuing to make the
pursuit of generic animal drug approvals viable and to
continuing to increase the number of safe and effective generic
animal drugs on the market.
    Thank you.
    [The prepared statement of Ms. Johansson follows:]
             Prepared Statement of Jennifer Johansson, J.D.
                                summary
    GADA is an independent professional trade organization that
represents the interests of generic animal drug companies. Our members
are focused on the development, FDA approval, and marketing of high
quality generic drugs for livestock and pets.
    Generic animal drugs provide significant benefits to the public by
providing cost-effective alternatives to pioneer animal drugs, just
like the benefits that human generic drugs provide to patients and
payers. Lower cost generic options help increase access to much-needed
therapies for animals and contribute to the safety of the Nation's food
supply, the ability of pet owners to provide care to their beloved pet
family members, and the treatment of diseases in animals that can be
transmitted to humans. The potential cost savings to consumers with
generic animal drugs cannot be achieved without broad availability of
such drugs. Therefore, it is crucial that we continue to explore ways
to get generic animal drugs to market by providing an efficient CVM
review process for approving generic animal drugs.
    AGDUFA successfully reduced ANADA review cycle times, which
improved the efficiency and predictability of the generic review
process. Under AGDUFA, CVM eliminated the review backlog and reduced
the review time for a single review of an ANADA from 700 days or more
to the current 270-day goal. In addition, CVM implemented multiple
process enhancements and CVM-industry communications increased,
including with the addition of quarterly CVM-industry meetings. While
user fees are a significant cost to a small industry, we believe the
fees have not created too much of an impediment to pursuing generic
animal drug applications. In fact, we believe user fees serve as a
necessary gating mechanism to ensure sponsors are serious about their
intent to pursue applications to approval. Furthermore, the shorter
review times and predictability of the review timeline help contribute
to growth of our industry and to growing employment, including in areas
of the country with fewer industries to create jobs.
    AGDUFA II as agreed upon will continue the shorter ANADA review
times and introduce additional important review process enhancements.
The proposed legislation strikes a balance between a robust revenue
stream for CVM and the realities of a small but growing generics
industry. We expect this will enable more generic products to come to
market sooner and create incentives for more development by generic
companies, as well as more innovation by pioneer companies. Thus,
reauthorization of AGDUFA is crucial to continuing to make the pursuit
of generic animal drug approvals viable, to promoting a healthy
generics industry, and to continuing to increase the number of generic
animal drugs on the market, bringing safe and effective cost-effective
drug alternatives to our Nation's farmers and pet owners.
                                 ______

                      Generic Animal Drug Alliance,
                                         Bel air, MD 21015,
                                                 February 25, 2013.
U.S. Senate,
Committee on Health, Education, Labor, and Pensions,
Washington, DC 20510-6300.

    Dear Honorable Members: Thank you for the opportunity to provide
testimony to the U.S. Senate Committee on Health, Education, Labor, and
Pensions on behalf of the Generic Animal Drug Alliance (``GADA'') in
support of reauthorization of the Animal Generic Drug User Fee Act of
2008 (``AGDUFA'' and ``AGDUFA II''). GADA is an independent
professional trade organization that represents the interests of
generic animal drug companies. Our members are focused on the
development, FDA approval, and marketing of high quality generic drugs
for livestock and pets. We seek to provide more options to ranchers,
farmers, and pet owners for affordable medical care for animals.
    GADA is the only trade organization that represents the interests
of generic animal drug companies in the United States. We represent the
majority of sponsors who hold investigational files for Abbreviated New
Animal Drug Applications (``ANADAs'') and ANADAs pending approval by
FDA's Center for Veterinary Medicine (``CVM''). Our member companies
also hold more than half of the currently approved ANADAs.
  generic animal drugs are an important alternative to pioneer animal
                                 drugs
    Generic animal drugs provide significant benefits to the public by
providing cost-effective alternatives to pioneer animal drugs, just
like the benefits that human generic drugs provide to patients and
payers. Lower cost generic options help increase access to much-needed
therapies for animals and contribute to the safety of the Nation's food
supply, the ability of pet owners to provide care to their beloved pet
family members, and the treatment of diseases in animals that can be
transmitted to humans.
    Generic animal drugs are demonstrated safe and effective and go
through a rigorous CVM approval process. They must meet the same high
quality standards as pioneer animal drugs and are manufactured in FDA-
inspected facilities, just like human drugs. However, generic animal
drug options are not nearly as prevalent as their human generic
counterparts. For example, a survey conducted by one of our member
companies of Animal Drugs@FDA showed that only 7 percent of CVM
approved drugs for dogs and cats have a CVM approved generic
equivalent.
    The potential cost savings to consumers from generic animal drugs
cannot be achieved without broad availability of such drugs. Human
generic drugs have demonstrated the value of generic alternatives to
the public; in 2011 alone, human generic drugs saved consumers and the
Nation's health care system $192 billion.\1\ Furthermore, greater
availability of generic animal drugs means that veterinarians and
consumers can make animal care decisions focused on medical reasons
without having to forego treatments due to costs that are often higher
than what human patients pay for drug treatment. Therefore, it is
crucial that we continue to explore ways to get generic animal drugs to
market by providing an efficient CVM review process for approving
generic animal drugs.
---------------------------------------------------------------------------
    \1\ Generic Pharmaceutical Association Report, ``Saving $1 Trillion
Over 10 Years: Generic Drug Savings in the U.S. (Fourth Annual Edition,
2012).''
---------------------------------------------------------------------------
         agdufa i successfully reduced anada review cycle times
    To encourage a robust generic animal drug industry that provides
options for the health of livestock and pets, the ANADA approval
process must be efficient and predictable. Prior to the implementation
of AGDUFA, companies wishing to pursue generic animal drug applications
had no certainty as to how long a single CVM review of their
application would take, other than that it might take longer than 2
years. In most cases, the first review yields deficiencies and multiple
review cycles are required. For each additional review the application
goes to the back of the queue for another lengthy review cycle. In the
time it took to get an application approved, the entire market for a
generic drug could change, making it no longer cost-effective to market
the drug and denying the public cost-effective generics to treat their
livestock and pets.
    An unpredictable application review timeline can prove fatal to the
generic animal drug industry. Generic animal drug companies tend to be
smaller and have fewer resources than their pioneer company
counterparts. In the pre-AGDUFA environment, it was difficult for
companies to survive and there was extreme disincentive for new
companies to pursue approval of generic animal drugs.
    GADA believes AGDUFA was a success in improving the efficiency and
predictability of the generic review process. Since enactment of
AGDUFA, CVM eliminated the review backlog and reduced the review time
for a single review of an ANADA from 700 days or more to the current
270 day goal. In addition, CVM implemented multiple process
enhancements and CVM-industry communications increased, including the
addition of quarterly CVM-industry meetings.
    The establishment of review time goals created a more predictable
review timeline that allows sponsors to plan for product review,
approval, and launch. This helps generic animal drug options get to
market more efficiently. The shorter review times also apply to post-
approval manufacturing change reviews, making it easier for
manufacturers to improve and modernize their manufacturing processes.
Protocol reviews under investigational files also have reduced review
times, which help shorten the development time prior to seeking drug
approval.
    While we believe AGDUFA introduced improvements to the ANADA review
process, immediately after the implementation of AGDUFA the number of
ANADA submissions and reactivations significantly decreased. GADA
believes this apparent decrease may be because more sponsors are
pursuing ANADAs through a phased approval process and those numbers are
not reflected in the number of ANADAs submitted. Also, we believe the
addition of user fees created a gating mechanism to ensure that
sponsors only submit ANADAs if they are serious about pursuing high
quality, approvable ANADAs for products that they will bring to market.
    While we also saw a significant decrease in the number of generic
drugs that are drug listed with FDA, we believe this is due to sponsors
``cleaning up'' their drug listings so as not to list products they do
not market. Furthermore, we believe sponsors reduced their redundant
private labels, as maintaining multiple private labels for the same
product is a common practice in the animal drug industry. Thus, the
reduction in the number of listed drugs does not reflect a reduction in
the number of product alternatives on the market.
    Since the implementation of AGDUFA, we also have seen indications
that applications are on the rise and our industry is growing. During
the term of AGDUFA there was an increase in the number of
investigational study submissions and in the number of generic animal
drug sponsors. As the only industry association for generic animal
drugs, we have seen our membership increase by 53 percent since the
passage of AGDUFA, including with some new sponsors planning to develop
generic animal drugs and submit ANADAs.
    During the term of AGDUFA, we have also seen new companies form to
pursue generic animal drugs and already-established companies in the
fields of new animal drugs and human drugs enter the generic animal
drug industry. Thus, while user fees are a significant cost to a small
industry, we believe the fees have not created a significant impediment
to pursuing generic animal drug applications. Instead, we believe the
shorter review times and predictability of the review timeline help
contribute to growth of our industry and to growing employment,
including in areas of the country with fewer industries to create jobs.
 agdufa ii will continue shorter anada review times and introduce more
                      review process enhancements
    Entering into AGDUFA II negotiations, the generic animal drug
industry had three primary goals: (1) keep user fee costs from
increasing beyond the generic industry's ability to pay; (2) keep
review times at least as good as in Year 5 of AGDUFA, and (3) implement
more process enhancements to help reduce overall time to approval of
drug applications.
    The agreed upon AGDUFA II proposed legislation includes 5-year
industry fees of $38,100,000 and strikes a balance between a robust
revenue stream for CVM and the realities of a small but growing
generics industry. The agreed upon increase in fees from AGDUFA I are
to account for inflation and estimated reductions in congressional
appropriations.
    GADA recognizes that user fees are intended to supplement
congressional appropriations. The generic animal drug industry is
comprised of small companies and the product markets are smaller than
for human drugs. Therefore, we believe it is important that the review
of drug applications be primarily funded via congressional
appropriations and that appropriations continue at a level that enables
FDA to meet its public health mission and the important public policy
goal of providing generic drug options for farmers and pet owners.
    Since the number of ANADA submissions each year is less predictable
than the number of marketed products and application sponsors, under
AGDUFA II the application fee will contribute a smaller percentage of
total revenue than in AGDUFA I. This will provide more predictability
to the amount of funding collected by CVM, which benefits both CVM and
industry. This will also help keep the application fee as a gating
mechanism to ensure submission of high quality applications, while
helping prevent the application fee from becoming too high and serving
as a significant disincentive for companies to submit applications. In
exchange, the product fee and sponsor fee, which are primarily paid by
established sponsors with products on the market and are therefore more
predictable, will contribute an increased percentage of fees to the
total user fee revenue.
    GADA was not concerned predominantly with reducing the review times
for single review cycles because the current 270-day review goal is a
marked improvement over pre-AGDUFA timelines. While GADA would like CVM
to achieve the statutory 180-day review times, the industry recognizes
that the additional fees for CVM to obtain the resources needed to
reach such goal are not a viable option for the generics industry.
Therefore, the industry believes that maintaining the existing
timelines is an acceptable compromise while the industry grows and
becomes further established.
    An important industry goal for AGDUFA II was implementing
substantial process enhancements that will reward high quality
submissions. The enhancements will make the approval process easier to
navigate for new and established sponsors, and will help reduce the
overall time to approval, thus allowing more safe and effective generic
products to reach the market sooner. For example, one enhancement
allows for a second, shortened review cycle of 90 or 190 days, as
opposed to 270 days, when deficiencies are not substantial.
    Another enhancement, the two-phased Chemistry, Manufacturing, and
Controls (``CMC'') technical section process, enables sponsors to
submit certain parts of their CMC section to an investigational file
before the entire section is complete, thereby receiving earlier CVM
feedback and avoiding deficiencies later in the review process that can
delay approval. A third enhancement allows sponsors making significant
post-approval changes to their application that receive non-substantial
deficiencies to their supplement to implement their changes 30 days
after submitting their deficiency responses, rather than waiting for
another 270-day review cycle.
    These and other improvements introduce efficiencies to the ANADA
review process and help generic drug company sponsors better meet CVM's
approval expectations. It is our hope that these enhancements, along
with the current 270-day single cycle review timelines, will help
reduce the number of review cycles and shorten the overall time to
approval for ANADAs to get generic animal drug options to market
sooner.
 reauthorization of agdufa supports a healthy generics industry to get
             more generic animal drugs to the market sooner
    It is extremely important to the generic animal drug industry that
AGDUFA be reauthorized. Prior to its original implementation the
industry feared it would not survive, as review times dragged out and
few drugs and companies made it to the end of the approval process.
Furthermore, there were few incentives for new companies to pursue
generic animal drugs and thus, the industry could only be sustained,
and the benefits of cost-saving, high-quality generic drugs for
livestock and pets realized, if the few existing companies remained.
    AGDUFA has introduced shorter, predictable timelines for ANADA
reviews, making it easier for companies to pursue generic animal drug
applications. Furthermore, it has brought review process improvements
and efficiencies. AGDUFA II will continue these shortened review
timelines and bring more process enhancements that will help reduce the
overall time to approval. We expect that this will enable more generic
products to come to market sooner and incentivize more development by
generic companies, as well as more innovation by pioneer companies.
Thus, reauthorization of AGDUFA is crucial to continuing to make the
pursuit of generic animal drug approvals viable, to promoting a healthy
generics industry, and to continuing to increase the number of generic
animal drugs on the market, bringing safe and effective cost-effective
drug alternatives to our Nation's farmers and pet owners.
            Sincerely,
                          The Generic Animal Drug Alliance,
Generic Animal Drug Alliance Member Companies: AgriLabs, Ltd., St.
Joseph, MO; AmPharmCo, Inc., Fort Worth, TX; Aratana Therapeutics,
Inc., Kansas City, MO; Argenta Limited, Metuchen, NJ; Bimeda North
    America, Inc., Oakbrook Terrace, IL; Ceva Animal Health, Inc.,
Lenexa, KS; First Priority, Inc., Elgin, IL; GDL International, St.
Joseph, MO; Herschel J. Gaddy & Associates, St. Joseph, MO; Lloyd,
    Inc., Shenandoah, IA; Med-Pharmex, Inc., Pomona, CA; Norbrook,
      Inc., Lenexa, KS; Nutramax Laboratories, Inc., Edgewood, MD;
Pegasus Laboratories, Inc., Pensacola, FL; Pharmgate, LLC, Ramsey,
NJ; Piedmont Animal Health, Greensboro, NC; Putney, Inc., Portland,
          ME; Rochem International, Inc., Ronkonkoma, NY; Sparhawk
Laboratories, Inc., Lenexa, KS; Teva Animal Health, a wholly owned
subsidiary of Bayer HealthCare, LLC, St. Joseph, MO; Vetoquinol USA
Inc., Fort Worth, TX; VetPharm, Inc., East Rochester, NY; World Gen
                                                  LLC, Paramus, NJ.

    The Chairman. Thank you very much, Ms. Johansson.
    We will now start a 5-minute round of questions. Dr.
Carnevale, I will start with you.
    Again, just for the record, if ADUFA were not reauthorized,
what do you think would be the impact on animal health? How
would it affect ranchers, farmers, and pet owners if we did not
reauthorize it by October 1?
    Mr. Carnevale. Well, Senator, clearly FDA would have to
lose a number of resources that they have now, a number of
staff that they have hired on to do those reviews faster. So
clearly, the review times would slip back, as Dr. Dunham had
mentioned earlier, back to what they had been before.
    The process will slow down even more than it is now, and it
is a very rigorous review process, and we understand that we
are always working to try to shorten that time. Without those
resources, those times will just dramatically increase.
    And as far as farmers and ranchers, there are very few
drugs that are approved now. It is very difficult to get a drug
through the process and when it does go through, it is very
important to those farmers and ranchers. So unfortunately, this
will probably decrease an incentive to develop those drugs if
the process is taking longer than it does today.
    The Chairman. Thank you.
    Ms. Johansson, again for the record, tell me what role do
generic drugs for animals play in animal health? How do they
help ranchers, farmers, and pet owners?
    Ms. Johansson. Generic drugs give alternative to the brand
drugs or the pioneer drugs that are equivalent. They are
equivalent in safety and effectiveness and quality, but they
are lower cost options. So this provides a cost benefit for
farmers, for pet owners, for ranchers. And often may enable a
treatment that a pet owner or a rancher could not afford in the
first place.
    The Chairman. The same question I asked of Dr. Carnevale--
what would be the effect if AGDUFA were not reauthorized? What
would be the impact on ranchers, farmers, and pet owners if it
were not reauthorized in time?
    Ms. Johansson. Right. As Dr. Carnevale mentioned, FDA would
have to reduce their staffing and then they would not be able
to review the applications in a timely manner. This would mean
that less options, whether it be pioneer drugs or generic
drugs, would be available to ranchers, farmers, and pet owners.
    In the generics industry, we just had our first AGDFUA
legislation 5 years ago. So just 5 years ago, we really were in
that world where it was taking 700 days or more for a review.
And it was not incentivizing companies to pursue those generic
drug options.
    The Chairman. Thank you both very much.
    I will yield to Senator Alexander.
    Senator Alexander. Mr. Carnevale, give us a little
historical perspective on the importance of animal health to
human health. My memory of history is that, throughout world
history and in our country, many epidemics have been spread by
unhealthy animals. In the early days of, what, North America,
the arrival of the Europeans with animals kind of led to small
pox. It wiped out whole populations. Is that where all of this
begins, this concern about the relationship of healthy animals
to healthy people?
    Mr. Carnevale. Yes, well fortunately, we don't have
outbreaks like small pox any longer, but clearly, there is a
nexus between animal and human health. Diseases are spread, as
we all know, between animals and humans. And the fact is, the
healthier that we can keep our animals, the healthier we can
keep humans, particularly with the food supply.
    It has been shown that animals that are not healthy that
might go to slaughter with some clinical disease, the meat from
those animals may be more tainted with bacteria than those
animals that are kept healthy.
    There is a long history of maintaining that animal health
through vaccines. Vaccines are very important as well as animal
drugs. Both of those go hand in hand to keep our food animals
healthy, so that they don't spread those diseases to humans.
    Of course, there have been other measures besides the use
of technologies. There has been the way we have raised animals
with good biosecurity techniques to keep them from being
infected by pathogenic organisms that could transfer to humans.
But the whole arena of agriculture, including the use of the
technologies we are talking about here, has improved to
maintain that separation of animal disease from human disease.
    Senator Alexander. We don't have to go back very far to
find the time, maybe it was the 1930's, that say when there
were almost no, well, there wasn't the pharmaceutical industry
really. There were almost no drugs for human health. How far
back do we have to go to find the development of drugs for
animal health?
    Mr. Carnevale. I would say probably in the 1950s is when we
really----
    Senator Alexander. Not before then?
    Mr. Carnevale. Probably not before then, I mean, I think
there were probably remedies out there. There was no organized
drug business, but I think probably in the 1950s, antibiotics
started to become used in animals, and so, it is a fairly new
industry.
    Senator Alexander. Ms. Johansson, you mentioned the 270-day
timeline, and it sounded like what you were saying was that it
was too expensive to aim for 180-day timeline, to try to take
that 700 day period and get it down to 180. Is that right? That
would just cost too much in user fees to do that, was that the
consensus?
    Ms. Johansson. Well, to take the 270-day time period.
    Senator Alexander. Yes.
    Ms. Johansson. And bring it down to 180 days.
    Senator Alexander. Yes.
    Ms. Johansson. Right, would cost too much in user fees.
    Senator Alexander. Yes. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Alexander.
    Senator Roberts.
    Senator Roberts. Thank you, Mr. Chairman. I have a very
general question, and the answer to it is yes, if I can find it
here.
    Dr. Carnevale, I have been getting feedback, all of us who
are privileged to represent agriculture States and the animal
drug community, that while there may be some minor tweaks or
changes to the user fee programs that various folks would
recommend generally, that my impression is that you support a
clean bill, and we have a clean bill. And as the Chairman
indicated, we hope that we can be successful on the Senate
floor, and that we would have your support. Is that correct?
    Mr. Carnevale. That's correct, Senator.
    Senator Roberts. All right. Let me veer off into another
concern that I have that also involves a thank you to you and
all of the veterinary associations from all of our States.
    As a former member of the Intelligence Committee and I was
chairman for a while, I was always worried about a possible
attack on our food supply, and obviously, that deals with the
animal industry. And we had several exercises and in one, I was
privileged--if that is the proper word for it--to play the role
of the president. I emphasize that there wasn't anybody else in
town, so they had to get somebody, but I think it was because
of my experience on the agriculture committee and on the
intelligence committee.
    We went under attack--this was an exercise--and there have
been numerous exercises like this. Following those exercises,
and I won't go into any detail, but some very difficult, we
went through what would happen in regards to an attack like
hoof and mouth, and what would happen to the animal industry,
and it was pretty bad.
    That was some years ago. I think we have a much better
understanding of that. That threat still exists. It could be
easy to do by any terrorist group, but the veterinarians in
Kansas, at least, and this comes down to county level, have
done an excellent job of doing training to be first responders
if anything like that would happen. And they know the criteria
that they are supposed to follow and they have repeatedly gone
to meetings statewide and even national meetings on this
subject.
    I just want to thank your Center for what you have been
doing, and I hope you have been doing in regards to any
possible threat to our food supply. And the fact that one of
the first responders is your local veterinarian, who also, by
the way, has a lot of trust wherever that person may be
practicing.
    Do you have any comment?
    Mr. Carnevale. No. Thank you for that. I think our industry
has been very forward-looking in trying to provide the vaccines
that are needed for those kinds of threats and I know that is
at the top of their mind.
    Ever since 9/11, as you said, we have been going through
those exercises. And I would only say that we are very
fortunate in this country to have as safe a food supply as we
do, and I think people take it for granted because those
threats, as well as common threats from bacteria and viruses
that do not come from terrorism, are also a threat to the food
supply. And I think the farmers, the ranchers, the
veterinarians, the animal drug industry all do a marvelous job
of keeping our food supply safe.
    But those threats are there and you are right. We have been
very lucky, but I think we have also prepared very well, and I
think our industry has helped with those preparations in trying
to make sure the vaccines for those viral diseases that could
come from terrorism are out there and ready to be used if
necessary. So thank you for that, Senator.
    Senator Roberts. I appreciate that.
    Thank you, Mr. Chairman.
    The Chairman. Thank you very much, Senator Roberts.
    Thank you all very much. Thank you, Dr. Carnevale. Thank
you, Ms. Johansson for your involvement in this effort.
Hopefully, as you have heard from all of us and we have heard
from you, we hope to keep this a clean bill and get it moved
expeditiously through the Senate, and hopefully the same thing
will happen on the House side. Thank you all very much.
    The record will remain open for 10 days for further
submissions by other Senators.
    The Chairman. And with that, the committee will stand
adjourned.
    Thank you.
    [Whereupon, at 10:58 a.m., the hearing was adjourned.]

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